refers to a set of economic institutions that dominate a given economy with the main objective of solving the basic

economic problems

ECONOMIC SYSTEM

 What goods and services should be produced and in

what quantities?
How should these good and services be produced? For whom should these goods and services be

produced?

economic system in which individuals, rather than government, make the majority of decisions regarding economic activities and transactions

FREE-MARKET ECONOMY

Market
any method by which, or place at which, buyers can communicate with sellers

FREE-MARKET ECONOMY

Good/ Service
purchased and sold for a price

Price
helps determine what kinds of economic activity will take place in a market system

FREE-MARKET ECONOMY

 The private sector owns and manages the means of

production
The price system in a market structure applies to

determine how much will be paid for a certain commodity or service

It is also known as laissez-faire or free enterprise
FREE-MARKET ECONOMY

 There is a minimum government interference on decisions

pertaining to the management of the economy (Protection of the society against internal and external aggression)
Public Goods
- include defense, law and order, and education

Existence of competition often results to monopoly There is presence of economic power

FREE-MARKET ECONOMY

 protecting private property

enforcing contracts
regulating certain economic activities restrict economic freedom for the sake of protecting

individual rights:
laws that restrict child labor prohibit toxic emissions forbid the sale of unsafe goods

FREE-MARKET ECONOMY