The   Market   System 4 C H A P T E R
CAPITALIST IDEOLOGY FREEDOM OF ENTERPRISE & CHOICE PRIVATE PROPERTY SELF- INTEREST COMPETITION
LARGE NUMBERS ENTRY & EXIT CAPITALIST IDEOLOGY FREEDOM OF ENTERPRISE & CHOICE PRIVATE PROPERTY SELF- INTEREST COMPETITION
CAPITALIST IDEOLOGY MARKETS & PRICES FREEDOM OF ENTERPRISE & CHOICE PRIVATE PROPERTY ACTIVE, BUT LIMITED, GOVERNMENT SELF-...
GLOBAL  PERSPECTIVE Index of Economic Freedom, Selected Nations FREE MOSTLY FREE MOSTLY UNFREE REPRESSED Rankings among 15...
Other Characteristics CAPITALIST IDEOLOGY Reliance on Technology and Capital Goods Roundabout Production
Other Characteristics CAPITALIST IDEOLOGY Reliance on Technology and Capital Goods Specialization and Efficiency
Other Characteristics <ul><li>Division of Labor </li></ul>CAPITALIST IDEOLOGY Reliance on Technology and Capital Goods Spe...
Other Characteristics <ul><li>Differences in Ability </li></ul><ul><li>Fosters Learning by Doing </li></ul><ul><li>Saves T...
Other Characteristics <ul><li>Geographic Specialization </li></ul>CAPITALIST IDEOLOGY Reliance on Technology and Capital G...
Other Characteristics Specialization and Efficiency As a Medium of Exchange CAPITALIST IDEOLOGY Use of Money Reliance on T...
Other Characteristics Barter System Difficulties CAPITALIST IDEOLOGY Use of Money Reliance on Technology and Capital Goods...
The Four Fundamental Questions... What will be produced? THE MARKET SYSTEM AT WORK
The Four Fundamental Questions... How will the goods be produced? What will be produced? THE MARKET SYSTEM AT WORK
The Four Fundamental Questions... How will the goods be produced? What will be produced? Who will get the goods and servic...
The Four Fundamental Questions... How will the goods be produced? What will be produced? Who will get the goods and servic...
Economic or Pure Profit Normal Profit Expanding Industry Declining Industry Consumer Sovereignty WHAT WILL BE PRODUCED? <u...
Economic or Pure Profit Normal Profit Expanding Industry Declining Industry Consumer Sovereignty <ul><ul><li>Dollar Votes ...
<ul><li>Least Cost Production </li></ul><ul><ul><li>Resource Prices </li></ul></ul><ul><ul><li>Resource Productivity </li>...
Market System Rationing Function of Equilibrium Prices Income Constraints Resource Prices WHO WILL GET THE GOODS AND SERVI...
<ul><li>Dynamic Market Systems </li></ul><ul><li>Guiding Function of Prices </li></ul><ul><li>Role in Promoting Progress <...
The Case for the Market System Efficiency Incentives Freedom COMPETITION AND THE INVISIBLE HAND
KEY TERMS private property freedom of enterprise freedom of choice self-interest competition roundabout production special...
Coming up next... Chapter 5 Private and Public Sectors THE U.S. ECONOMY
Upcoming SlideShare
Loading in …5
×

Chap04rev

606 views

Published on

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
606
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
9
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Chap04rev

