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Free Enterprise System Assignment -

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Question - What are the four conditions that must exist for the free enterprise system to exist? What are the implications of the relationship between supply and demand?

Answer - Free enterprise system is primarily a legal system, where in the primary business operations (commercial activities) are regulated by private bodies rather than government system. Hence obviously the first requirement for a free enterprise is existence of a private property. Secondly there is need to have freedom of choice, no sort of restrictions on the customer choices as well there is no sort of enforcements exist for customer choice selections. Further it is a business activity and hence there is need to make the profits and hence there is need for the facilitation of the profits in the organization. Right to keep the profits is the third and one more significant condition that shapes the free enterprise system. The fourth condition is existence of environment where fair competition can be enabled to provide better transactions and freedom in business (Giachetti, 2016).

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Supply and demand are the key elements that decide the equilibrium prices as well they will also work for finalizing the quantity of the materials in the market. Supply and demand dynamics will decide the prices of the goods as well as the services in the market (O'sullivan, 2003).

There are several factors that work on to impact the supply and demand dynamics in the chosen commercial market, for example price fluctuations will affect the supply and demand equations, Income levels of the people and the possible credits will also impact the supply and demand dynamics in the market, Availability of the alternatives and the competition will also decide the supply and demand trends in the market, Commercial advertising and seasons are other important elements that will impact the supply and demand trends in the economy in general.

In any case the key implications of the supply and demand and their relationship are the price variations and enterprises can plan their quantities and prices in accordance with the trends of the supply and demand in the commercial market.

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