Chapter 18.3 Being an Economically Smart Citizen

Understanding Your Role in the Economy The U.S. has a market economy. Most economic decisions are not made by the government, but by individuals looking out for their own and their families self-interests.The U.S. has a market economy. Most economic decisions are not made by the government, but by individuals looking out for their own and their families self-interests. A market economy is participatory. The choices you make as a consumer affect the products that businesses make and the prices they receive for their products. Likewise, the products offered and their prices affect the choices you make.A market economy is participatory. The choices you make as a consumer affect the products that businesses make and the prices they receive for their products. Likewise, the products offered and their prices affect the choices you make.

continued A market economy is based on capitalism, a system in which citizens own most of the means of production. It is also based on free enterprise – businesses compete for profit with a minimum of government interference.A market economy is based on capitalism, a system in which citizens own most of the means of production. It is also based on free enterprise – businesses compete for profit with a minimum of government interference. Keeping informed means reading news stories, listening to news reports, and gathering information about economic activities of businesses and government.Keeping informed means reading news stories, listening to news reports, and gathering information about economic activities of businesses and government.

continued Incentives are rewards offered to try to persuade people to take certain economic actions. Price is one incentive. Others are bonuses for salespeople and low credit rates for consumers. Knowing how incentives work will help you make wise choices.Incentives are rewards offered to try to persuade people to take certain economic actions. Price is one incentive. Others are bonuses for salespeople and low credit rates for consumers. Knowing how incentives work will help you make wise choices. One role of gov’t in the economy is to help maintain competitive markets. Another role is to provide services, such as education and national defense, that the private sector does not provide.One role of gov’t in the economy is to help maintain competitive markets. Another role is to provide services, such as education and national defense, that the private sector does not provide.

continued Competition forces businesses to use society’s resources efficiently to produce goods and services people prefer to produce quality products at low costs. Low production costs keep prices low for consumers.Competition forces businesses to use society’s resources efficiently to produce goods and services people prefer to produce quality products at low costs. Low production costs keep prices low for consumers. Gov’t can use incentives to encourage people and businesses to take certain actions. For example, offering scholarships encourages more people to get higher education.Gov’t can use incentives to encourage people and businesses to take certain actions. For example, offering scholarships encourages more people to get higher education. Gov’t can also discourage certain actions. For example, tax laws can punish companies that cause pollution.Gov’t can also discourage certain actions. For example, tax laws can punish companies that cause pollution.

Making Wise Choices Rational choice is choosing the alternative that has the greatest value from among comparable- quality products. You make a rational choice when you buy the goods and services that you believe will best satisfy your wants for the lowest possible cause.Rational choice is choosing the alternative that has the greatest value from among comparable- quality products. You make a rational choice when you buy the goods and services that you believe will best satisfy your wants for the lowest possible cause.

continued Wise consumers will not all make the same choices. A rational choice is one that generates the greatest perceived value for any given expenditure.Wise consumers will not all make the same choices. A rational choice is one that generates the greatest perceived value for any given expenditure. Wise decision making by individuals also benefits society by making the best use of scarce resources.Wise decision making by individuals also benefits society by making the best use of scarce resources. Being fully informed is the best way to make the best economic as well as political decisions.Being fully informed is the best way to make the best economic as well as political decisions.