In a free market system, there are many buyers and sellers with no significant share of the market. Buyers and sellers enter and leave the market freely in addition to having full knowledge of the market in terms of who is selling what, of what quantity and at what price. Products are indistinguishable and homogenous, and hence quality is comparable (Harris, 2017). The participants in this market system aim at maximizing utility –buyers and sellers target purchasing as much goods and services as possible using the little they have. Further, government intervention is limited and therefore no third parties to regulate price, quantity or quality.
E-commerce business is a good example of a free market system. In e-commerce, the exchange of goods and services take place through electronic platforms. The business to consumer (B2C) famously known as online shopping describes a perfect market scenario. Ideally, online shoppers have a variety of similar goods being supplied by different sellers online. Therefore, buyers have the autonomy of selecting the most economical seller to maximize on utility. Sellers place their goods and services online with price tags attached to them, and hence buyers have the autonomy of comparing prices and opting for the lower priced commodities and services under the principle of rationality. For instance, if Walmart is selling a vacuum cleaner at $150, Amazon at $140 and Alibaba at $125, buyers will opt to shop at Alibaba when purchasing a vacuum cleaner.
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