1. Free Enterprise Markets make the world go ‘round

2. Review The Basic Economic Questions • What will be produced? • How will it be produced? • Who will get it? • How a country answers these questions will determine what type of economic system they have. • Traditional, Command, Market, Mixed

3. The Pillars of Free Enterprise • Private Property • Incentives to use resources efficiently • The Price System • Market Competition • Entrepreneurship • Profit motive

4. Price System • Information • Value customer places on products • Opportunity costs of using different resources • Measures relative scarcity • Incentives • Increased prices encourages more production • Higher wages (price of hunk of human capital) attracts workers

5. Market Competition The Regulator • Market for resources • My hunka human capital is better than yours • How much do you want for that hunk of h.c. • Market for products • I’ll give you $7 for that Creed CD. • Anybody want a Big Cherry?

6. The Circular Flow Model What comes around goes around • Market for Products (Goods and Services) • Markets for Resources (Hunka, Hunka) • Both based on voluntary exchange • Roles of Households (you and me) • Consumers—the cookie monster syndrome • Resource owners– want a hunk?

7. Adam Smith’s Wealth of Nations "Give me that which I want, and you shall have this which you want..." • How can people who pursue their own self-interest through voluntary exchange also promote the best interest of society? • Profit is the motivator • Entrepreneurs are the risk-takers • Competitions is the regulator • And the invisible hand goes round and round

8. Relative Scarcity and Value • Which is more valuable? • Insulin • Diamonds • Which is more scarce? • Insulin • Diamonds • Scarcity is relative • It all depends on other things

9. Order these products in terms of relative scarcity • A candy bar • A yacht • A Jeep Cherokee • A room at Grand America • Lunch at McDonald’s • A laptop computer • Olympics opening ceremony tickets

10. Order these resources in terms of relative scarcity • Someone who plays basketball like MJ • Agricultural land in New York • A teacher • Agricultural land in Utah • Electricity in Utah • Electricity in California