Google
Friday 
November 24, 2017 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
WPI: The abbreviation for Wholesale Price Index, which is an index of the prices paid by retail stores for the products they would ultimately resell to consumers. The Wholesale Price Index, abbreviated WPI, was the forerunner of the modern Producer Price Index (PPI). The WPI was first published in 1902, and was one of the more important economic indicators available to policy makers until it was replaced by the PPI in 1978. The change to Producer Price Index in 1978 reflected, as much as a name change, a change in focus of this index away from the limited wholesaler-to-retailer transaction to encompass all stages of production. While the WPI is no longer available, the family of producer price indexes provides a close counterpart in the Finished Goods Price Index.

Visit the GLOSS*arama


FREE ENTERPRISE:

In theory, an economic system that relies extensively, if not exclusively, on unregulated markets to exchange resources, goods and services, and to answer the three questions of allocation. In practice, this term is often used synonymously with capitalism.
In principle, free enterprise is an economy in which businesses and consumers of the private sector are "free" to engage their resources in any desired production, consumption, or exchange activity without government restriction, regulation, or control. The guiding philosophy is that individuals, not governments, know how best to allocate resources.

Laissez Faire

The free enterprise view can be traced at least to the laissez faire notion championed by Adam Smith in The Wealth of Nations. Smith argued that individual consumers and producers pursuing their self interests through voluntary market exchanges achieve an efficient allocation of resources and do what is best for the entire economy.

Efficiency in a market is achieved with the equality of the maximum demand price that buyers are willing and able to pay (the value of goods produced) and the minimum supply price that sellers are willing and able to accept (the value of goods not produced). In a competitive, unregulated market, absent market failures, efficiency is achieved at equilibrium. If one market achieves efficiency in this manner, then an entire economy consisting of such markets also achieves efficiency.

Proponents of free enterprise contend that the primary reason an economic system based on voluntary market exchanges does not, or would not, achieve efficiency is government intervention. The principle forms of efficiency disrupting government intervention are price floors, price ceilings, and taxes.

Market Failures

Contrary to what some folks think, free enterprise has never actually existed in any country at any time. Governments have always played central, and valuable roles, as society attempts to reduce the problems of scarcity. The reason for government intervention is that "free" markets can and do fail to achieve efficiency. The principle market failures include:
  1. Public goods.
  2. Market control.
  3. Externalities.
  4. Imperfect information.
These market failures prevent the equality between the value of goods produced and the value of goods not produced that achieves efficiency. The persistent existence of market failures means that free enterprise does not achieve economic utopia, as some contend. These failures also explain the persistent government intervention in the economy.

A Bit of Politics

This notion of free enterprise is often championed by business firms and capital owners who have the most to gain from market failures, especially market control. In theory, a firm with market control receives a higher price, and often greater economic profit, than it would in a more competitive market. Proper government intervention could lower the price and reduce economic profit.

To avoid government intervention, a firm might then be inclined to promote, erroneously, the benefits achieved with free enterprise, even though such benefits do not exist. However, if the firm has sufficient political influence, then the unfounded free enterprise argument might avoid government action and maintain economic profit.

<= FRACTIONAL-RESERVE BANKINGFREE GOOD =>


Recommended Citation:

FREE ENTERPRISE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2017. [Accessed: November 24, 2017].


Check Out These Related Terms...

     | capitalism | market-oriented economy | government functions |


Or For A Little Background...

     | scarcity | economic system | private sector | laissez faire | invisible hand | efficiency | second estate | political views |


And For Further Study...

     | four estates | consumer sovereignty | mixed economy | seven economic rules | three questions of allocation | public sector | production possibilities |


Related Websites (Will Open in New Window)...

     | American Enterprise Institute |


Search Again?

Back to the WEB*pedia


APLS

BEIGE MUNDORTLE
[What's This?]

Today, you are likely to spend a great deal of time visiting every yard sale in a 30-mile radius trying to buy either a genuine down-filled comforter or a 200-foot blue garden hose. Be on the lookout for neighborhood pets, especially belligerent parrots.
Your Complete Scope

This isn't me! What am I?

The first paper currency used in North America was pasteboard playing cards "temporarily" authorized as money by the colonial governor of French Canada, awaiting "real money" from France.
"You are younger today than you will ever be again. Make use of it for the sake of tomorrow. "

-- Norman Cousins, editor

LSE
London Stock Exchange
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2017 AmosWEB*LLC
Send comments or questions to: WebMaster