Chapter 2 Mr. Bertrandt There are 5 characteristics of a Market System. 1. Economic Freedom 2. Economic Incentive 3. Competitive Markets (Competition) 4. Limited Government 5. Private and Public Property When consumers, producers and workers are free to make economic choices that are in their own best interest. In a Market economy there are 3 economic actors or groups that interact with one another. 1. Consumers 2. Workers 3. Producers What to buy? Where to shop? What prices to pay? Where to work? What kind of job to do? What wage to accept? What to make? What resources to use? What to charge? Who to hire? Even in a Market economy there can be restrictions on the economic actors. Restrictions on Consumers - Limited quantities for items, must be a certain age to make purchases, prices too high, stores not open. Not qualified for good jobs (skills/education) Minimum wage Amount of hours that can be worked Type of jobs Quotas on resources Minimum wage Environmental restrictions Diversity in the workplace Positive or negative rewards or punishments for economic choices. Sales Giveaways Promotions Wage increases Paid vacations Benefits Bonuses Profits Good Reputation Logo/Name Recognition High Prices Lack of Variety Sizes Styles Unemployment Poor Working Conditions Long hours Governmental Regulations Increase Cost of Resources When two or more companies produce the same good or service and vie for consumer dollars. 1. Wider Variety, colors, sizes, styles 2. High Quality 3. Good Prices 4. Good Service What are some examples of competitive markets? Automobile Beverage Fast Food Examples of Markets with No Competition: Public Utilities Cable Television Post Office What is meant by a voluntary exchange? When two people feel they will benefit from a transaction. Private Ownership When individuals are able to possess goods and services. Examples of Private Property House Car Boat Clothes Ipod Computer What are some restrictions we have as property owners in our economy? Building permits Noise Restrictions Obeying Laws Public Ownership Property that is owned by everyone and is financed by taxes but is managed by a selected group of the government. Examples of Public Property Streets Parks Courthouse Library What is the role of Limited Government in a pure market economy? To provide structure for business to operate. What are the 3 functions of government in a pure market economy? 1. Establish the Laws Legislative 2. Enforce the Laws Executive 3. Settle Disputes Judicial In what areas of the American Economy does our government exert some economic control? Taxation Social Security, Property, Income Health and Safety Standards OSHA, FDA Public Protection Police, Fire, Military