The

Market
System

1
The Capitalist Ideology
Characteristics
 Private property

2
The Capitalist Ideology
Characteristics
 Freedom of enterprise and choice

3
The Capitalist Ideology
Characteristics
 Self-interest

4
The Capitalist Ideology
Characteristics
 Competition

5
The Capitalist Ideology
Characteristics
 Markets and prices

6
The Capitalist Ideology
Characteristics
 Reliance on technology and capital
goods

7
 The Capitalist Ideology
Characteristics
 Specialization

Learning by doing

Saves time

Division of labor Differences in ability

8
The Capitalist Ideology
Characteristics
 Use of money
Nueva Ecija
Has surplus of onions;
wants coconuts

Pangasinan Laguna
Has surplus of fish; Has surplus of
wants onions coconuts;
wants fish

9
The Capitalist Ideology
Characteristics
 Use of money
Nueva Ecija
Has surplus of onions;
s coc
n ion wants coconuts o n ut
o s

Pangasinan Laguna
Has surplus of fish; Has surplus of
wants onions
fish coconuts;
wants fish

10
The Capitalist Ideology
Characteristics
 Use of money
mo
ey ne
n y
mo
Nueva Ecija
Has surplus of onions;
io ns wants coconuts
coc
o
on n ut
s

Pangasinan Laguna
Has surplus of fish; Has surplus of
wants onions
fish coconuts;
wants fish

money
11
The Capitalist Ideology
Characteristics
 Active but limited government

12
The Capitalist Ideology
Characteristics
 Private property

 Freedom of enterprise and choice

 Self-interest

 Competition

 Markets and prices

 Reliance on technology and capital goods

 Specialization

 Use of money

 Active but limited government

13
Market Defined
A market is any institution or
mechanism that brings together
buyers and sellers of a particular
good or service.

14
 The Market System at
Work
Fundamental Questions
1. What will be produced?
…what combination of goods &
services will the economy produce?

Economic Profit vs Normal Profit

15
 The Market System at
Work
Fundamental Questions
2. How will the goods and services be produced?
…what technology will be used to
produce the goods and services
considering the prices of goods & services?
 Least cost combination
 Economic efficiency
 Available technology

16
 The Market System at
Work
Fundamental Questions
3. Who will get the goods & services?
… the rationing function of
prices
… the ability of consumers to
pay
market/price system

17
 The Market System at
Work
Fundamental Questions
4. How will the system accommodate
change?
… what about the capital goods which are
already passe or outmoded?
… what about if new techniques of
production are discovered?
capital accumulation
advancement in technology

18
 The Market System at
Work
Fundamental Questions
1. What will be produced?
2. How will the goods and services be
produced?
3. Who will get the goods & services?
4. How will the system accommodate
change?

19
 The Market Models
 Pure Competition
 Pure Monopoly
 Monopolistic Competition
 Oligopoly

20
 The Market Models
Pure Competition
 Very large number of sellers
 Standardized product
 Price taker
 Free entry
 No non-price competition
Agricultural commodities

21
 The Market Models
Pure Monopoly
 Single seller
 Unique product
 Price maker
 Blocked entry
 Goodwill advertising
Public utilities

22
 The Market Models
Pure Monopoly
Blocked entry
Natural monopoly
Economies of scale
Ownership of essential raw
materials
Patents & Licenses
Economies of being established

23
 The Market Models
Monopolistic competition
 Large number of sellers
 Differentiated products
 Limited control of prices
 Easy entry
 Presence of non-price competition
Retail trade

24
 The Market Models
Oligopoly
 Few sellers
 Standardized product for raw
materials; Differentiated for finished
consumer products
 Mutual interdependence
 Difficult entry
 Presence of non-price competition for
finished consumer goods
oil industry

25