Characteristics of a Market Economy

Market Economy An economy in which ordinary people decide what, how, and for whom to produce goods and services. Based on economic freedom, trade, private property, profit, and competition

Property Rights A property right is the exclusive authority to determine how a resource is used, whether that resource is owned by government or by individuals

Property Rights The three basic elements of private property are: (1) exclusivity of rights to choose the use of a resource, (2) exclusivity of rights to the services of a resource, and (3) rights to exchange the resource at mutually agreeable terms

Property Rights Example The owner of an apartment with complete property rights to the apartment has the right to determine whether to rent it out and, if so, which tenant to rent to; to live in it himself; or to use it in any other peaceful way. That is the right to determine the use or resource. If the owner rents out the apartment, he also has the right to all the rental income from the property. That is the right to the services of the resources (the rent). A private property right includes the right to delegate, rent, or sell any portion of the rights by exchange or gift at whatever price the owner determines (provided someone is willing to pay that price) These are the rights to exchange the resource at mutually agreeable terms.

Intellectual Property literary and artistic works symbols, images, names, and designs used in commerce the information and original expressions of creative individuals

Intellectual Property KEY FORMS OF INTELLECTUAL PROPERTY The key forms of intellectual property are patents, copyrights, trademarks, and trade secrets. Because intellectual property shares many of the characteristics of real and personal property, associated rights permit intellectual property to be treated as an asset that can be bought, sold, licensed, or even given away at no cost. IP laws enable owners, inventors, and creators to protect their property from unauthorized uses.

Copyright Copyright is a legal term describing the economic rights given to creators of literary and artistic works, including the right to reproduce the work, to make copies, and to perform or display the work publicly. The U.S. Copyright Office serves as a place where claims to copyright are registered and where documents relating to copyright may be recorded when the requirements of the U.S. copyright law are met.

Patent Under the terms of this social contract, the inventor is given the exclusive right to prevent others from making, using, and selling a patented invention for a fixed period of time – in most countries, for up to 20 years – in return for the inventor's disclosing the details of the invention to the public.

Trade Secrets Any information that may be used in the operation of a business and that is sufficiently valuable to afford an actual or potential economic advantage is considered a trade secret. Examples of trade secrets can be formulas for products, such as the formula for Coca-Cola Although secrecy is expensive to maintain, large companies rely heavily on it when patents are not available.

Trademarks Trademarks are commercial source indicators, distinctive signs that identify certain goods or services produced or provided by a specific person or enterprise. Throughout most of the world, trademarks must be registered to be enforceable, and registrations must be renewed.

Freedom of Enterprise Freedom of enterprise means that entrepreneurs and businesses have the freedom to obtain and use resources, to produce products of their choice, and to sell these products in the markets of their choice.

Competition The freedom to choose from several alternatives

Competition 1. Large numbers of sellers mean that no single producer or seller can control the price or market supply. 2. Large number of buyers means that no single consumer or employer can control the price or market demand. 3. Depending upon market conditions, producers can enter or leave industry easily.

Consumer Choice Consumers are free to spend their income in such a way as to best satisfy their wants (consumer sovereignty).

Limited Role of Government Government's role in a free-market economy also includes protecting private property, enforcing contracts, and regulating certain economic activities.

Sources http://www.econlib.org/library/Enc/PropertyRights.html http://encarta.msn.com/encyclopedia_761579938/Free-Market_Economy.html http://www.america.gov/st/econ-english/2008/April/20080429213326eaifas0.2220423.html http://www.harpercollege.edu/mhealy/eco212i/lectures/cap/cap.htm http://www.harpercollege.edu/mhealy/eco211/lectures/captism/ch4.htm