Market economy self-regulating principles

United States Economic System What is capitalism? What type of economic system does the United States have? Capitalism allows the freedom of consumption and production of goods and services. The economic system of the United States is based on capitalism.

United States Economic System continued The four principles of U.S. economic system are: Private property Freedom of choice Profit Competition Private property – can own, use, or dispose of things of value. Freedom of choice – can make decisions independently and must accept consequences of those decisions. Profit – money left from sales after all of the costs of operating a business have been paid. Competition – the rivalry among businesses to sell their goods and services.

Market Economy What is the role of consumers in a market economy? A consumer includes individuals, businesses, and government. A consumer buys and uses goods and services. Consumers decide what to buy, where to buy, from whom to buy, and what price they are willing to pay.

Market Economy continued What is the role of producers in a market economy? Producers are individuals and organizations that determine what products and services will be available for sale. Producers determine what products and services will be available, what needs and wants they will satisfy, and the prices they want to receive.

Market Economy continued The market economy is based on the principles of supply and demand. What is demand? What are some examples of consumer demand? What is supply? What are some examples of how producers establish supply? Demand is the quantity of goods or services that consumers are willing and able to buy. Supply refers to the quantity of goods or services that businesses are willing and able to provide. Producers establish the quantity of goods or services that will be produced to meet the demands of consumers. Consumers set the demand for goods and services. Demand influences how much producers will supply. Use the following slides to explain supply and demand using graphs. Demand Examples: High demand for a new gaming console or electronic item causes the price to rise. Last year’s fashions go “out of style” and drop in price occurred. Supply Examples: Many companies are creating an mp3 player, therefore the price drops. Only a few companies started selling tablets, such as the iPad, so the price was high when they were introduced to the public.

Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western

Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western

Supply and Demand Graphs Market (equilibrium) price is the point where supply and demand are equal. Intro to Business, 6e, Thomson South-Western