1. Free Market
Economics Chapter 2

2. Do you value your freedom?
We have our freedom of speech, religion, etc.
But we also have the freedom to own property, get a job, spend money the way you want

3. Economic freedom is the chief characteristic of a free market economy

4. Why markets exist
A market is any arrangement that allows buyers and sellers to exchange things
Markets eliminate the need for any one person to be self-sufficient
We do not grow cotton, process the cotton into cloth, weave the cloth into a shirt.
Instead we just go to a store and purchase a shirt
Markets allow us to exchange the things we have for the things we want

5. Specialization
Instead of being self-sufficient, each of us specializes in a few products or services
Specialization is the concentration of the productive efforts of individuals and businesses on a limited number of activities
Specialization leads to efficient use of capital, land, and labor
It is easier for people to learn one or a few tasks very well than them all
This allows us to work more efficiently—saving resources by avoiding wastes

6. Buying and selling
Without specialization, markets would not be necessary
In a modern market-based economy, people typically earn income by specializing in particular jobs.
They then use this income to buy the products that they want to consume

7. Free market economy
In a free market economy, answers to the three economic questions are made by voluntary exchange in markets
Individuals and businesses make their own decisions about what to buy or sell
Market economies are also called capitalist economies because the capital that entrepreneurs invest in businesses is a vital part of the system

8. Free market economy
Individuals and privately owned businesses own the factors of production
Make what they want and buy what they want
Individuals answer the three economic questions
What to produce
How to produce
And who consumes what is produced

9. Self-regulating
Competition and our own self-interest keep the marketplace functioning—known as the invisible Hand

10. Advantages of the free market
Economic efficiency—responds efficiently to rapidly changing conditions
Economic freedom—workers work where they want, firms produce what they want, individuals consume what they want
Economic growth—competition encourages innovation
Additional goals—offer wider variety of goods and services because consumers have the power to decide what gets produced (consumer sovereignty)

11. No country operates under a pure, unregulated free market