Chapter 4

Question 1

economic system in which economic decisions and the pricing of goods and services are guided by the interactions of a country’s individual citizen and businesses

Answer 1

Market Economy

Question 2

the unobservacle market force that helps the demand and supply of goods in a free market to reach equilibrium automatically

“laissez-faire”

Answer 2

Invisible Hand

Question 3

Characteristics of Markets

Answer 3

a. allocate resources efficiently
b. market system is more flexible and able to adjust to business cycles than government (mas mabilis mag-adjust)
c. market promotes competition (more goods and services, much satisfied)
d. reliance in markets disperses economic and political power and therefore consistent with democracy (freedom of businesses)

Question 4

Areas of Market Failure

Answer 4

a. monopoly or oligopoly control (masyadong mataas prices)
b. presence of externalities (positive and negative)
negative creates market failure - natural calamities
c. markets may not facilitate change in economic structure (walang pagbabago)
d. missing or underdeveloped institutuions of rules or laws (inefficient laws)
e. macroeconomics imbalances (unemploymnt, inflation, poverty)