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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Free market system

"The primary source of complaints to the free economy are precisely purchasing that they need the gathering. Hidden the contentions for the free market is simply the absence of faith in opportunity" (Milton Friendman ). The free market system is basically and economy where purchasers and merchants of merchandise and enterprises are dependable exclusively for their trade. Every exchange is a willful assention between the two gatherings in light of a shared concession to cost without tax/state/government intercession as subsidies or directions. Quickly, the free market system is a economic system in which the government  does not meddle with business exercises in any case. In free market system, economic depends on market activity that is supply and demand, they are determinate of offering of resource allocation. This is essentially a theoretical idea as every one of the nations, entrepreneur things, yet some restrictionson claimed and exchanges goods exchanges. It can not be said that this kind of framework is a standout amongst the best approaches to utilize nation assets. Therefore, there are many countries converting to this methodology. Resource allocation is an avaluation of lack of production factors or "resources" are shared among manufacturers and shared among customers. Within this assessment, considering the acounting cost, economic cost, opportunity cost and other resource and service cost, it is economic efficiency and maximized correlated maximized.


Efficiency. Free market economy is very competitive. Most of their industry is assumed to be fully competitive, so they use resources to make them more profitable smartly and efficiently. The final decision on what to produce is made by the people actually consuming the goods

2. Selection. Industries and businesses will generate what kind of consumers are ready to purchase. Remember that the consumer is sovereign or has a final say. There are no other restrictions on what the enterprise can produce. It is not surprising, therefore, there will be a tremendous choice of goods and services within the free market economy compared to the command economy.

3. Innovation. Industries and businesses are constantly looking to generate something new to get in front of competitors. Even though the role of the government is very limited, one of the tasks is to protect the rights of people to their property. It includes intellectual property rights through patents, or legal documents that give individuals or groups ownership of ideas. Therefore, incentives, or rewards, free market systems for companies, is innovative and produces better quality products

4. High economic growth rate. History demonstrates that economies with more market characteristics have high growth rates and generally have a wealthy population. The United States is one of the most free market economies in the world, and it is also the biggest economy. In comparison, the economic growth rate of China was much slower than the command economy, than the details of the mixed economy today.

Malaysia uses a mixed economy to do business in this country. The advantages of a combination of free enterprise systems and Central Command systems have been used to have good management of marketing in this country. However, this may occur if marketing management fails. This is usually called market failure.

Market failure

Market failure is marketing that fails to give its resources. This usually happens when the free market starts or starts a business activity. Economic loss of influence, social welfare is rampant. Beside, but overall the profit of the competition in the civil perspective is not efficient. This usually gives a divergence from the benefits of the society as a whole by doing certain activities of individuals and businesses in the free market

.Reasons the Market Fail raise

Negative external:

This leads to production at a higher social cost than private costs. For example, competitors. Competitors want to become a company they chase for technology.

Positive external:

Socially beneficial. It exceeds the advantage of taking personal consumption. Supply of health and education, for example. The government gives poor people free research to study.

Insufficient information:

Demand curves are generated in small amounts. Many demand curves are produced in small quantities. For example, beverages. Most of them produce more than the citizens the company needs, although they do not eat vegetables. The private sector can not accommodate people's demand curve. The solution is that the government had to intervene according to demand\

Market control by monopoly:

Dominance of monopoly pricing occurs every month with people with insufficient income to wipe out the price of goods in the market. This situation the seller causes conflicts with each other about the price of the goods sold by them.

Factor immobility:

It causes a number of increased unemployed. Therefore, more work can not be executed. Well, non-professional employees are increasing the possibility of wasting money, time, energy. For example, the government hires more foreigners than local people.

Equity problem:

Stock issues arise when the market generates 'unacceptable' goods or products. CSL mobile phones for example, , CSL company people initially began to maintain product purchase. If problems are diminishing, people will stop buying, but the company will continue to produce mobile phones.

Market failure result

Normally, enterprises in the country can see the results of market failure by checking Productivity and Assigning Inefficiencies. Regarding productivity inefficiency, due to lack of efficient control can not meet the demand and desire of lost output from production. Therefore, certain input coefficients can not be maximized by business output. Next, assign inefficiency. This happens when materials and goods are generated in several places not suitable. There is no suitable means, items not required in some areas. For example, a sweater. Malaysia does not have winter, but the parties of the company continue to produce sweaters. The following shows the options for the government to intervene in a foreign or domestic company.

Government legislation and regulation

The regulatory authorities appointed by the government can control the price of most of the goods that are routinely used by everyone, such as telecommunication lines, gas, electricity, public transportation. Economic situation, as a movement now with a huge amount of regulation. Regarding new competitors, in many cases, the regulations as described above will be introduced. One example is a Malaysian telecommunications company. There are many that caused many competition with each other.

Providing a direct position of products and services

This means sending the government or its employees, or providing goods and services to customers and users. For example, about five to seven years ago, the government owns (Tenaga Shrimp National Berhad). They supply electricity directly to consumers without going through another party.

Fiscal Policy intervention

Changing the demand level for each product is usually different because you are a related operator who uses the physical foundation. Not only does it increase the amount of products that people need, but it can also change the economic demand. It can be changed by changing to indirect taxes, subsidies, tax relief and taxation and welfare payments.


Indirect tax can be changed through tax. This impacts business by compliance, price, cash flow and profitability. It is also very important for the company because management is very important to avoid those indirect taxes and to prevent unnecessary expenses. There is a risk that some errors can generate expensive costs. Most of the clients turn to our experts to reduce the risk of indirect taxes and to reduce the risk of indirect tax and allow them to better manage and reduce. Collected taxes can be used to increase the price of good and service.


The cost of daily life, such as education subsides, leads to consumers they can not assume. In this situation, the Government provides grants. Fees, for example. Most of the Malaysia schools are now completely owned by the Government to support people from the economic aspect.


Tax reduction is a previously determined tax deduction or reduction amount. It is usually given to a country, region or taxpayer. This method is most used in the country of the United States. Generally, this method is necessary for individual or business. Because they want a little space to breathe in financial problems. For example, for taxpayers they lost with their responsibility to face tropical storms or another word, they may be eligible for tax relief. The government usually does not charge tax directly to customers, but depending on the flexibility of the requested price and bid price. For this reason, wage tax indirectly introduced to the market.


Rottenly leads to market failure outcomes caused by customers who suffer from lack of information about the cost and benefits of the products available on the market. The actions of the Government should be taken to improve the consumer's lack of information to produce the ' true ' cost and good or service benefits. An example of what the government is doing is anti-speed TV and advertising to reduce road accidents. These programs are specially designed to change the cost of "regards" and the benefits of customer acquisition. They have not completely affected the market price, but are trying to influence the customer's demand and hence the final output and consumption.

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