Markets are mechanisms for coordinating the set of connections of production operations that are distributed throughout the whole economic system. Thus, the market is the predominant and determining link between producers of goods and services and consumers. Accordingly, markets, as an exchange of goods and services that takes place as a result of buyers and sellers interactions, are generally considered the most efficient allocator of resources in the market economy.

However, free markets are not allowed to solve some of the social problems in a society due to various reasons. One such social problem is illegal drugs. Another example is environmental issues such as pollutions. For an additional example for a social problem, where supply and demand is not allowed to freely function, conduct basic research on markets for human organs. There are black markets (underground economy) for human organs in some countries. But a trade in human organs, based on supply and demand, raises ethical issues and hence it indicates a limitation of relying on markets to solve the social problems we have in the society.

Directions

Your research should be about social problems where the free markets are not allowed to function, which includes the market for a particular illegal good and service, a regulated market, etc.

Select a social problem where free markets are not allowed to function, and conduct research on the social problem.

Describe how free market features could be introduced to help alleviate the social problem through free market operations of supply and demand.

Discuss the risks of introducing market mechanisms of supply and demand in situations where ethical issues are present.

Explain roles of the government in maintaining ethical business practices.