Unit 6 Free Market and Role of Government. The existence of competition in a free market economy ensures individual choice. . The government can protect a free market economy by maintaining a stable currency, tax breaks to proprietorships, law and order….
The government can protect a free market economy by maintaining a stable currency, tax breaks to proprietorships, law and order…
Scarcity – The basic economic problem that arises because people have unlimited wants but resources are limited
Trade Off/Opportunity Costs – A benefit, profit, or value of something that must be given up to acquire or achieve something else.
Factors of Production – Resources
required for the production process.
Ex. Land, Labor, Capital, Enterprise
way things have always been done.
of each other
leave business/free enterprise
alone, “hands off”
by competition, profit motive and self interest
their private property, the
goods/services belong to the
When the supply and demand curves intersect, the market is in equilibrium
Surplus in equilibrium is when there is an excess supply of a product.
Shortage is when the quantity demanded is higher than the available supply
1. Only one seller in the market
2. Extremely difficult to enter the market
3. Produces 1 product
4. Doesn’t need to compete
5. Full control over price
1. A few (2-4) sellers in the market
2. Difficult to enter the market
3. Similar products
4. Compete with few other sellers
5. Some control over price
1. Large number of sellers
2. Easy entry into the market
3. Very similar products
4. Highly competitive
5. Very little price control
recession, 6 months of declining GDP
depression, high unemployment, low GDP, low CPI
GDP = Gross domestic product= total dollar value of all final goods and services produced in a country
CPI = Consumer Price Index= measure of change in price over time of specific goods/services