Which of the following practices are characteristics of a free economy? 1. private ownership of asset 11. central planning 111. price fixing 1V. freedom of contract
Answers
"1V. freedom of contract "
is the correct answer
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Answer:
1. The free enterprise: All the economic activities and business are conducted by private individuals making it a free enterprise economy.
2. The private property: In this economy, all the means of production are privately owned, ie. they belong to private individuals.
3. Consumer's sovereignty: Under capitalism, a consumer is supposed to be supreme and is compared to a king.
4. Role of self-interest: The motive of self-interest gives direction and consistency to work harder and to earn maximum income by satisfying the consumers.
5. Economic freedom: Individuals and business units are free to consume whatever they like.
6. Competition: It implies to the presence of a large number of buyers and sellers who are free to buy and sell and are also free to leave or enter any particular market.
7. Markets and price: The medium through which economic problems are solved is the operation of prices in the market.
8. The freedom of contract: Under capitalism, people are free to make contract and settle transaction.