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Unformatted text preview: CHAPTER 3 MARKET DEMAND AND MARKET SUPPLY SUPPLY Spring, 2011 Spring, 1 CHARACTERISTICS OF A CHARACTERISTICS MARKET ECONOMY MARKET 1. Private property rights 2. Freedom of choice 3. Self-interest 4. Limited government 4. 5. Specialization and exchange 6. Use of money 6. 2 OVERVIEW OF MARKET OVERVIEW ECONOMY ECONOMY Who are the participants? Who Households Businesses Government The rest-of-the-world The 3 CIRCULAR FLOW OF CIRCULAR ECONOMIC ACTIVITY What is a market? What How do we classify markets? How Product markets Resource markets Resource Assumptions of simple circular Assumptions flow model of a market economy flow No government No foreign trade No Only consumer goods Only produced No saving 4 THE BASIC CIRCULAR FLOW MODEL, P. 125 MODEL, Figure 15.1 (Macro 5.1) IMPLICATIONS OF CIRCULA...
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