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 unable to solve many social problems, and they make others worse. One
such social problem is illegal drugs. Another example is environmental issues such as pollution. For
one example of a social problem where supply and demand is not allowed to function freely, conduct
basic research on markets for human organs. There are black markets (underground economies) for
human organs in some countries. But a trade in human organs, based on supply and demand, raises
enormous and troubling ethical issues and shows that free markets are clearly limited in their ability to
provide answers to social problems.
Course Outcome practiced and assessed in this Assignment:
GB540-1: Evaluate ethical issues in economics.
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 or 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.