Describe the neoclassical view of the free market system How do externalities occur in a free
Describe the neoclassical view of the free-market system. How do externalities occur in a free market? Why might some types of transport or travel listed in Table 1 cause externalities? A Market is a place where buyers and sellers, known as agents, transfer the property rights of commodities or services. The term market could be applied to a large variety of situations, the fruit a veg markets found in towns and villages throughout the world or the stock markets located in the worlds financial centers. The term free-market refers to an unregulated market, a market free of constraints. In particular a market where the price of commodities is not determined but free to fluctuate, find its own level. But for any market to be successful it needs stability. This raises the question of how can a free-market, composed of agents acting purely out of self interest, buyers trying to minimise cost and sellers trying to maximize profit, provide a stable base for commerce? Is there some invisible force at work regulating the free-market? Adam Smith, the founder of the neoclassical view of the free-market, introduced the concept of the invisible hand in his book The wealth of Nations. His metaphor describes the way that a group of selfish agents each out for personal gain, will naturally form a stable market to everyones mutual advantage.