Economic Crash Course
Markets
- Only place where buyers and sellers to meet to willingly make a transaction
- Voluntary exchange: win-win
- Farmer gets money, you get strawberries
- Most markets are based on volunteer exchange
- Price signals: Incentives to balance the price
Supply and Demand
When the price is high, producers will overproduce, known as a surplus, when the price is too low, producers cant keep up, know as a shortage
Supply and demand curves can be shifted by external forces (weather, legislation, pandemics)
4 market behaviors
- Supply can increase
- Supply can decrease
- Demand can increase
- Demand can decrease
Role of the Government
- Regulate critical industries
- Protect companies critical for national security
- Protect individuals from exploitation
- Keep the economy stable
Examples
Gasoline shifts a lot, based on supply and demand. When new technology (e.g. fracking) comes around, or more oil is found
Organ donation is controversial
Role of the Entrepreneur
Risk their wealth, time, and effort to develop an innovative product or method for profit
Let the free-enterprise system help them succeed
Change business practices through new technology and innovative management techniques
Free Markets
Benefits
- Allows competition
- Higher quality at fair prices
- Build wealth in industrialized countries
- Provides poor people a way to work up the ladder
- Encourages businesses to be efficient
Limitations
- Owners and managers make more
- Old, sick, disabled may not be able to work
- greed
- Some government regulations are necessary