Chapter 1 Economic System
Slides in this set (3)
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- Market is any arrangement that allows buyers and sellers to exchange things. Markets eliminate the need for anyone person to be self- sufficient. None of us produces all we require to satisfy our needs and wants.
- Markets allow us to exchange things we have for things we want
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- In a Free market economy, answers to the the three economic questions are made by voluntary exchange in markets. The choices made by individuals determine what gets made, how is it made, and how much people can consume if the goods and services produced. Individuals and businesses make their own decisions about what to buy or sell. Market economies are also capitalist economies because the capital that entrepreneurs invest in businesses is a vital part of the system.
- Advantages
- - Economic Freedom - Free market economies have the highest degree of economic freedom of any system. Workers work where they want, firms produce what they want
- - Economic Efficiency- Because it is self regulating, a free market economy responds efficiently to rapidly changing conditions. Producers provide only the goods and services that consumers want, and generally at prices consumer are willing to pay.
- - Economic Growth- Because the competition encourages innovation, free markets encourage growth. Entrepreneurs are always seeking profitable opportunities, contributing new ideas and innovations.