Chapter 1 What Is Economics? 23
clothing. You would probably have little interest in doing something new
or different from what your friends and family do, 1-1.
In recent years, some traditional economies have begun to develop a
new approach to economics. They have come to recognize the advantages
of technology and other advances in the modern world. There is a desire
both to keep the old and to accept some of what is new.
Market
A market economy is a system in which privately owned businesses
operate and compete for profi ts with limited government regulation or
interference. It is also called a free enterprise system or capitalism.
In a market economy, consumers are important and businesses react
to their demands. A consumer is a buyer and user of goods and services.
A producer is an individual or business that provides the supply of goods
and services to meet consumer demands. The activities and decisions of
consumers determine in large part what goods and services businesses
will produce and sell. A market economy offers many opportunities for
businesses to grow and profi t. It also offers hard-working individuals with
education and training the incentives and opportunities to develop their
talents and succeed in fi elds of their choice.
In economic terms, the marketplace or market is not a physical place
like a mall or a grocery store. It is an arena in which consumers and
1-1
In traditional economies,
change comes slowly from
generation to generation.