1. EE #14 – The Market Economy

2. Market Means by which ppl buy and sell something
Types of markets – how do we best answer the 3 economic questions?

3. Traditional Market Economy
Based on custom and/or religion
Family determines your job
US today – still some jobs are “male” and “female”

4. Pure Market Economy aka Capitalism
Private (individual) ownership of all resources, no public (gov) involvement

5. Owners make all economic decisions -
What to produce?
Whatever will make a profit!
How?
Cheapest way possible!
For whom?
Those who are willing & able to buy it – consumer goods

6. Capitalism Adam Smith writes of this in 1776
“Invisible Hand” guides the economy w/o any regulation / gov controls
Competition drives market: make the best product at cheapest price, ppl will buy it & you’ll make profit!
No one says: you should charge $1 for your cheeseburger – the market decides the price!

7. Selfish?!
Making rational self-interested decisions benefit all of society
Why do employers give raises?
Why do items go on sale?

8. Is capitalism good?
Advantages:
Disadvantages:

9. Capitalism
ADV  : owners make $, make goods consumers want, prices stay low so ppl will buy them
DIS  : labor = cheap & expendable, monopoly (1 person owns an entire sector of industry), no public (gov) services