1.  Self-interest  Entrepreneurs try to maximize profit or minimize loss.  Property owners try to get the highest price for the sale or rent of their resources.  Workers try to maximize their utility (satisfaction) by finding jobs that offer the best combination of wages, hours, fringe benefits, and working conditions.  Consumers try to obtain the products they want at the lowest possible price and apportion their expenditures to maximize their utility. © 2013 McGraw-Hill Ryerson Ltd.Chapter 2, LO21

2.  Competition  Independently acting sellers and buyers operating in a particular product or factor market  Freedom of sellers and buyers to enter or leave markets, on the basis of their economic self- interest © 2013 McGraw-Hill Ryerson Ltd.Chapter 2, LO22

3. © 2013 McGraw-Hill Ryerson Ltd.Chapter 2, LO23 Free 1 Hong Kong 3 Australia 6 Canada Mostly Free 9 United States 20 Japan 31 Spain Mostly Unfree 113 Brazil 135 China 143 Russia Repressed 171 Iran 175 Venezuela 179 North Korea

4.  Markets and Prices  A market is an institution or mechanism that brings buyers (“demanders”) and sellers (“suppliers”) into contact.  The coordinating mechanism of capitalism is a system of markets and prices. © 2013 McGraw-Hill Ryerson Ltd.Chapter 2, LO24

5.  Technology and Capital Goods  Extensive use of technologically advanced capital goods helps market economies achieve greater efficiency in production. ©2013 McGraw-Hill Ryerson Ltd.Chapter 2, LO25

6.  Specialization  Division of labour ▪ ability differences ▪ learning by doing ▪ saving time switching tasks  Geographic specialization ©2013 McGraw-Hill Ryerson Ltd.Chapter 2, LO26

7.  Use of money  FIGURE 2-1 Money Facilitates Trade When Wants Do Not Coincide ©2013 McGraw-Hill Ryerson Ltd.Chapter 2, LO27

8.  Active, But Limited, Government  Market failures  The central government, along with the central bank, needs to take action if a market economy is experiencing recession or inflation. ©2013 McGraw-Hill Ryerson Ltd.Chapter 2, LO28