This lesson teaches the basics about the market economy, including the relationships between consumers and producers, supply and demand, and profit and incentive. Students learn six traits of a market economy, compare the market economy to other types of economies, identify opportunity costs, and much more. We recommend teaching this lesson before the other lessons in this unit.

Learning Objectives

Students will be able to...

  • Describe the characteristics of a market economy, including the principle and protection of private property rights.
  • Identify the relationship among supply, demand, scarcity, and opportunity cost.
  • Analyze how profit, incentive, and competition motivate individuals, households, and businesses.
  • Describe the circular flow that shows the interaction among consumers/households, businesses/producers, and markets.
  • Analyze how changes in technology, costs, and demand interact in competitive markets to determine or change the price of goods and services.
  • Compare the market economy to other types of economies (command, traditional, mixed).