The market economy.

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Presentation transcript:

The market economy

Economy: The economy is responsible for the use or administration of resources which satisfy the needs of society in the form of: - goods: Material objects (food, car...) - services: transport, education, healthcare... All of them have a price. Factors of production: are the resources used to produce goods and services. - Natural resources: wood, water, minerals... - Human resources: people and their labour. - Capital resources : money, buildings, machines....

Factors of production Capital Human resources Natural resources Money Machines workers Raw materials Products

Market economy. Supply and demand In market economies people and companies produce, buy and sell goods freely with a limited involvement of the state. The factors of production belong to individuals and businesses. The market is the method to exchange goods and services. Supply and demand determine the prices. - If the supply of a product is high the price goes down. - If the supply of a product is low the price goes up.

Supply and demand

Economic agents Families State Business (companies) Colect taxes Provide Provides Provides Provide Salaries Workers and capital Create demand Services Infrastructures Goods Provide Incomes or profits

Labour market In a capitalist economy workers are subjet to the market laws, specially supply and demand.They are the labour market. Supply is the people who want to work. Demand is the number of workers that companies need. Labour market is changing: Unemploiment is rising due to new technologies and relocation. ICT increase the teleworking. Companies demand flexibility to workers and workers demand better labour conditions using trade unions and colective agreements.

Globalization of economy Today world's economies are interconnected and form part of an enormous free market system. This is globalization which has the following characters: ICT allows companies all over the world to be in contact. The expansion of multinationals and the relocation of industries. Free trade zones and common markets, to make easy and cheap the exchanges. UN promote the free trade between its members.