As society grow to include more people, human tastes and preferences continually grow, creating an inevitable conflict between the magnitudes of human wants and the availability of resources for satisfying them. The tension between limited resources and unlimited wants makes the efficient use of resources especially critical and underscores the importance of optimising behaviour. Therefore, a free market economy should be imposed as an economic model so that the resources can be allocated efficiently to each economic actor.
According to Adam Smith's work, the "An Inquiry into the Nature and Causes of the Wealth of Nations."" - one of the most important books on economics ever written, his work established economics as an autonomous subject and launched the economic doctrine of a free market economy. Smith argued that the state should not interfere with the functioning of the economy. It should adopt a free market economy. A free market economy is one of the economic systems, which attempt to solve the basic economic problem with a minimum of regulation and control by governments, and the allocation of resources is determined by very unique system called the price mechanism. The reason why it is called the "price- mechanism is because the price acts as a signal and an incentive for producers to act in the require way so as to maximise their gain, which, in turn, optimises the allocation of resources in the whole economy. As the objective of social provisioning is to maximise everyone's satisfaction, then this system achieves best because the system allows each individual to maximise their own benefits. .
In the market economy, there are four main types of economic actors in a market economy - consumers, workers, firms, and governments. All economic actors in this system are motivated by pure self-interest where they are all aimed to maximise their own interests.
Consumers: Consumers want to maximise their own economic welfare, sometimes referred to as utility or satisfaction.
