Fundamentals of a Market Economy Private Property Specialization Consumer Sovereignty Competition Profit Voluntary Exchange Limited Government Involvement

1. Private Property Property resources owned by private sector Right to use, sell, abuse, bequeath Buyers and sellers are free to own and use private property.

2. Specialization Buyers and sellers are able to concentrate their efforts in areas where they have an advantage. A situation in which people concentrate their efforts in the activities that they do best firms not truly free to make what they want; will only produce what individuals want to purchase

3. Consumer Sovereignty Buyers can exercise their dominance over what is produced by freely deciding whether to buy or not to buy. The idea that consumers have the ultimate control over what is produced because they are free to buy what they want and to reject what they don’t want.

4. Competition Businesses have to compete for the consumer’s dollar Large number of buyers & sellers means No one firm can control price in an industry Increases quality of products Lower prices for products

5. Profit Sellers are free to attempt to maximize their profits. A financial gain from a business transaction.

6. Voluntary Exchange When a buyer and seller agree to do business together, each believes that the benefits outweigh the costs. Both sides think what they are getting is worth more than what they are giving up.

7. Limited Government Involvement Buyers and sellers must be free to operate with minimal government intervention. Laissez faire – French meaning: “leave things alone” All real-world market economies have some degree of government involvement.