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Macroeconomic - goverment Intervention

            In order to understand how government subsidies and indirect taxation affects the supply of goods and services in a free market, one must first understand the principles and ideas behind a free market. First one has to assume that the given country is relatively advanced and economically stable. It also needs to be capitalistic oriented, and by that I mean that it has to be (somewhat) wealthy, provide broad banking services and have lots of Capital. This sounds like elements of total democracy, but let me take it a little bit further than that and return with a more detailed explication later. The various incomes e.g. incomes, wages, and land rent are in a perpetual cycle, and specify the products the consumers want, so that the producers may produce them. This flow of cash enables the producer to invest in more capital factors, thereby producing more, at a probable cheaper cost. Thus everybody ends up satisfied and life is well. Of course this might not work entirely correct, since there will always exist certain externalities, which will have influence on the cash flow. Yet, it has to be assumed, so that we may move on and create the overall picture. .
             The free market is a relatively new way of thinking and only goes back about three centuries or so. Is has changed many things and brought many benefits for the people who had the courage to give it a go. Today it is widely recognised as the most efficient thing to do, if one has the resources to attempt it. One might say that industrialization gave birth to the free market. It is important to recognise the benefits and balance them with the disadvantage in any economy, thereby giving an overall picture of how things really work. One thing is seeing it on paper; another is seeing it in real life. Yet, things tend to work out and behave almost equally well in most cases. .
             Innovation is the greatest achievement in a free market, where competition and efficiency forces technological advances to occur.

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