Adam Smith and Free Market Economy

Economic driver in free market

self-interest

The Invisible Hand

Explains Adam Smith's theory that the market will automatically reach equilibrium if the government stays out of it and allows buyers and sellers to act in their own self-interest

4 P's of Marketing

Product, Price, Place, Promotion

Effective Prices

Realistic, flexible, and competitive

division of labor/specialization

The situation where each person works on one or a few tasks that they are best at, and then trades to obtain the things produced by others.

The Wealth of Nations

This is the 18th century book written by Scottish economist Adam Smith in which he spells out the first modern account of free market economies.

3 economic questions

What will be produced? How will it be produced? For whom will it be produced?

incentives

a reward that motivates one to act a certain way

Economic regulator in free market

competition

Types of Prices

fees, dues, and admission

Laissez-faire economics

hands off approach to government; the government should not interfere in the economy

minimum wage

lowest legal wage that can be paid to most workers

equilibrium price

the price at which the quantity demanded equals the quantity supplied

Factors that affect price

1. Costs 2. Economy 3. Consumer tastes 4. Government 5. Company objectives and strategies

The Father of Economics

Adam Smith