MARKET ECONOMY SOCIAL 9 CHAPTER 6 MARKET ECONOMY

MARKET ECONOMY SOCIAL 9 - CHAPTER 6

MARKET ECONOMY • No government involvement in economic decisions; private firms account for all production • Consumers decide WHAT should be produced. They do this through the purchases they make • Businesses determine HOW the products will be produced. They must be competitive • WHO buys the products? The people with the most money are able to buy more goods and

MARKET ECONOMY (CAPITALISM) Pure Price System • Decisions about scarcity should be Decentralized made free from govt. control. Laissez Faire • Economic forces (price system/supply & demand) in the market should answer the three economic questions. Free Enterprise • In “laissez faire the Free Market economics”, government should adopt a “hands off” Private Enterprise policy when it comes to

MARKET ECONOMY CONT’D… • Competition and profit motive find the most efficient and innovative methods of production. • Values individualism and self-interest. • Individuals can best achieve their goals if they are allowed to have private ownership. • Dollar voting: An analogy used to explain how the purchasing choices of consumers affect which products will continue to be produced and supplied to the market – Every $ paid for a particular product is

SUPPLY & DEMAND • What happens when demand exceeds supply? • What happens when supply exceeds demand? • How does supply and demand affect choices such as… –Careers –Types of cars –Types of restaurants/food(I. e. Lobster) • What are some recent examples of instances where demand exceeded supply? What were the results?

ADVANTAGES DISADVANTAGES • Market gives producer incentive • Market provides incentive to hire skilled labor • Wide variety of goods and services are available • Competition encourages good quality goods • Productivity is rewarded by profits • Market economy fosters self-reliance • It is possible to become • Consumers can be manipulated by advertising • Prices and incomes may not reflect what is best for society • Boom & bust cycle • Some firms try to monopolize markets; conspiring & price fixing • Extreme income inequality can exist • Environmental problems • Job security