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    Chapter 2 Section 2: The Free Market

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    Alison Yang
    The document summarizes key concepts related to free markets including: Specialization allows individuals and firms to focus on specific tasks, improving efficiency. Markets are where buyers and sellers interact, with factor markets where firms obtain resources from households and product markets where households buy goods and services from firms. Competition between firms benefits consumers by encouraging lower prices and better quality or service. Adam Smith's invisible hand describes how free markets self-regulate through the interactions of supply and demand without centralized control.

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    Chapter 2 Section 2: The Free Market

    Uploaded by

    Alison Yang
    49 views2 pages
    The document summarizes key concepts related to free markets including: Specialization allows individuals and firms to focus on specific tasks, improving efficiency. Markets are where buyers and sellers interact, with factor markets where firms obtain resources from households and product markets where households buy goods and services from firms. Competition between firms benefits consumers by encouraging lower prices and better quality or service. Adam Smith's invisible hand describes how free markets self-regulate through the interactions of supply and demand without centralized control.

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    Econ 2 2

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    The document summarizes key concepts related to free markets including: Specialization allows individuals and firms to focus on specific tasks, improving efficiency. Markets are where buyers and sellers interact, with factor markets where firms obtain resources from households and product markets where households buy goods and services from firms. Competition between firms benefits consumers by encouraging lower prices and better quality or service. Adam Smith's invisible hand describes how free markets self-regulate through the interactions of supply and demand without centralized control.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    49 views2 pages

    Chapter 2 Section 2: The Free Market

    Uploaded by

    Alison Yang
    The document summarizes key concepts related to free markets including: Specialization allows individuals and firms to focus on specific tasks, improving efficiency. Markets are where buyers and sellers interact, with factor markets where firms obtain resources from households and product markets where households buy goods and services from firms. Competition between firms benefits consumers by encouraging lower prices and better quality or service. Adam Smith's invisible hand describes how free markets self-regulate through the interactions of supply and demand without centralized control.

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    Chapter 2 Section 2: The Free Market

    Vocabulary: 1) market: gathering of people where they can buy, sell, or exchange goods 2) specialization: focuses on specific tasks so resources are efficiently used and it focuses on the individuals efforts and firmss efforts on a certain tasks 3) household: group of people/a person who lives in a home together 4) firm: organization that makes products using resources to then sell 5) factor market: market where firms buy factors of production (land, labor, capital, entrepreneur) from households; purchase/rent land, hire workers/pay for their labor, borrow money from households to buy capital/pay interest or profits for that 6) profit: income made from a transaction 7) product market: market where households buy the firms goods and services 8) self-interest: a personal gain 9) incentive: something that encourages people to think a certain way/ lean toward a certain direction; hope of reward/fear of punishment for example 10) competition: producers struggle for consumers money 11) invisible hand: describes the self-regulating nature of the marketplace 12) consumer sovereignty: power of consumers to choose what gets made Section 2 Assessment: 1) Specialization makes us more efficient because its easier for a person to excel at doing one or several thing(s) than excelling at everything. 2) The factor market is when firms buy goods and services from households and the product market is when households buy goods and services from the firms. 3) Profit is the income made from a transaction. 4) A household serves as the people living at a residence and firms are organizations that make the products. And through factor market or product market, one sells the other goods and services. 5) Competition among firms benefit consumers because then firms try to lower their prices and provide incentives, so consumers get the best deals and buy from the better firm. 6) By the invisible hand of the marketplace. Adam Smith is describing the way that the marketplace flows without any help since it self-regulates itself.

    7) Incentives provide people reasons to buy or to not buy goods, and consumer sovereignty gives producers reasons to meet the consumers desires. 8) Economic equity is difficult to achieve in a free market economy because there is always competition between the firms and there are always new ideas introduced, therefore, more competition. 9) We made ___ fold-its, and through specializing, we made ___ foldits. 10) Three real world examples that illustrate the circular flow model of a market economy would be

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