ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In a free market economy, resources are allocated through the interaction of free and self-directed market forces. This means that what to produce is determined consumers, how to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers.

Detailed explanation-2: -The price mechanism is the means by which decisions of consumers and businesses interact to determine the allocation of resources.

Detailed explanation-3: -A price mechanism, part of a market system, comprises various ways to match up buyers and sellers. The price mechanism is an economic model where price plays a key role in directing the activities of producers, consumers, and resource suppliers. An example of a price mechanism uses announced bid and ask prices.

Detailed explanation-4: -A true free market economy is an economy in which all resources are owned by individuals. The decisions about the allocation of those resources are made by individuals without government intervention.