The Free Market Free Enterprise Free Markets Free

The Free Market (Free Enterprise)

Free Markets (Free Enterprise) Private buyers and sellers are in complete control of economic decisions They own the factors of production (resources). They consume and produce what they want

What Regulates the Free Market? Self-Interest Incentives All of these together make up the The reward you get for doing something INVISIBLE HAND!!! Competition Looking out for your own economic advantage Entities fighting for consumer demand Prices are signals to producers and consumers

The Invisible Hand Adam Smith presented this theory Markets can self-regulate if left alone by the government. Incentives, prices, competition, and many other factors self regulate the market.

What do all of these people have in common?

They all specialize in something!!! Specialization When an entity uses its resources to produce what they’re best at Free markets allow this Makes us and markets more efficient

The Player’s in the Free Market Households Consumers of goods and services They ARE the factors of production Firms Producers of goods and services They USE the factors of production

Household or Firm?

Household or Firm?

There are Two Specific Markets Within a Free Market

Factor Market in which the factors of production are bought and sold Example worker – Mc. Donalds hiring a

Factor Market BUYS

To produce…

Product Market in which the finished good or service is bought and sold

Circular Flow Model