Making Choices in a Free Market System Day 1

Class BA-1310

What is a Market

A Market is a means for buyers and sellers to exchange for goods and services

What is a Labor Market

A market where Employees and Employers can connect

What is a Stock Market

Connects publicity traded companies with investors, and buyers/sellers of financial assets more broadly.

What separates a Labor Market and a Stock Market

The Labor Market makes connections for employed seeking jobs, while the Stock Market connects companies with investors to buy or sell finacial assets

What is a Free-Market System?

a way of organizing economic activity, so all businesses are owned and operated by individuals

What’s unique about the Free-Market System?

Competition ins encouraged by market forces while government regulates to put anti-competitive behavior

What are the features of a Free-Market System?

Rights to have private ownership of property, to own and keep profits, to make decisions on how their business should run, and the freedom for individuals to choose where to live, work, and what to purchase.

What do Free Market systems require (1)

Regulation and oversight to ensure that prices are based on supply and demand

What do Free Market systems require (2)

Contract enforcement so prices are not distorted in anticipation of fraud and abuse

Ingredients of a good choice (1)

Opportunity cost: What must be given up in order to acquire or do something else

Ingredients of a good choice (2)

Marginal Analysis: The process of comparing additional benefits of an activity with the additional costs

Ingredients of a good choice (3)

Short vs Long run thinking

What are incentives

the attractiveness of one option over another by adjusting expected gains or losses.

What is Efficiency?

How effectively available resources are used