1. Chapter 2.3 notes

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

3. 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.

4. 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

5. 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.

6. 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.

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

8. 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.

9. 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.