As its name suggests, the free market is a system in which businesses and markets are allowed to operate freely. This involves the circulation of money in venues where products and services are offered. Under a free market, therefore, one of the most basic things is for an individual to be able to decide to make a purchase from another entity in order to meet a certain need or desire, and for that party to charge an amount which will cover the cost of the item as well as provide a certain amount of profit. This enables both parties to benefit from the transaction.
Of course, the benefit for each of the parties involved in the trade is subjective. The benefit to be acquired after the exchange must present a certain value for the person who will be receiving it in order for the person to want to enter into the transaction in the first place. This desire may be driven by need or other types of preferences, which are of course determined by the buyer. The preferences of consumers therefore translate into the demand for the product, which together with supply, dictate how the market will operate.
The free market paradigm encourages the natural interaction between supply and demand and recognizes this as the determining factor as to how markets should operate and progress. It places a premium on private ownership and control, as well as on the idea that exchanges made should be voluntary. It strongly discourages the intervention of the state on trade and pushes for as little external regulation as possible.