The document defines key terms related to the free market such as Adam Smith, laissez-faire, self-interest, and competition. It explains that Adam Smith was the first economist to explain how free markets function in his book The Wealth of Nations. A free market is one where the government does not intervene and people can freely buy and sell goods, though all markets have some restrictions. Competition and self-interest allow markets to efficiently regulate themselves through the invisible hand mechanism.
The document defines key terms related to the free market such as Adam Smith, laissez-faire, self-interest, and competition. It explains that Adam Smith was the first economist to explain how free markets function in his book The Wealth of Nations. A free market is one where the government does not intervene and people can freely buy and sell goods, though all markets have some restrictions. Competition and self-interest allow markets to efficiently regulate themselves through the invisible hand mechanism.
The document defines key terms related to the free market such as Adam Smith, laissez-faire, self-interest, and competition. It explains that Adam Smith was the first economist to explain how free markets function in his book The Wealth of Nations. A free market is one where the government does not intervene and people can freely buy and sell goods, though all markets have some restrictions. Competition and self-interest allow markets to efficiently regulate themselves through the invisible hand mechanism.
characteristics of the Free Market. •Students will be able to define the following terms: •Adam Smith •Laissez-faire •Self-interest •Competition E. Napp Adam Smith was the first economist. In his book, The Wealth Nations (1776), Adam Smith explained how free markets functioned. E. Napp Markets are places where people can exchange the things they have for the things they want. E. Napp The Free Market • In a free market economy, people are free to buy and sell whatever they want.
• Obviously, we do not live in a completely
free market economy.
• There are some restrictions on what we
can buy and sell. E. Napp In the United States today, there are some products that we cannot legally buy. We can buy a rifle but not this gun. E. Napp Laissez-faire • Laissez-faire is the doctrine that states that the government should not intervene in the marketplace.
• It means “let them do (as they please)”.
• In a free market, the government does not
regulate the economy. E. Napp Adam Smith believed that an Invisible Hand existed or that the market would always fix itself. E. Napp The Invisible Hand is the idea that the economy fixes itself. If there is demand for a good that currently does not exist in the market, some enterprising entrepreneur will eventually produce it. E. Napp Adam Smith • Adam Smith was the first person to explain how the free market functioned.
• He did not invent the free market rather he
explained how it functioned.
• His book, The Wealth of Nations, is still
considered a classic today. E. Napp Competition and self-interest allow markets to function effectively. E. Napp Competition and Self-Interest • Competition is the struggle among producers for the dollars of consumers.
• Self-interest is acting on behalf of one’s
personal gain.
• Competition and self-interest make
markets work. E. Napp Competition leads to lower prices and better quality. When consumers have choices, producers must offer worthwhile products. E. Napp Every person has his or her best interest in mind. This photograph is an example. The tutor is interested in earning money and the student is interested in learning. E. Napp Questions for Reflection: • Who was Adam Smith? • How does a free market economy differ from a traditional economy? • Define Laissez-faire. • How does the market fix itself? • How do competition and self-interest help the market function efficiently? • What is the Invisible Hand? E. Napp
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