{lesson Activities Lesson Vocabulary Background Warm-Up Activity ' Understand how businesspeople use a niarliinii1 analysis to make decisions I can understand how business organizations operate in a free market. Warm-Up Activity The Free Market: Selling and Buying What is a Free Market? What is the Invisible Hand"?. The Circular Flow Model What is the Impact of the Market Economy? EIEIL'IEIUEI ' The denitions of the words in bold below are in the Glossary in the back or the LEP. Adam Smith Free Market Invisible Hand Capitalism Prot Laissez Faire Before diving into supply and demand, it's important to recall that historically, the United States has had a free market economy, meaning that people are free to buy and sell products. and businesses are free to decide which products to make in order to make as much money as poosible. What do you think guides your choices the most? g \"'me California Economics .nn. I-l LEP 2 HS - L4L Economics (202\" What is a Free Market? ELABORATE DIRECTIONS: Read p. 45-46 and p. 188 and the information below, then answer the questions that What is a Free Market? The free market is an economic system based on supply and demand with little or no government control. Other words used to describe free market are laissez faire and capitalism. a free market is where there is voluntary exchange there is no government intervention supply and demand are the sole basis for the economic system there are no coerced or forced transactions While there are no PURE free market economies, because there are constraints on all economies, there is a positive relationship between free markets and measures of economic well being. No modern country operates with completely free markets. However, the more free the market, the more value there is for private property, capitalism, and individual rights. 1. Write five features that describe the characteristics of a free market. O In your opinion, what components of a free market are the most important? Why? HS - L4L Economics (2021) lifelong California Economics LEP 2EXPLAIN DIRECTIONS: Read the information below and then answer the questions that follow. In a free market econorny, businesses try to ll a need or want in order to sell goods and services. If you own a business. you are a producer or seller. If you buy products, then you are a consumer in the market. This system works as producers try to meet the needs and wants of the consumer. This idea came from the economic philosopher Adam Smith during the American Revolution. Adam Smith (TIMI Wcaltl'l of Nations} Is an economy really that simple? Just think about motivation of both the businessperson and the buyer. The businessperson wants to make a prot, while the buyer wants a low priced, quality product. Businesses also need to produce. or supply to the right amount of product in order to meet the demand of the customers. If there isn't a match in supply and demand there could be a problem in the \"free market." For example, customers might see prices go up because of the lack of supply if a business did not produce enough goods. On the other hand. a business might need to lay off workers if they spent too much money to make more products than they could sell. Adam Smith called these hidden motivations or incentives the Invisible Hand. 1. Draw and describe Adam Smith's \"invisible hand" idea. 2. In your own words, how does the invisible hand work? 3. According to the information above, what kind of problems occur when the invisible hand isn't working? ___________ ________________________ - 4 Q \"filling California Economics LE? 2 H5 ' L'\" \"mm\" (2021] What is the Invisible Hand? ELABORATE DIRECTIONS: Read the information below, then answer the questions that follow. One part of the free market is the concept of the invisible hand. Watch this video on the Invisible Hand and answer the questions below. https://www.youtube.com/watch?v=ulyVXa-u4wE The Invisible Hand - 60 Second Adventures in Economics (1/6). 1. Who came up with the concept of the invisible hand? 2. What did he think the government should do with markets? 3. How will the economy regulate itself with the invisible hand? 4. What can be a problem of letting the invisible hand regulate the economy? 5. Why do governments get involved in a free market economy? FIGURE JA GOVERNMENT IN THE ORCULAR FLOW MODEL Forurt lifelong California Economics HS - L4L Economics (2021) LEP 2. _- i DIRECTIONS: Read 11. 24-26 and examine the Figure 1.9 on p. 25 to answer the following queations. your own words, what is the circular ow model? P5 In your own words, what is a product market? 5. Think of a good or service you have recently bought. Using the circular flow model as a guide, write an explanation of the impact of your purchase on the economy. Q \"I\". .\"ll Cil'rfomia Economics LEP 2 H5 - UL Economics [2021 J