Transcript Chapter 3 Section 2

Chapter 3 Section 2
• Private property rights- guarantee individuals the
right to use their resources as they choose or to
charge others for the use.
• Owners will benefit from every use of their
resources.
• Safeguard our property, incentive work, to save, to
invest, to buy things, or to pursue other market
activity.
• Less investment if owners felt that property could
stolen, damaged, or destroyed.
Intellectual Property Rights
• Laws grant property rights to the creators of new
ideas and new inventions.
• Inventors and their creations reap rewards so they
have more incentives to create.
• Innovation – Process in which patents also provide
stimulus to turn inventions into marketable
products.
• Copyright-assigns property rights to original
expressions off an author, artist, composer, or
computer programmer.
Measurement and Safety
• Uniformed measurement sold by weight- pounds,
by volume, gallon of gasoline.
• Food is safe to buy and sell.
• FDA a.k.a. Food Drug Administration. Food is
safe to sell and eat.
• Consumer Product Safety Commission, a federal
agency monitors the safety of all consumer
products, baby cribs to dishwasher.
Market Competition and Natural
Monopolies
• Adam Smith’s argument that the invisible hand of
market competition harnesses self-interest to
promote the general good.
• Competition imposes a discipline that most
businesses would rather avoid.
• Promoting Market Competition-competition
typically ensures the most efficient use of
resources, an individual firm would prefer the
higher price and higher profit of monopoly.
Antitrust Laws
• Attempt to promote competition and reduce
anticompetitive behavior.
• The laws prohibit efforts to create a monopoly in a
market in which competition is desirable.
• Laws are enforced in the courts by government
attorneys.
• Enforced by individual firms bringing lawsuits
against other firms for violating these laws.
Regulating Natural Monopolies
• Natural monopoly – one firm that can serve
the entire market at a lower per unit cost
than two or more firms.
• Government-owned and governmentregulated monopolies are called public
utilities
Growth and Stability of the U.S.
Economy
• U.S. economy and other market economies
experience alternating periods of growth and
decline in their level of economic activity.
• Business cycles reflect the rise and fall of
economic activity relative to the long term growth
trend of the economy.
• Govn’ts try to reduce these fluctuations, making
the bad times not so bad and the good times not
quite so good.
Fiscal Policy
• Pursuing these objectives through taxing
and spending.
• That when economic activity in the private
sector slows down, the govn’t should offset
this by cutting taxes to stimulate
consumption and investment.
• Govn’t may increase its own spending to
offset a weak private sector.
Inflation
• The economy is growing so fast as to cause
higher inflation, which is an increase in the
economy’s average price level, the govn’t
should increase taxes and reduce its own
spending to cool down the economy.
Monetary Policy
• Tries to supply appropriate amount of money to
help stabilize the business cycle and promote
healthy economic growth
• U.S. Federal Reserve System or Fed. Established
US. Central bank by congress 1913.
• 2001 the Fed put more money to circulate in the
economy to encourage people to borrow money
and spend.
Monetary policy