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Market Economy Supply and Demand (self-regulating principles) 1 United States Economic System Capitalism allows the freedom of consumption and production of goods and services. The economic system of the United States is based on capitalism. 2 4 Principles of U.S. Economic System • Private property – can own, use, or dispose of things of value. • Freedom of choice – can make decisions independently and must accept consequences of those decisions. • Profit – money left from sales after all of the costs of operating a business have been paid. • Competition – the rivalry among businesses to sell their goods and services. 3 Market Economy • What is the role of consumers in a market economy? (A consumer includes individuals, businesses, and government.) Decides what to buy Decides where to buy Decides what price they are willing to pay 4 Market Economy • What is the role of producers in a market economy? (Producers are individuals and organizations that determine what products and services will be available for sale.) Decides what to produce Decides what needs & wants to satisfy Decides what price they want to receive 5 Market Economy The market economy is based on the principles of supply and demand. – Demand is the quantity of goods or services that consumers are willing and able to buy. What are some examples of consumer demand? 6 Market Economy – Supply refers to the quantity of goods or services that businesses are willing and able to provide. What are some examples of producers of supplies? 7 Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western 8 Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western 9 Supply and Demand Graphs • Market (equilibrium) price is the point where supply and demand are equal. Market Price Intro to Business, 6e, Thomson South-Western 10