Free Markets in Modern World

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Free Markets in Modern World
Introduction
A free market is an economy without government intervention whereby prices of goods and services are determined solely by the interplay of demand and supply. Mercantile policies are national regulations aimed at maximizing exports while minimizing imports. These may include use of tariffs on manufactured goods and promoting a favorable balance of trade. Adam Smith advocated for a free market economy by noting that competition and self-interest often led to economic prosperity.
Smith differentiated between value in use, which is the utility of a product and value in exchange; the purchasing power of a product. He argued that products that have great value in use like water had little exchange value like say, diamond. In truth, public goods cannot be left in private sector due to the principle of diminishability. Merit goods like water and health would be ignored if left in private hands while demerit goods like alcohol and cigarettes would be promoted. The government has to regulate access to demerit goods while banning or taxing demerit good for the good of the public CITATION Ada76 \y \l 1033 (Adam Smith).
A perfect free market is one with excess supply and excess demand. The market is large with free movement of the many buyers and the many sellers. This highly commercialized society makes it necessary for division of labor. Commodities are sold at their real price with no haggling or bargaining. In reality, these factors are limited to the size of the market. For example, it would not be prudent for an individual to commit themselves to a specific skill set or trade when the market is small.
Division of labor ensures that prod...