HOW FREE MARKETS WORK

HOW FREE MARKETS WORK - HOW FREE MARKETS WORK In a...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
HOW FREE MARKETS WORK In a free-market system, decisions about what to produce and in what quantities are made by THE MARKET. Consumers send signals to producers about what to make, how many, and so on through the mechanism of PRICE . (White Sox t-shirts are the example in the text.) The price tells producers how much to produce, reducing the changes of a long-term shortage of goods. Prices in a free market are not determined by sellers; BUYERS AND SELLERS NEGOTIATING in the marketplace determine them. Price is determined through the economic concepts of supply and demand. SUPPLY refers to the quantity of products that manufacturers or owners are willing to sell at different prices at a specific time. The amount supplied will increase as the price increases (DIRECT relationship.) The quantity producers are willing to SUPPLY at certain prices is illustrated on a SUPPLY CURVE.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

HOW FREE MARKETS WORK - HOW FREE MARKETS WORK In a...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online