Free Markets: Why do Markets Exist?
• Market allows buyers and sellers to exchange
things
• Markets exist because none of us produces all we
require
• Specialization concentrating on producing a
• Specialization leads to the
Because we specialize, we need markets to sell what we
have and buy what we want
Five Features of the Free Market
1. Private Property any good that is
– Under free markets, individuals and businesses
have the right to own property
2. Choice the key element of the Free Market
– Workers have the right to choose what
– Businesses have the right to choose the products
Five Features of the Free Market
3. Voluntary Exchange people have the right
to make
3. Competition with competition there is a
wider selection of products to
Last Feature and Advantages
5.
Economic Incentives if you produce goods and services
people
•
Economic Efficiency producers make only what
consumers want at
•
Economic Freedom workers work where they want, firms
produce what they want,
•
Economic Growth people are always looking for new
ideas and innovations
How a Centrally Planned Economy is
Organized
• The government owns both
• They control where individuals
• It decides how much to produce and
Problems with Centrally Planned
Economies
1. Greatest disadvantage their performance always
falls short of the
2. Tough to meet consumers’
3. Workers lack incentive to work hard
4. No
5. You have to sacrifice individual freedoms in order to
Rise of Mixed Economies
• Laissez faire the government
• Some needs and wants in the modern society are
difficult
– Example: how could a free market provide for national
defense?
• Some needs that markets could provide for fall to
governments
– Example: education
Balancing Control and Freedom
• Governments create laws
• Without laws insisting on competition, some
firms would dominate the
• Some goals of a society are best met by an
open market, others