  1. 1. The Market System 4 C H A P T E R
  2. 2. CAPITALIST IDEOLOGY FREEDOM OF ENTERPRISE & CHOICE PRIVATE PROPERTY SELF- INTEREST COMPETITION
  3. 3. LARGE NUMBERS ENTRY & EXIT CAPITALIST IDEOLOGY FREEDOM OF ENTERPRISE & CHOICE PRIVATE PROPERTY SELF- INTEREST COMPETITION
  4. 4. CAPITALIST IDEOLOGY MARKETS & PRICES FREEDOM OF ENTERPRISE & CHOICE PRIVATE PROPERTY ACTIVE, BUT LIMITED, GOVERNMENT SELF- INTEREST COMPETITION
  5. 5. GLOBAL PERSPECTIVE Index of Economic Freedom, Selected Nations FREE MOSTLY FREE MOSTLY UNFREE REPRESSED Rankings among 156 nations, 2003 Source: Heritage Foundation & The Wall Street Journal 1 Hong Kong 3 New Zealand 6 United States 16 Chile 18 Canada 40 France 72 Malaysia 99 Pakistan 127 China 146 Iran 155 Cuba 156 North Korea
  6. 6. Other Characteristics CAPITALIST IDEOLOGY Reliance on Technology and Capital Goods Roundabout Production
  7. 7. Other Characteristics CAPITALIST IDEOLOGY Reliance on Technology and Capital Goods Specialization and Efficiency
  8. 8. Other Characteristics <ul><li>Division of Labor </li></ul>CAPITALIST IDEOLOGY Reliance on Technology and Capital Goods Specialization and Efficiency
  9. 9. Other Characteristics <ul><li>Differences in Ability </li></ul><ul><li>Fosters Learning by Doing </li></ul><ul><li>Saves Time </li></ul>CAPITALIST IDEOLOGY Reliance on Technology and Capital Goods Specialization and Efficiency
  10. 10. Other Characteristics <ul><li>Geographic Specialization </li></ul>CAPITALIST IDEOLOGY Reliance on Technology and Capital Goods Specialization and Efficiency
  11. 11. Other Characteristics Specialization and Efficiency As a Medium of Exchange CAPITALIST IDEOLOGY Use of Money Reliance on Technology and Capital Goods
  12. 12. Other Characteristics Barter System Difficulties CAPITALIST IDEOLOGY Use of Money Reliance on Technology and Capital Goods Specialization and Efficiency
  13. 13. The Four Fundamental Questions... What will be produced? THE MARKET SYSTEM AT WORK
  14. 14. The Four Fundamental Questions... How will the goods be produced? What will be produced? THE MARKET SYSTEM AT WORK
  15. 15. The Four Fundamental Questions... How will the goods be produced? What will be produced? Who will get the goods and services? THE MARKET SYSTEM AT WORK
  16. 16. The Four Fundamental Questions... How will the goods be produced? What will be produced? Who will get the goods and services? How will the system accommodate change? THE MARKET SYSTEM AT WORK
  17. 17. Economic or Pure Profit Normal Profit Expanding Industry Declining Industry Consumer Sovereignty WHAT WILL BE PRODUCED? <ul><ul><li>Economic Profit = Total Revenue – Total Cost </li></ul></ul>
  18. 18. Economic or Pure Profit Normal Profit Expanding Industry Declining Industry Consumer Sovereignty <ul><ul><li>Dollar Votes </li></ul></ul><ul><li>Market Restraints on Freedom </li></ul><ul><ul><li>Derived Demand </li></ul></ul>WHAT WILL BE PRODUCED? <ul><ul><li>Economic Profit = Total Revenue – Total Cost </li></ul></ul>
  19. 19. <ul><li>Least Cost Production </li></ul><ul><ul><li>Resource Prices </li></ul></ul><ul><ul><li>Resource Productivity </li></ul></ul><ul><ul><li>Transportation Costs </li></ul></ul><ul><li>Available Technology </li></ul><ul><li>Economic Efficiency </li></ul>HOW WILL THE GOODS AND SERVICES BE PRODUCED?
  20. 20. Market System Rationing Function of Equilibrium Prices Income Constraints Resource Prices WHO WILL GET THE GOODS AND SERVICES?
  21. 21. <ul><li>Dynamic Market Systems </li></ul><ul><li>Guiding Function of Prices </li></ul><ul><li>Role in Promoting Progress </li></ul><ul><li>Technological Advance </li></ul><ul><ul><li>Creative Destruction </li></ul></ul><ul><li>Capital Accumulation </li></ul>HOW WILL THE SYSTEM ACCOMMODATE CHANGE?
  22. 22. The Case for the Market System Efficiency Incentives Freedom COMPETITION AND THE INVISIBLE HAND
  23. 23. KEY TERMS private property freedom of enterprise freedom of choice self-interest competition roundabout production specialization division of labor medium of exchange barter money Four Fundamental Questions economic costs normal profit economic profit expanding industry declining industry consumer sovereignty dollar votes derived demand guiding function of prices creative destruction “invisible hand” Copyright McGraw-Hill/Irwin, 2005 BACK END
  24. 24. Coming up next... Chapter 5 Private and Public Sectors THE U.S. ECONOMY

×