Also referred to as free enterprise, free markets refers to an [economic system]( in which private businesses operate in competition with one another and market forces largely determine how prices are set, with limited input from or control by the government. In a free market system, the prices for goods and services are determined by the open market and by consumers. In a completely free market, the laws and forces of supply and demand are free from any intervention by a government, price-setting [[monopoly]], or other authority. In essence, a free market is characterized by voluntary exchanges that are mutually beneficial to both parties involved. The sellers in the market are free to set their prices, and buyers are free to pay these prices or seek goods and services elsewhere. ## Key principles of free markets 1. **Voluntary Exchange**: This principle states that individuals are free to negotiate the terms of their exchange, and the terms of the exchange are not to be dictated by a third party. 2. **Competition**: In a free market, companies compete with each other to sell their goods or services. This competition helps to drive innovation, improve quality, and lower prices. 3. **Private Property Rights**: This principle ensures that individuals and businesses have the right to control their possessions as they wish. 4. **Profit Motive**: The desire to earn profit drives entrepreneurs to create new products, services, and technologies. 5. **Limited Government**: In a truly free market, the role of the government is limited to enforcing contracts and property rights. It's important to note, however, that no market is entirely free. All markets operate within certain constraints, whether they be legal, social, or physical. In practice, most economies are mixed, meaning they incorporate elements of both free market and planned economies.