Question

Match each term with the correct definition. private property, freedom of enterprise, mutually agreeable, freedom of choice, self-interest, competition market. a. An institution that brings buyers and sellers together. b. The right of private persons and firms to obtain, control, employ, dispose of, and bequeath land, capital, and other property. c. The presence in a market of independent buyers and sellers who compete with one another and who are free to enter and exit the market as they each see fit. d. The freedom of firms to obtain economic resources, decide what products to produce with those resources, and sell those products in markets of their choice. e. What each individual or firm believes is best for itself and seeks to obtain. f. Economic transactions willingly undertaken by both the buyer and the seller because each feels that the transaction will make him or her better off. g. The freedom of resource owners to dispose of their resources as they think best; of workers to enter any line of work for which they are qualificd; and of consumers to spend their incomes in whatever way they feel is most appropriate.

Short answer

1:a; 2:b; 3:c; 4:d; 5:e; 6:f; 7:g

Step-by-step solution

Identifying Key Terms

Begin by listing seven key terms: market, private property, competition, freedom of enterprise, self-interest, mutually agreeable, and freedom of choice. These terms need to be matched to their correct definitions.

Match Term 'Market' with Definition

The term 'market' corresponds to the definition: 'An institution that brings buyers and sellers together.' This matches the transactional nature of markets where interactions occur.

Match Term 'Private Property' with Definition

'Private property' is matched with the definition: 'The right of private persons and firms to obtain, control, employ, dispose of, and bequeath land, capital, and other property.' This definition emphasizes ownership and control rights.

Match Term 'Competition' with Definition

The term 'competition' aligns with the definition: 'The presence in a market of independent buyers and sellers who compete with one another and who are free to enter and exit the market as they each see fit.' This describes the competitive dynamics in markets.

Match Term 'Freedom of Enterprise' with Definition

For 'freedom of enterprise,' the match is: 'The freedom of firms to obtain economic resources, decide what products to produce with those resources, and sell those products in markets of their choice.' This definition pertains to business decisions and operations.

Match Term 'Self-Interest' with Definition

'Self-interest' is appropriately paired with: 'What each individual or firm believes is best for itself and seeks to obtain.' This reflects the driving motivation of individuals and firms.

Match Term 'Mutually Agreeable' with Definition

The term 'mutually agreeable' fits the definition: 'Economic transactions willingly undertaken by both the buyer and the seller because each feels that the transaction will make him or her better off.' This agreement is central to voluntary economic exchange.

Match Term 'Freedom of Choice' with Definition

'Freedom of choice' corresponds to: 'The freedom of resource owners to dispose of their resources as they think best; of workers to enter any line of work for which they are qualified; and of consumers to spend their incomes in whatever way they feel is most appropriate.' This captures the concept of decision-making autonomy in economic terms.

Key concepts

Private Property

Private property is a foundational element of modern economics, emphasizing the right of individuals or firms to own and control assets. This concept goes beyond just owning land or buildings. It includes the right to use, rent, or sell any ownership, such as land, capital equipment, or intellectual property. The ability to make decisions about one’s property is vital for economic efficiency.

• This personal control encourages individuals to manage resources responsibly.
• It provides an incentive to invest, innovate, and maintain property in good condition.

Private property rights are often protected by law, ensuring that owners can have confidence in their investments.

Freedom of Enterprise

Freedom of enterprise allows businesses to operate without undue interference from the government. This includes the freedom to obtain resources, choose their production methods, and sell in markets they see fit. This concept is crucial for fostering an environment where businesses can thrive.

• Companies can enter and exit markets freely based on potential profitability.
• This freedom enables businesses to respond to consumer demands quickly and efficiently.

By having the independence to pursue new ventures, businesses can foster competition and innovation.

Competition

Competition refers to the rivalry among sellers in the market. It ensures that no single firm controls the entire market, leading to fair prices and quality products for consumers. When multiple sellers offer similar goods or services:

• Prices tend to decrease as sellers compete to attract consumers.
• Quality and innovation are encouraged, improving the overall market offerings.

Healthy competition also means businesses strive to reduce costs and improve efficiency, benefiting the end consumer.

Freedom of Choice

Freedom of choice empowers individuals and businesses to make decisions that best serve their needs. Consumers have the liberty to choose from diverse products and services, each meeting different preferences and budgets.

• Workers can decide on their career paths, influenced by their skills and interests.
• Resource owners can allocate their resources to areas where they see the best potential returns.

This autonomy supports a vibrant and dynamic economy, where decisions are made based on personal preferences and market signals.

Self-Interest

Self-interest is a driving force in economics, where individuals and businesses make decisions based on what they perceive as beneficial for themselves. Unlike selfishness, self-interest can lead to positive outcomes, like innovation and improved services.

• Individuals work towards their own financial security, which often leads to more profound societal benefits.
• Companies strive to maximize profits by creating value for consumers.

By acting in their self-interest, participants in the market contribute to the overall economic prosperity.

Market

A market is the heart of economic activities, functioning as a meeting point for buyers and sellers to engage in trade. It's a system where prices adjust based on supply and demand, leading to the efficient allocation of resources.

• Markets can be local, national, or global, depending on the goods and services traded.
• They allow for the specialization of labor, where individuals focus on tasks where they are most efficient.

Through these interactions, markets facilitate the distribution of goods and services across different regions and sectors.

Mutually Agreeable Transactions

Mutually agreeable transactions are those where both the buyer and seller feel they benefit from the exchange. These transactions form the basis of healthy economic activity and require both parties to voluntarily consent to the trade.

• Sellers offer products or services that meet buyers’ needs, building trust and goodwill.
• Fair transactions encourage repeated business, contributing to market stability.

By ensuring that exchanges are beneficial to both sides, mutually agreeable transactions enhance the overall satisfaction and efficiency in markets.