Free market economics stimulate greater economic growth, whereas state-directed economies stifle growth. Explain.
First off, Free Market Economies are privately owned and production is determined by the interaction of supply and demand. State-directed Economies are not privately owned and are controlled by the government which plans the goods and services that are to be produced, the quantity, and the price. Going with the free market economy, private ownership also encourages vigorous competition and economic efficiency.
It also ensures that entrepreneurs have a right to the profits generated by their own efforts. This gives people an incentive to search for better ways of serving consumer needs. This constant improvement in product and process that results from such an incentive has been know to have a major positive impact on economic growth and development.
In a state-desired economy, there is very little incentive to control costs and be efficient because they cannot go out of business. Also, the abolition of private ownership means there is no incentive for individuals to look for better ways to serve consumer needs. Instead of growing, these markets tend to stagnate.
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