Добавил:
Upload Опубликованный материал нарушает ваши авторские права? Сообщите нам.
Вуз: Предмет: Файл:
предпринимательство 3.doc
Скачиваний:
11
Добавлен:
28.03.2015
Размер:
194.05 Кб
Скачать

1 What is the role of prices in American economic system?

2 Why is American economic system called price-directed system?

3 What are the fundamental questions that price system provides the answers to?

How the price system answers the What question. When buyers want more of a product, they are willing to pay more for it. Higher prices attract other producers. As production increases, the need for additional workers causes wages to rise within the industry. When demand for the product fails, the opposite happens. Prices fall, producers who can no longer operate profitably shut down, or switch to other products, and production falls enough to meet the reduced demand.

How the price system answers the How question. The price system encourages sellers to produce in such a way as to costs and maximize profits.

Stanly Lee owns a newspaper delivery service. Stanly used to rely on 10 to 15 kids with bicycles to deliver the newspapers before and after school. One day Stanley calculated that it would cost less to use one adult with an automobile than 15 kids on bicycles to deliver his newspapers. He laid off the school kids and hired the adult.

How the price system answers the Who question. Those who graduate from high school earn more, on the average, than those who drop out. Many professional athletes earn more than letter carriers. Physicians and attorneys earn more, on the average, than stenographers and building superintendents.

Since they earn more, professional athletes, physicians and attorneys can afford to buy more goods and services than people earning less than they do. Thus, by assigning values to the work people do, the price system answers the Who question.

Answer these questions using your knowledge and experience.

III

Competition refers to the rivalry among buyers and among sellers. Sellers compete by trying to produce the goods and services buyers want at the lowest possible price. Those unable or unwilling to sell at a price low enough to attract buyers will be unable to dispose of their goods and services. This rivalry benefits us all.

It benefits us by giving us the goods and services we want, when and where we want them. Producers know that if they don’t satisfy consumer demand, their competitors will.

It benefits us because producers must constantly strive to operate more efficiently. The quest of greater efficiency conserns scarce resources, increases output and raises living standards by reducing costs.

Buyers compete with one another because there is never around everything to go around. Those willing to pay the price can buy a steak. Those unwilling or unable to pay will substitute a less costly product like chopped meat, chicken or hot dogs. In other words, in the rivalry among buyers of steak, those unable to pay the price will lose to those who are able to pay.

If we think of private property, the price system and competition as providing the foundation of our free enterprise economic system, then profits and other economic incentives supply the cement that holds the structure together.

The role of economic incentives. Economic incentives influence our decisions about what and where to buy. The desire to achieve the greatest profit for our efforts is the principal economic incentive in the American and other market economies. Economists refer to this as economic self-interest.

Of course economic self-interest cannot explain human behavior. Workers may pass up the chance to earn more simply because they don’t want to move to another region. Business firms often reduce their profit by contributing to charitable or other public service organizations. Many parents forgo job opportunities to raise their children at home. And for many reasons other than price, consumers may prefer to shop at one store rather than another.