• Replaced feudal empires (i.e.

Holy Roman
Empire) and monarchies
• Created markets where buyers and sellers of
goods and services agreed on prices
• Created market types:
– Competition
– Monopoly
– Oligopoly
• Long distance trade increased dramatically
due to innovation in transportation
 Ideas of Adam Smith
• Believed in free economy, or free markets
• Wrote book The Wealth of Nations
• Economic liberty guaranteed economic progress
• Three Natural Laws of Economics:
– Law of Self Interest: People work for their own
good
– Law of Supply and Demand: Enough goods will be
produced at the lowest possible price to meet
demand in a market economy
– Law of Competition: Competition forces people to
make a better product