re: How does the free market and economy work in the Harry Potter Universe?

I do not recall ever seeing or reading someone create matter, so corporations would be necessary to make everything everyone uses on a daily basis, etc. The food had to come from somewhere too, no doubt, requiring farmers. Being England, there was also likely a very high tax rate.

There is also a lot of people with family money (like the Malfoys and Potter) from centuries ago. No doubt much of that money was acquired from muggles in less than legal or ethical ways.

Finally, we know the muggle prime minister of England always was informed about the wizarding world. The ministry of magic does a lot to keep the muggles safe and ignorant. I imagine they were compensated for that service somehow by the muggle government.