Chapter 4 introduce an overview of the market system & the Canadian economy. In this chapter you will learn: The basic institutions required for a market economy, the Four Fundamental Questions any economy faces, how the “invisible hand” helps to close the gap between private & public interests, the role of government in a market economy, about the structure of the Canadian economy.
An Overview of the Market System & the Canadian Economy Chapter SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE © 2002 McGraw-Hill Ryerson Ltd Chapter In this chapter you will learn The basic institutions required for a market economy The Four Fundamental Questions any economy faces How the “invisible hand” helps to close the gap between private & public interests The role of government in a market economy About the structure of the Canadian economy © 2002 McGraw-Hill Ryerson Ltd Chapter Chapter Topics Characteristics of the Market System The Market System at Work Competition and the Invisible Hand Market Failure The Circular Flow Revisited Structure of the Canadian Economy & Its Evolution Over Time © 2002 McGraw-Hill Ryerson Ltd Chapter The Market System Six basic facets: private property • individuals & firms own resources © 2002 McGraw-Hill Ryerson Ltd Chapter 4 The Market System Six basic facets: private property • individuals & firms own resources also intellectual property â 2002 McGraw-Hill Ryerson Ltd Chapter The Market System Six basic facets: private property • individuals & firms own resources • also intellectual property facilitates exchange â 2002 McGraw-Hill Ryerson Ltd Chapter The Market System Six basic facets: private property freedom of enterprise & choice • freedom of enterprise: businesses can buy & sell as they choose • freedom of choice: – owners can use or sell property as they choose – workers can work where they like – consumers can buy what they want © 2002 McGraw-Hill Ryerson Ltd Chapter The Market System Six basic facets: private property freedom of enterprise & choice self-interest • businesses seek profits consumers seek value â 2002 McGraw-Hill Ryerson Ltd Chapter The Market System Six basic facets: private property freedom of enterprise & choice self-interest competition • independently acting sellers & buyers • easy entry & exit © 2002 McGraw-Hill Ryerson Ltd Chapter The Market System Six basic facets: private property freedom of enterprise & choice self-interest competition markets & prices • prices signal scarcity & guide resource allocation © 2002 McGraw-Hill Ryerson Ltd Chapter 10 Chapter Topics Characteristics of the Market System The Market System at Work Competition and the Invisible Hand Market Failure The Circular Flow Revisited Structure of the Canadian Economy & Its Evolution Over Time © 2002 McGraw-Hill Ryerson Ltd Chapter 24 Market Failure Spillovers or Externalities spillover costs © 2002 McGraw-Hill Ryerson Ltd Chapter 25 Market Failure Spillovers or Externalities spillover costs • correction through – legislation – specific taxes © 2002 McGraw-Hill Ryerson Ltd Chapter 26 Market Failure Spillovers or Externalities spillover benefits © 2002 McGraw-Hill Ryerson Ltd Chapter 27 Market Failure Spillovers or Externalities spillover benefits • correction through – subsidization of consumers/suppliers – provision via government © 2002 McGraw-Hill Ryerson Ltd Chapter 28 Market Failure Public Goods and Services indivisible exclusion principle does not apply free-rider problem Quasi-Public goods • • • education, streets, police, fire, etc could be priced/provided by private firms because of positive spillovers, government intervenes © 2002 McGraw-Hill Ryerson Ltd Chapter 29 Market Failure Public Goods and Services reallocation of resources through the tax system resources released from private consumption and investment to public and quasipublic goods © 2002 McGraw-Hill Ryerson Ltd Chapter 30 Chapter Topics Characteristics of the Market System The Market System at Work Competition and the Invisible Hand Market Failure The Circular Flow Revisited Structure of the Canadian Economy & Its Evolution Over Time © 2002 McGraw-Hill Ryerson Ltd Chapter 31 The Circular Flow Revisited (1) $ INCOME -RENTS (1)COSTS BUSINESSES (8) RESOURCES (9)GOODS & SERVICES GOVERNMENT NET TAXES (11) (4) GOODS & SERVICES (3) REVENUE © 2002 McGraw-Hill Ryerson Ltd (5) $ INTEREST (10)GOODS & SERVICES (7) $ (2) LAND LABOUR CAPITAL (2)RESOURCES RESOURCE MARKETS HOUSEHOLDS NET TAXES (12) (6) GOODS & SERVICES (4) GOODS & SERVICES PRODUCT MARKETS (3) CONSUMPTION SPENDING Chapter 32 Chapter Topics Characteristics of the Market System The Market System at Work Competition and the Invisible Hand Market Failure The Circular Flow Revisited Structure of the Canadian Economy & Its Evolution Over Time © 2002 McGraw-Hill Ryerson Ltd Chapter 33 Structure of the Canadian Economy Production shares by sector selected years 1870-2000 70 60 % of GDP 50 PRIMARY 40 SECONDARY 30 TERTIARY 20 10 1870 1911 1926 © 2002 McGraw-Hill Ryerson Ltd 1960 1970 1980 1986 2000 Chapter 34 Structure of the Canadian Economy Employment shares by sector selected years 1891-2000 80 % of total employment 70 60 50 PRIMARY 40 SECONDARY TERTIARY 30 20 10 1891 1921 1947 © 2002 McGraw-Hill Ryerson Ltd 1960 1970 1980 1987 2000 Chapter 35 Structure of the Canadian Economy foreign ownership • high, mostly American • costs & benefits © 2002 McGraw-Hill Ryerson Ltd Chapter 36 Chapter Topics Characteristics of the Market System The Market System at Work Competition and the Invisible Hand Market Failure The Circular Flow Revisited Structure of the Canadian Economy Its Evolution Over Time © 2002 McGraw-Hill Ryerson Ltd Chapter 37 NEXT CANADA IN THE GLOBAL ECONOMY CHAPTER © 2002 McGraw-Hill Ryerson Ltd Chapter 38 ... interests The role of government in a market economy About the structure of the Canadian economy © 2002 McGraw-Hill Ryerson Ltd Chapter Chapter Topics Characteristics of the Market System The Market System. .. Characteristics of the Market System The Market System at Work Competition and the Invisible Hand Market Failure The Circular Flow Revisited Structure of the Canadian Economy & Its Evolution... Competition and the Invisible Hand Market Failure The Circular Flow Revisited Structure of the Canadian Economy & Its Evolution Over Time © 2002 McGraw-Hill Ryerson Ltd Chapter The Market System Six