1. Homework: Unit 2 Test (Ch 4, 5 and 6) next Thursday FrontPage: NNIGN Worst Fast Food Names 1

2. Chapter 6, Section 2

3. Our economic system is not run by any single group or individual…  But how do producers and consumers know what to make or buy, and when?  How do scarce resources (with alternative uses) get allocated efficiently across a huge nation with hundreds of millions of people?  The answer is…

4.  Send signals to producers about:  What to produce  When to enter or leave a market  Send signals to consumers about:  What to buy  When to buy

5. Characteristics of the Price System  Neutrality  Do not favor either producer or consumer  Free interactions of both help determine equilibrium price  Market-driven  The “invisible hand”, not central planners (gov.) determine prices  Flexibility  Can change as market conditions change; faster than decision-making by individuals  Efficiency  Will adjust until maximum number of goods are sold

6. Prices motivate and inform both producers and consumers  Provide positive and negative incentives  For producers  Provide both motivation and information  Rising prices – get in market; make profit  Falling prices – get out; avoid losses, allocate resources elsewhere  While our system is often called a “profit” system, it should also be called a “loss” system  For consumers  Act as incentives; encourage purchases, or motivate to switch to a substitute

7. Signals?  For each of the following images, determine who is being sent a signal, and what the signal is.

8.  Signal to whom?  What is the message?

9.  Signal to whom?  What is the message? From businessinsider.com

10.  Signal to whom?  What is the message?

11.  Signal to whom?  What is the message?

12.  Signal to whom?  What is the message?

13.  Signal to whom?  What is the message? Non-store = Internet

14.  Signal to whom?  What is the message?

15.  Signal to whom?  What is the message?

16.  Signal to whom?  What is the message?

17.  Signal to whom?  What is the message?