Who should have the authority to set prices, the free market, or the state? When the state has authority to set prices it creates shortages and gluts. A shortage is when there isn’t enough of a certain good or service. A glut is when there is a surplus of goods or services. As a result businesses go out of business. If the government tells businesses that they cannot sell anything under a certain price, the result is little or no sales. If businesses sell everything because the government set a price limit the result would be bankruptcy because they under sold their products. The definition of a free market is a capitalistic economic system in which there is free competition and prices are determined by the interaction of supply and demand and not by the state. In the free market prices are set by the customers. Customers are always looking for the best product for the lowest price. Businesses want sales so they try as best as possible to meet the demand of the customers. This is the formula for success. The free market has the legitimate authority to set prices not the state.