Chapter 2.3 notes

1. Chapter 2.3 notes

2. Market Economy • normally based on a system of capitalism – private citizens (many are entrepreneurs) own the factors of production.

3. Advantages • can adjust to change • freedom of consumers • small degree of gov’t interference • everyone has a voice • variety of goods and services • high degree of consumer satisfaction.

4. Disadvantages • inability of market to meet every person’s basic needs while others are very rich • market can’t provide some things such as justice, education and health care (gov’t must do so) • No job security; unemployment

5. Characteristics of Market Economies • Economic freedom –People can choose what to do, where to work, can accept or reject employment, etc. • Voluntary exchange –buyers and sellers freely and willingly engaging in market transactions; both better off after • Private property rights – includes all types of property; gives people incentive to be successful.

6. Profit motive – the driving force that encourages people and organizations to improve their material well-being • Competition –the struggle among sellers to attract consumers while lowering prices.

7. The Role of the Consumer • Consumer sovereignty – consumer is ruler of the market because their choices determine what will be produced.

8. Role of the government • Protector – against false advertising, unsafe food and drugs, etc. • Provider and consumer – by providing services like education, parks, etc., the gov’t becomes a consumer • Regulator – preserving competition; overseeing interstate commerce, communications, banking and even nuclear power.

9. 2.4 notes - Mixed Economies • Mixed Economy – has elements of traditional, command, and market economies • Almost all economies are mixed • Most emphasize one type • U.S. – mostly market, but gov’t involved to protect, regulate competition, etc.