Date post: | 23-Jun-2015 |
Category: |
Documents |
Upload: | professorhood |
View: | 50 times |
Download: | 0 times |
START PREP
2.2 THE FREE MARKET
TEXTBOOK PAGE 23
THEN START READING SECTION
NOTES BEGIN AT 12.25
ECONOMICSMR. HOOD17 FEBRUARY 2014
2.2 THE FREE MARKET
ECONOMICSMR. HOOD`S NOTES17 FEBRUARY 2014
SECTION FOCUSMARKETS EXIST SO THAT PEOPLE CAN EXCHANGE WHAT THEY HAVE FOR WHAT THEY WANT. A FREE MARKET IS A SELF-REGULATING ECONOMIC SYSTEM DIRECTED BY INDIVIDUALS ACTING IN THEIR OWN SELF-INTEREST.
INTRODUCTION
M A R K E T S
BUYERS AND SELLERS EXCHANGE
THINGS
BUT WHY DO WE HAVE
MARKETS?
OBJECTIVE 1EXPLAIN WHY
MARKETS EXIST
NOBODY IS
SELF - SUFFICIENT
EACH OF US CAN PRODUCE JUST ONE OR A
FEW PRODUCTS
SPECIALIZATION IS CONCENTRATING ON A LIMITED
NUMBER OF ACTIVITIES
SPECIALIZATION LEADS TO EFFICIENT USE OF
RESOURCES
BUT SPECIALIZATION MEANS
WE NEED MARKETS
AND MARKETS ALLOW US TO EXCHANGE
THINGS
WE CAN BUY TO SUIT OUR NEEDS AND
WANTS
PEOPLE USUALLY EARN A SALARY TO BUY
THINGS
OBJECTIVE 2ANALYZE A
CIRCULAR FLOW MODEL OF A FREE MARKET ECONOMY
INDIVIDUALS AND PRIVATE BUSINESSES OWN FACTORS OF
PRODUCTION
INDIVUDUALS ANSWER 3 ECONOMIC QUESTIONS
MARKET ECONOMY REPRESENTED IN A CIRCULAR FLOW
DIAGRAM
FACTOR MARKET
HOUSEHOLDS SUPPLY FIRMS WITH LAND, LABOR,
CAPITAL
FIRMS PAY HOUSEHOLDS FOR LAND, LABOR,
CAPITAL
PRODUCT MARKET HOUSEHOLDS PAY FIRMS FOR GOODS AND
SERVICES
FIRMS SUPPLY HOUSEHOLDS WITH GOODS
AND SERVICES
OBJECTIVE 3UNDERSTAND THE SELF-REGULATING NATURE OF THE MARKETPLACE
WE LIVE IN A COMPETITVE
SOCIETY
BUYERS ONLY CONSIDER
SELF - INTEREST
BUYERS LOOK FOR
LOWEST PRICE
SELF INTEREST IS THE MOTIVATING
FORCE BEHIND THE FREE MARKET
COMPETITION IS THE REGULATING
FORCE
PRICES STAY LOW
QUALITY STAYS HIGH
SELF-INTEREST + COMPETITION
“THE INVISIBLE HAND”
NO NEED FOR GOVERNMENT
OBJECTIVE 4IDENTIFY THE
ADVANTAGES OF A FREE MARKET
ECONOMY
COMPETITION AND SELF-INTEREST SERVE
THE PUBLIC
MARKET RESPONDS QUICKY
TO CHANGES
MARKET PRODUCES ONLY WHAT CONSUMERS
WANT
WORKERS CAN WORK WHERE THEY WANT
PRODUCERS CAN
PRODUCE WHAT THEY WANT
ENTREPRENEURS ALWAYS SEEKING
NEW IDEAS
WIDE VARIETY OF GOODS AND SERVICES
AVAILABLE
CONSUMER SOVEREIGNTY
WE GET TO DECIDE WHAT IS
PRODUCED
BUT FREE MARKET IS ALSO WEAK
ECOMOMIC EQUITY AND SECURITY IS
DIFFICULT