Resource Allocation and Economic System

Property Rights in a Market System

• property rights in market system

  • legal rules that protect what people own

  • give people the right to use, sell, or invest their property

  • make people feel safe owning things

  • encourage people to work, invest, and build businesses

  • strong property rights = strong market system

  • if property rights break down, the market system also breaks down

• price signals = price changes

  • tell buyers what to buy or not buy

  • tell sellers what to make or stop making

  • help people make smart choices with money

  • help the economy stay balanced

  • answer key questions like what to produce, how to produce, and for whom to produce

• property rights = give people the power to act

• price signals = give people the info to act

• together, they make markets work

  • no property rights = no one responds to price signals

  • no price signals = people don’t know what to do with what they own

• three economic questions

  • What should be produced

  • How should it be produced

  • Who should get the goods produced