Discussion 4 Discuss how a free market eliminates a shortage or a surplus.

First, a free market is a type of economic system where the supply and demand controls the prices of commodities as opposed to the kind of market where the government regulates the prices. In a free market, resources and companies are owned by entities or private individuals who are free to trade with each other (Torab, 2018). A free market eliminates shortages or surpluses in various ways. For instance, when prices go up, the demand reduces which consequently discourage further production and supply. With reduced demand, sellers are forced to lower prices to attract more buyers. The prices continue reducing until an equilibrium is established whereby supply is equal to demand.

           In a free market, customers drive choices. Consumers decide the success or failure of specific products based on their demand. For instance, the consumers evaluate the features of every product, and choose whichever they want, thus influencing the shortage or surplus of these products (Lu et al., 2020). To a great extent, consumers in a free market influence specific price sets on products. Here, a free market has the final say in a product shortage or surplus.

           Lastly, if a surplus exists, the price of products must fall in order to trigger or entice an additional demand for quantity. In the process, it reduces the number of products supplied into the free market eliminates the surplus. On the other hand, if product shortages exist, the price must increase or rise to attract additional supply and, in the process, reduce quantity demanded until the free market eliminates the product shortages (Agwu & Onwuegbuzie, 2018). The free market influences the impact consumers have on the market as it relates to the product shortage or surplus.

References

Agwu, M. E., & Onwuegbuzie, H. N. (2018). Effects of international marketing environments on entrepreneurship development. Journal of Innovation and Entrepreneurship, 7(1). https://innovation-entrepreneurship.springeropen.com/articles/10.1186/s13731-018-0093-4

Torab, E. S. (2018). A law or just a hypothesis? A critical review of supply and demand effect on the affordable residential markets in developing countries. Alexandria Engineering Journal, 57(4), 4081-4090. https://www.sciencedirect.com/science/article/pii/S1110016818302023

Lu, C., Fang, J., & Fu, S. (2020). A new equilibrium strategy of supply and demand for the supply chain of pig cycle. Mathematical Problems in Engineering, 2020, 1-13. https://www.hindawi.com/journals/mpe/2020/2093593/