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6 Market Economy


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6 Market Economy

  1. 1. The Market Economy Utility, Preferences, Profits and Incentives
  2. 2. Entrance Ticket •What is the best way to allocate scarce resources?
  3. 3. Coke and East Germany
  4. 4. Rich vs. Poor
  5. 5. Normal Goods vs. Inferior Goods • As income • As income increases, increases, consumption consumption increases. decreases.
  6. 6. Is it fair for those of us who live comfortably to impose our preferences on individuals in the developing world?
  7. 7. Why aren’t these men selling car insurance?
  8. 8. Utility • People act to increase their utility at all times. • Why is this not the same as being selfish?
  9. 9. The Power of Markets
  10. 10. Markets are amoral
  11. 11. Command Economy Communism
  12. 12. Markets are Self-Correcting
  13. 13. Prices Transmit Information • How do prices transmit information? • What happens when demand goes up for a product? What does that tell the producer? • What happens to the prices of oranges in Ohio when a hurricane hits Florida? Why? • What happens to the price of lumber and other construction equipment in Florida during an active hurricane season?
  14. 14. The Circular Flow Model
  15. 15. Every Transaction Benefits Each Party
  16. 16. The Pillars of Free Enterprise • Private property • Specialization • Voluntary exchange • The price system • Market competition • Entrepreneurship