A free market is a market system in which the prices for goods and services are set freely by consent between sellers and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority.
Benefits of free markets:
1. Economic efficiency: profits aim to maximise profits (by increasing level of output and decreasing level of input). Competition ensures that firms use the least cost and most economic methods of production – such as efficient use of labour and technology.
E.G. Fuel-efficient airlines – reducing plane weight e.g. smaller water tanks
2. Allocative efficiency: firms use scarce inputs to produce a combination of goods that maximises the welfare of the population. Resources go to firms that are most efficient at satisfying customers
E.G. If the population as a whole valued organic fruit and vegetables more highly than alternatives they would demonstrate this through the markets and firms would shift resources into production of organic produce
3. Consumer sovereignty: consumer drives productions. Firms that are sensitive to consumer demand will profit and grow.
4. Economic growth – resources will be directed away from firms that are inefficient and unprofitable to firms that are profitable and efficient
This generates economic growth – which leads to higher employment – leads to more consumption – leads to economic growth
Criticism of free markets
1. Free market benefit of Allocative efficient uses the perfect market assumption: that there are many buyers and sellers, no government intervention, homogenous products, freedom for entry and exit, perfect knowledge = not a realistic assumption.
Variations of these characteristics result in a less than perfect market and sub-optimal efficiency of resources use.
2. Consumer Sovereignty: Consumers are supposed to make rational decisions based on perfect knowledge – which they don’t have. Persuasive advertising influences consumers
3. Equity – consumers with more money have more power within the market place. Consumers with a low disposable income cannot access the goods and services that they need.
4. Public, merit and demerit goods
5. Externalities: firms do not have to take into account the externalities by their actions
Public Goods: Would not be provided in a free market, as suppliers cannot charge users.
Non-rival: one person using the good does not prevent another person from using the good
Non-excludable: once provided, cannot charge users for using it
e.g. street lighting, signage, clean beaches
Merit goods: seen as having a social benefits and probably would be underprovided in a free market.
- These goods tend to have short-term costs but have social and private benefits in the long run.
- People with a low disposable income – would be tempted not to purchase these which has a negative externality on the community in the long run.
Demerit goods: seen as having negative externalities and would probably be overprovided in a free market.
These goods have short-term private benefits but long-term social and private costs.
In a free market the organisation that produces these goods are not forced to rectify the externalities.
An example of market failure: Ticket scalpers
In a free unconstrained market, prices are set by the point where demand are supply are in equilibrium.
- The promoter would profit from selling tickets at this price.
PROBLEMS:
- don’t know what the market is willing to pay
- Tickets for special events are often “under-priced” for social equity / political reasons.
Method and benefits of market intervention
- Central planning: production decisions are made by govt planning teams
- Mergers and Monopolies: Aim to protect consumers from high prices and reduced choice created by concentration of ownership (e.g. ACCC – in Australia)
- Laws, permits and control planning: used by all levels of govt to constrain a free market:
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the European Business Ethics Network In 1982 the first single-authored books in the field appeared.
Functional business areas of ethics
Finance
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Trends and happenings
Jennifer Terrazas
California State University, Eastbay
Introduction
Tourism Industry: Trends and Happenings
It all begins with serving the tourist. Tourism is one of the main roles in where many hospitality companies provide different types of services. It can be exciting for tourist to travel to another place such as inside the country or out. People have different options on what transportation should they arrive in. It can be by car, bus, train…
business landscape ?
Woody Wade on scenario planning in the hotel industry
This excerpt from the Hotel Yearbook 2013
is brought to you by :
WADE & COMPANY
Wade & Company is a Lausanne-based consultancy that helps senior managers in the hospitality industry
better understand how their future “business landscape” could change, affecting their competitiveness
and creating new opportunities and challenges. Its scenario planning workshops give management teams
a creative yet structured approach…
audits
2 Understand the main barriers to marketing planning
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4 Understand ethical issues in marketing.
Unit content
1 Be able to compile marketing audits
Changing perspectives: changing perspectives in marketing planning; marketed strategic change
Assessment of capability: evaluate issues relating to aspects of competing for the future and balancing strategic intent and strategic reality
Organisational auditing: evaluating and…
Edexcel BTEC Level 4 HNC Hospitality Management
Unit 1
The Contemporary Hospitality Industry
Thomas Spalding
8/29/2014
Summary
This assignment outlays how the hospitality industry is fairing in today’s economy, and how its best to approach the future with staffing issues and improving the image for the younger generation to be involved in a career in Hospitality, to how we can make Hospitality a more environmentally friendly surrounding and deal with the ever changing society in which…
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