1. Market Economy
Social 9 - Chapter 6

2. 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 services

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

4. 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 considered a “dollar vote” for that product

5. SUPPLY & DEMAND Careers Types of cars
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?

6. 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 rich
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