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A free market economy is an idealized form of a market economy in which buyers and sellers are permitted to carry out transactions based solely on mutual agreement without interventionism in the form of taxes subsidies regulation of government provision of goods and services In this type of economy all decisions are made by individuals and firms The economy is in equilibrium when income equals output equals expenditure or simply Injections equal Leakages On a chart this is represented when the supply and demand curves intersect at the point where supply and demand are equal The price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time Basic SupplyDemand Graph If either of the curves shifts a new equilibrium will be formed If one of the determinant of demand changes the whole demand curve will shift This will lead to a movement along the supply curve to a new intersection point Likewise if one of the determinants of supply changes the whole supply curve will shift An increase in supply will lead to a shift to the right whereas a decrease in supply will lead to a shift to the left of the original supply curve This will lead to a movement along the demand curve to the new intersection point Demand Curves When more people want something the quantity demanded at all prices will tend to increase This can be referred to as an increase in demand The increase in demand could also come from changing tastes where the same consumers desire more of the same good than they previously did Increased demand can be represented on the graph as the curve being shifted right because at each price point a greater quantity is demanded An example of this would be more people suddenly wanting more coffee This will cause the
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