Chapter 2.3 notes

Market Economy normally based on a system of capitalism – private citizens (many are entrepreneurs) own the factors of production.

Advantages can adjust to change freedom of consumers small degree of gov’t interference everyone has a voice variety of goods and services high degree of consumer satisfaction.

Disadvantages inability of market to meet every person’s basic needs while others are very rich market can’t provide some things such as justice, education and health care (gov’t must do so) No job security; unemployment

Characteristics of Market Economies Economic freedom –People can choose what to do, where to work, can accept or reject employment, etc. Voluntary exchange –buyers and sellers freely and willingly engaging in market transactions; both better off after Private property rights – includes all types of property; gives people incentive to be successful.

Profit motive – the driving force that encourages people and organizations to improve their material well-being Competition –the struggle among sellers to attract consumers while lowering prices.

The Role of the Consumer Consumer sovereignty – consumer is ruler of the market because their choices determine what will be produced.

Role of the government Protector – against false advertising, unsafe food and drugs, etc. Provider and consumer – by providing services like education, parks, etc., the gov’t becomes a consumer Regulator – preserving competition; overseeing interstate commerce, communications, banking and even nuclear power.

2.4 notes - Mixed Economies Mixed Economy – has elements of traditional, command, and market economies Almost all economies are mixed Most emphasize one type U.S. – mostly market, but gov’t involved to protect, regulate competition, etc.