| Chapter 1 Outline |
| I. MARKET ECONOMIC SYSTEMS: AN INTRODUCTORY LOOK |
| A. Essential Features of a Market System |
| 1. There are three essential features of a market system: private ownership, market exchanges, and market incentives. |
| B. Relative Price |
| 1. A relative price is the price of one good in terms of another good. |
| 2. Relative price measures what must be given up to purchase an item. |
| 3. Relative price is the exchange value of a good. |
| a. In order for relative prices to provide information about exchange value to consumers, reasonable price stability is necessary. |
| C. Private Property Rights |
| 1. In order for a market system to function well, private property rights must be defined, established, and protected by law. |
| a. Private property rights allow individuals base their decisions on their own self interest. |