The free market is the most efficient way to match supply and demand  In a free market, goods are voluntarily exchanged at a price arranged solely by the mutual consent of sellers and buyers. The aggregate ‘market price’ is the result of all individual transactions and contains important information for both buyers and sellers. When there is more demand than supply, prices rise (because buyers have to ‘outbid’ each other), making it attractive for new producers to enter the market and thus adding supply. When there is more supply than demand, prices fall, causing some sellers to leave the market since their production costs are higher than the price at which they can sell. Thus, in the long run, markets settle on an ‘equilibrium price’ where demand and supply are exactly equal.  Examples of the free market actually working are all around us: take the supply of the pen and paper used to take notes on. If the price is too high at one store, anyone would move to another store where it’s cheaper. Therefore, sellers have an incentive to provide the best quality at the lowest price. [1]  Central planning can never be as efficient as myriads of individually planning buyers and sellers in reaching this equilibrium. For example, a central planner who sets a price floor will likely create excess supply in that specific market. This has happened in the European Union, where the EU set a price floor on dairy products. The result were the well-known ‘butter mountains’ and ‘milk lakes’.  [1] It is of course slightly more complicated as there are multiple layers of supply and demand. There is a free market in the sale of pen and paper from stores to consumers. The stores themselves are also in a free market when it comes to sourcing the pen and paper from wholesellers or the producers. The producers are then also in a free market to source the materials to make the pens. The price at the retailer therefore has a floor below which someone will make a loss due to the cost of the production.