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A free market is also known as a leisses –faire economies. This is kind of a market where government has no control of market thus it leaves it to be controlled by market forces of supply and demand of goods and services.
Resource allocation: Is how goods and services are distributed among producers and the consumers.
The following are the ways in which the government may influence allocation of resources in a free economy:
• By providing public goods and services; where government take control of public goods such as national defence such as guns, education, healthcare which is a merit services which cannot left in a free market since will be underprovided.
• Government may also interfere with provision of goods with negative externalities such as alcohol and tobacco which can be misused by citizens.
• Government may interfere with free market to control the monopolies; where it may take charge to control prices for example case of Kenya power where it may overcharge citizens with high prices of electricity. In this case government dictate the price.
• To ensure equality where government interfere in a free market so as to ensure equal distribution of social security to both poor and rich of which if it could only left on hands of free market only rich would benefit.
PETERMAN answered the question on March 2, 2019 at 10:50
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