 Private property  The right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property. Chapter 2, LO21©2013 McGraw-Hill Ryerson Ltd.

 Freedom of enterprise and choice  Freedom of enterprise: businesses can buy and sell as they choose  Freedom of choice: ▪ owners can use or sell property as they choose ▪ workers can work where they like ▪ consumers can buy what they want Chapter 2, LO22© 2013 McGraw-Hill Ryerson Ltd.

 Self-interest  Entrepreneurs try to maximize profit or minimize loss.  Property owners try to get the highest price for the sale or rent of their resources.  Workers try to maximize their utility (satisfaction) by finding jobs that offer the best combination of wages, hours, fringe benefits, and working conditions.  Consumers try to obtain the products they want at the lowest possible price and apportion their expenditures to maximize their utility. Chapter 2, LO23© 2013 McGraw-Hill Ryerson Ltd.

 Competition  Independently acting sellers and buyers operating in a particular product or factor market  Freedom of sellers and buyers to enter or leave markets, on the basis of their economic self- interest Chapter 2, LO24© 2013 McGraw-Hill Ryerson Ltd.

Chapter 2, LO25

 Markets and Prices  A market is an institution or mechanism that brings buyers (“demanders”) and sellers (“suppliers”) into contact.  The coordinating mechanism of capitalism is a system of markets and prices. © 2013 McGraw-Hill Ryerson Ltd.Chapter 2, LO26

 Technology and Capital Goods  Extensive use of technologically advanced capital goods helps market economies achieve greater efficiency in production. Chapter 2, LO27© 2013 McGraw-Hill Ryerson Ltd.

 Specialization  Division of labour ▪ ability differences ▪ learning by doing ▪ saving time switching tasks  Geographic specialization Chapter 2, LO28© 2013 McGraw-Hill Ryerson Ltd.

 Use of money  FIGURE 2-1 Money Facilitates Trade When Wants Do Not Coincide Chapter 2, LO29© 2013 McGraw-Hill Ryerson Ltd.

 Active, But Limited, Government  Market failures  The central government, along with the central bank, needs to take action if a market economy is experiencing recession or inflation. © 2013 McGraw-Hill Ryerson Ltd.Chapter 2, LO210