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

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

Five Features of the Free Market3. Voluntary Exchange people have the right

to make

3. Competition with competition there is a wider selection of products to

Last Feature and Advantages5. 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