Free Market Is the Most Efficient
1.) ‘The free market is the most efficient way of allocating resources in Singapore.’ Do you agree?
Every society in the world, including Singapore faces the basic problem of scarcity. I.e Allocating resources occurs because there is unlimited human wants and limited resources, hence the problem of scarcity derives. There is three basic choices to be made: What, How, and for Whom to produce. Where the choice of what to produce is dependent on product prices, Product prices are determined by the market demand and supply conditions of the particular goods/services. Moreover How to produce will depend on the factor prices, where firms will adopt its least costly method to maximise revenue by minimising cost. In addition, the decision for Whom to produce, will depend on both factor and product prices, as the price mechanism rations out the good produced according to the consumers’ willingness and ability to pay. Economic Efficiency is achieved when it is not possible to change the existing allocation of resources in a way that will make one person better off without making someone else worse off. For economic efficiency to exist, it is necessary to achieve both Allocative and productive efficiency. In a free market system, there is laissez-faire and no government intervention. The recurring problem of how to allocate the scarce resources between alternative uses is solved through the price mechanism. This decision is made through the free interaction of the market forces of demand and supply. (i.e the price mechanism). In the free market, it gives private ownership over all factors. There are self-motives, where consumers are out to maximise satisfaction, producers are assumed to be profit motivated and resources owners would want to maximise return on resources. Thus they rely on the price mechanism to allocate resources. The free market which uses the price mechanism may appear to be the most efficient
Every society in the world, including Singapore faces the basic problem of scarcity. I.e Allocating resources occurs because there is unlimited human wants and limited resources, hence the problem of scarcity derives. There is three basic choices to be made: What, How, and for Whom to produce. Where the choice of what to produce is dependent on product prices, Product prices are determined by the market demand and supply conditions of the particular goods/services. Moreover How to produce will depend on the factor prices, where firms will adopt its least costly method to maximise revenue by minimising cost. In addition, the decision for Whom to produce, will depend on both factor and product prices, as the price mechanism rations out the good produced according to the consumers’ willingness and ability to pay. Economic Efficiency is achieved when it is not possible to change the existing allocation of resources in a way that will make one person better off without making someone else worse off. For economic efficiency to exist, it is necessary to achieve both Allocative and productive efficiency. In a free market system, there is laissez-faire and no government intervention. The recurring problem of how to allocate the scarce resources between alternative uses is solved through the price mechanism. This decision is made through the free interaction of the market forces of demand and supply. (i.e the price mechanism). In the free market, it gives private ownership over all factors. There are self-motives, where consumers are out to maximise satisfaction, producers are assumed to be profit motivated and resources owners would want to maximise return on resources. Thus they rely on the price mechanism to allocate resources. The free market which uses the price mechanism may appear to be the most efficient