Chapter 3 Individual Markets

Chapter 3 Individual Markets - fd sdf sdf

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Chapter 3 Individual Markets: Demand and Supply I. Characteristics of the Market System A. Private individuals and firms own most of the private property (land and capital). 1. Private property, coupled with the freedom to negotiate binding legal contracts, enables individuals and businesses to obtain, control, use, and dispose of this property. 2. Private property rights encourage investment, innovation, exchange of assets, maintenance of property, and economic growth. 3. Property rights extend to intellectual property through patents, copyrights, and trademarks. B. Freedom of enterprise and choice exist. 1. Freedom of enterprise means that entrepreneurs and businesses have the freedom to obtain and use resources, to produce products of their choice, and to sell these products in the markets of their choice. 2. Freedom of choice means: a. Owners of property and money resources can use resources as they choose. b. Workers can choose the training, occupations, and job of their choice. c. Consumers are free to spend their income in such a way as to best satisfy their wants (consumer sovereignty). C. Self-interest a. Self interest is one of the driving forces in a market system. Entrepreneurs try to maximize profits or minimize losses; resource suppliers try to maximize income; consumers maximize satisfaction. b. As each tries to maximize profits, income, satisfaction, the economy will benefit if competition is present. D. Competition among buyers and sellers is a controlling mechanism. 1. Large numbers of sellers mean that no single producer or seller can control the price or market supply. 2. Large number of buyers means that no single consumer or employer can control the price or market demand.
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3. Depending upon market conditions, producers can enter or leave industry easily. E. Markets and prices 1. A market system conveys the decisions of the many buyers and sellers of the product and resource markets. Recall the demand and supply model in Chapter 3. 2. A change in the market price signals that a change in the market has occurred. 3. Those who respond to the market signals will be rewarded with profits and income. F. Reliance on technology and capital goods 1. Competition, freedom of choice, self-interest, and the potential of profits provide the incentive for capital accumulation (investment). 2. Advanced technology and capital goods uses the more efficient roundabout method
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This note was uploaded on 06/23/2008 for the course HIST 101 taught by Professor Wormer during the Spring '08 term at Acadia.

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Chapter 3 Individual Markets - fd sdf sdf

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