Determinants of Mobile Phone Prices in a Free Market

Determinants of Mobile Phone Prices in a Free Market

Introduction

Between the years 1970 and 2000, a drastic and remarkable change took place in the overall attitude towards the economic activities and the role that the state played in these activities. This era marked the surfacing of an ideology that favoured the management of the economy and perceived the state actions as raising more problems than it solved. During this period, the functioning of the markets was extended, and those markets that were being created by the government were minimized as they could not be evolved spontaneously to accommodate the increasing demands. Also, an attempt to minimize the role of the state was also aimed, particularly regarding the organization and funding of the economic activities.

All of these factors resulted in the privatization of the industries along with a sudden shift of the services provided by the state to private contractors. Moreover, this caused the reduction of taxes, deregulation of industries and a reduction in the level of spending by the government. This ultimately led to an overall shift in the attitudes towards the economic policies and gave way to the establishment of a free market.

Free Market and its Virtues

In economic sciences, the term free market refers to that kind of market which operates on minimal or no control, regulation and any form of economic intervention by the state. However, the state may play a role in these markets for the enforcement of private contracts and possession of the property. Free market, in its true sense, is the complete opposite of a controlled market, in which much of the regulation and distribution is governed directly by the state. The traditional advocates of a free market consider the term to additionally imply that all means of production in such a market too, are under private control, rather than being controlled by the state.

The comparative analysis of markets of a different nature has indicated that a free market has many virtues. Many theorists are of the view that this kind of market is more recognized and beneficial as it provides greater opportunities for growth, development and further expansion. Additionally, free markets are flexible in their approach and provide more room for individual choice and freedom, while maintaining a mutually beneficial exchange.

Determinants of Price in a Free Market

A free market being opposite in nature to a controlled market, has minimal or no influence of the government in the determination of factors such as the price regulation and the supply of products. According to the proponents of free market, these aspects benefit a market more and ensure its efficient functioning. They believe that a greater degree of control by the government can lead to the decreased efficiency of a market on the whole.

In any particular marketplace, the consumer demand is influenced by the price of a good or other services being offered. This in turn, communicates the producers to direct their resources to be allocated as ...