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EQ: How do consumers and businesses interact in the United States economy?
Market economy • Citizens own the businesses in the economy, not the govt. People can choose what they want to buy
Markets • Place where a nation can sell its goods
People buy groceries, cars, computers, clothes, houses, and other items in a market. Goods and services are everything bought and sold in a market.
Entrepreneur • Person who organizes a new business to produce goods and services for profit
Entrepreneurs take financial risks by spending their own money (or borrowed money) to start new businesses that they believe will eventually earn profits.
EQ: How do incentives and competition affect people’s economic decisions?
Income • Money earned through employment and investments
Businesses pay workers income for their labor. Workers then spend part of their income in the market as consumers. The more they spend, the better businesses do.
Incentive • Benefit given to encourage a person to buy (or produce) a good or service
Low prices are an incentive to buy. High prices are an incentive to produce and sell. Coupons are incentives to purchase a specific product.
Competition • The battle for your business between the sellers of a good or service
Since consumers are free to buy from whatever producer they want, producers have to compete to convince customers to buy from them. Price and quality are two main areas where producers compete.