ECN 104 Chapter 2: Chapter 2
13 Jun 2011
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Document Summary
Chapter 2: the market system and the circular flow. Economic system: a particular set of institutional arrangements and a coordinating mechanism to respond to economic problems: determines what & how goods are produced, who gets them and how to accommodate change. Private property: private individuals & firms (not government) own most of the property resources (land & capital); name of capitalism. Freedom of enterprise: freedom of firms to obtain & use economic resources to produce choice of goods. Freedom of choice: owners can use/sell property as they choose, workers can work where they like, consumers can buy what they want. Property owners t ry to get highest price for the sale/rent of their resources: consumers seek to maximize their utility at the lowest possible expense, competition: Freedom of entry & exit on the basis of their economic self-interest: markets & prices: www. notesolution. com, market: institution/mechanism that brings buyers (demanders) and sellers (suppliers) together.
