Reviewed by Sep 28, 2020| Updated on
What is Free Enterprise?
A free enterprise is a form of economy in which the market dictates the goods, prices, and services, and not the government. It is neither communism nor capitalism.
Supply of free items are not constrained, and every business corporation is an organisation. The free enterprise, therefore, applies to an economy in which businesses are open from government regulation. Because of supply and demand, costs in a free enterprise go up and down. If the demand is high, the prices will go up. If the demand is low, the prices go down.
Free Enterprise is an economy that mainly relies on market forces to allocate goods and resources and set prices.
It covers business activities that are not regulated by the government but defined by a set of laws, such as property rights, contracts and competitive bidding. Free markets are characterised in theory and practice by private property rights, cooperative contracts, and competitive market place bidding for goods and services.
Origin of Free Enterprise
The first recorded theoretical reference to free enterprise structures may have originated in China during the fourth or fifth century B.C. Laozi aka Lao-tzu argued that by intervening with individuals, governments impeded development and happiness.
Legal codes which resembled free enterprise systems were uncommon until much later. In between the16th and the 18th centuries, England was the original home of modern free markets. This development coincided with and also contributed to the first industrial revolution and the rise of modern capitalism.
Example for Free Enterprise
A homemaker selling mango pickle in her neighbourhood could be an example of free enterprise. She sells forty bottles of pickles at a standard rate of Rs.160 per 500 grams. A self-help group of women in the same neighbourhood are into the same business. The prices are competitive as well.
A certain degree of intervention by the government is always needed to regulate the market so that the sellers do not indulge in using substandard ingredients for making pickles or adding the harmful MSG while processing to enhance the taste. The Food Safety and Standards Authority of India (FSSAI) board is the overseeing authority for food safety and regulation in India.
The financial sector is a segment of the economy composed of companies and institutions that provide commercial and retail customers with financial services. Read more
Electronic Payment and Receipts Framework
Electronic payments and receipts refer to payments and receipts made using digital means or technology. Read more
Cash Reserve Ratio (CRR)
Cash reserve ratio (CRR) is the amount of money that the scheduled banks will have to have in deposit with the central bank of the country at all times. Read more
Beyond a reasonable doubt is a substantive standard of proof which is required to justify a criminal conviction in most adversarial justice systems. Read more
Labour Force Participation Rate
The labour force participation rate is the portion of the working population in the 16-64 years' age group in the economy currently in employment or seeking employment. Read more
A supranational entity is an international group or alliance in which member states' power and influence transcend national boundaries or interests to engage in decision-making and to vote on collective body matters. Read more
The labour market, also known as the job market, relates to the supply and labour demand in which the supply is provided by the workers and demand by the employers. Read more
Consumer surplus is an economic indicator of the benefits to the product. Read more
Labour productivity is a measure of labour output. Read more