Things closely follow the free market paradigm if two basic assumptions hold true: perfect competition and absence of “unnecessary” government quotas and regulations.
Perfect competition assumes that no seller is large enough to sway the natural movement of the market owing to its large market share and cash reserves, which too often becomes the case for corporations in a capitalistic system with the wherewithal to wipe out smaller players.
Moreover, the prove to be an icing on the cake — the production cost per unit decreases as we produce more and more of the same units (the initial one-time setup cost can be a major part of the total expense).
And the best part is that both parties are better off after doing the transaction (and so is Mother Earth, for less wastage).
Say goodbye to the i Phones, cushy jobs, roads (even the shitty ones), branded clothes and the air-conditioned comforts.
Studying economics can be both rewarding and intimidating at first, but knowledge of basic economics is essential not only for the B-School junta but for anyone who interacts with markets.
An interesting backdrop to consider here — the fundamental assumption that we need to make for the whole economic system (as we know it today) to work is that human beings are motivated by pure self-interest and will take decisions that they think will make them ‘better off’ now or sometime in the future.
The economic and political systems of a country are closely inter-linked and jointly determine the well-being of its citizens.
If an entity is really efficient in producing a commodity (output to input ratio is high), it has an advantage over another entity which is not that efficient in producing the commodity under consideration.
If I am good at making shoes and you are good at making jam, it makes sense to do what we are good at and trade afterwards.