Naked Economics Chapter 3

-The role and significance of prices in the market economy has to do with supply and demand. If there are the same amount of buyers as products, the price will settle. If there are more buyers than products, the price of the product will rise. And, if there are more products than buyers, the price of the product will decrease. This occurs until the supply of the product matches the demand of the product.

Decisions are what direct a average person's life. Some decisions are easy some are hard. But that’s the way of life and how it works.

1.According to Smith what should the role of Government be in the economy? Smith believed the government should adopt a “Laissez-Faire” altitude, leaving the economic decisions in the hands of those it directly affects, the businessmen and the consumers.

Trade is a very important factor in making a country successful, and it has certainly helped many countries for many years. Back when there was no concept of countries, trade simply meant moving certain materials from one place to another, and when people needed access to things they could not find where they lived, they'd simply travel and find it aboard. Eventually territory was owned and people could no longer keep peace when it came to taking things from elsewhere. That was when the word trade came into existence, and people began to make agreements to transfer goods for something in return, whether that meant other goods or money. In 1855 when Canada was in the hands of the British, free trade was agreed

Stability needs to be assured for the economy to remove fluctuation and to avoid risks of going into a period similar to the Great Depression. Though the ideals of government intervention may require the sacrifice of a limited amount of rights and freedoms the benefits it provides in the realm of economic stability and ensuring a country remains within a safe and stable debt range allows for the growth of industry, job creation, and opportunities for the individual. Opportunity also in an important factor that government intervention provides and through providing opportunity people can seek employment in an job of their choosing and in turn benefit the world through scientific, economic or political progress. Opportunity also lowers the unemployment rate which lowers inflation rates allowing the economy to become healthier without having to rely on private investors who manipulate the economy only for their own benefit and profits instead of for the people. Finally the benefits that modern liberalism and the government intervention it promotes benefits not only the people and the political institution but also the world as if the government is in control of resources it can use the income generated from public enterprise to benefit the

There are many advantages and disadvantages to having the government regulate businesses. The government also affects many things I encounter daily. From schools, roads, and taxes I pay for goods, the government plays a huge role in each of these.

The cost of something is how much the materials cost and how much labor and work was put in to make the product.

The appropriate role of government in the economy consists of six major functions of interventions in the markets economy. Governments provide the legal and social framework, maintain competition, provide public goods and services, national defense, income and social welfare, correct for externalities, and stabilize the economy. The government also provides polices that help support the functioning of markets and policies to correct situations when the market fails. As well as, guiding the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability. By applying the fiscal policy which adjusts spending and tax rates or monetary policy which manage the money supply and control the

The government should play an active role in business development as public goods such as roads, railway, and national defense is not developed in the free market as there is not any fiscal incentive. Similarly, the free market does not consider positive externalities and social benefit programs for the betterment of society (Pettinger, 2012). Therefore, it is very important for the federal government to promote business development and protect consumers and employees.

Tradeoffs involve all decisions. There are many different tradeoffs people face in society, one being "guns and butter" which means as society spends more on national defense (guns) to protect its nation, the less there is to spend on consumer goods (butter) for the home. Another tradeoff in society would be efficiency vs. equality. Efficiency means that society is getting the maximum benefits from its scarce resources. Equality means that the benefits are distributed evenly amongst society. A better way to understand it is efficiency is the size of the economic pie whereas equality is the individual slices of the pie.

All through life, we experience various occasions when decision-making become necessary. A number of them present themselves in difficult forms and at crucial points. Most of the verdict we take will eventually figure and describe our track of lives. These are what we refer to as lessons of life. Choices never present themselves in an easy way. In some instance we are always forced to pay a price to achieve something. This implies that we are trading for an outcome we are seeking.

To understand the economy of today one must understand the different market structures that make up the economy. There are four market structures that define the economic structure within the world’s economy; perfect competition, monopoly, monopolistic competition, and oligopoly. Team A will provide example of each market structure by completing a market structure table. The members of Team A will also compare and contrast the differences between public goods, private goods, common resources, and

The market process attempts to solve the key economic problem. The key economic problem being; what to produce? How much to produce? And who receives the product? The market process addresses this problem by letting firms know what is demanded by consumers; hence, firms will produce the good that is demanded. The price dictates who should receive the product and in due course let firms know how much of the good should be produced. However, the market process may not allocate the optimal amount of resources for certain products as it only considers factors which are internal to it e.g. healthcare. The market process does not account for externalities which maybe positive or negative. Therefore certain goods are over produced or over consumed whilst others are under produced or under consumed. Therefore, in certain cases the market process does not meet the needs of people. Overall, I believe the pros of the market process outweigh the cons and therefore I agree with the statement.

Five major functions play a role of government in the market economy. The five functions consist that governments provide framework for legal or social, sustain the competition, support public services, national protection, income and social welfare, and stabilize the economy. When markets and policies are functioning incorrectly the government provides support to help correct situations when the market fails. As well as, managing the overall pace of economic activity, striving to maintain a consistent growth, increase employment, and price stability. By applying and utilizing the fiscal policy which monitors spending and tax rates, or also the monetary policy which manages the supply of money and how to manage the use of credit. This can either speed up the growth of the economy's rate or slow it down. Which affects price levels and can increase or decrease employment as well. Therfore, the government is needed to keep the economy afloat.

International trade permits countries to concentrate in the resources they have. Countries benefit by producing goods and services they can provide most cheaply and by buying the goods and services other countries can provide most cheaply. International trade makes it possible for more goods to be produced and for more demands to be satisfied than if every country tries by itself to be produce everything its needs.