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Characteristics of Market Economy (1).ppt
- 1. What is an Economic System? an organized set of procedures a nation uses in producing and distributing goods and services The system is determined by who answers the 3 basic economic questions
- 2. Market Economy • Based on individual choice, not government directives. • Answering the 3 Basic Questions – What- the goods consumers are willing to buy are produced. – How- by individually owned enterprises – For whom- people who can afford them
- 3. • Markets are driven by consumer demand • Most efficient economic system Advantages • Act in your own self-interest • Wide variety of goods/services • Lower Prices Disadvantages • only productive resources rewarded • market failures (monopolies, public goods, etc.) • unequal income distribution Advantages vs. Disadvantages
- 4. • Crash Course: • Capitalism and Socialism-14:00 • https://www.youtube.com/watch?v=B3u4E FTwprM
- 5. 1. Private Property • Creates incentive to work, save, and invest. • Right to use, sell, abuse, bequeath
- 6. 2. Economic Freedom • You have the ability to create your own career path. (ex: what job you want, what school you want to attend, what major you want, etc.) – firms not truly free to make what they want; will only produce what individuals want to purchase
- 7. 3. Consumer Sovereignty • The idea that consumers have the ultimate control over what is produced because they are free to buy what they want and to reject what they don’t want. • Markets respond to consumer demand
- 8. 4. Competition • Businesses have to compete for the consumer’s dollar. (Ex: different channels on television) • Results from competition: – Increases amount of choices – Increases quality of products – Lower prices for products
- 9. 5. Profits (Incentives) • Sellers are free to attempt to maximize their profits. • Profit acts as an incentive to work harder.
- 10. 6. Voluntary Exchange • When a buyer and seller agree to do business together, each believes that the benefits outweigh the costs.
- 11. 7. Limited Government Involvement • Buyers and sellers must be free to operate with minimal government intervention. • All real-world market economies have some degree of government involvement.
- 12. Adam Smith • Adam Smith is known as the Father of Economics. • Wrote Wealth of Nations – In this publication he argued that a nation would be wealthier if it engaged in free trade rather than mercantilism. https://www.youtube.com/watch?v=ejJRhn53X2 M 6 min.
- 13. Characteristics of a Market Economy (free enterprise) 1. Private Property 2. Economic Freedom 3. Consumer Sovereignty 4. Competition 5. Profit 6. Voluntary Exchange 7. Limited Government Involvement
- 14. Market Economy Activity • With a partner or by yourself, draw a picture that represents a characteristic of a Market Economy. • Your picture must have color and it must be neat. • Make sure you title your drawing with the characteristic you have chosen. • Provide a sentence that explains what it is that you drew and how it relates to the characteristic you chose.