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Essay On Elements Of Economic System

884 Words4 Pages

The American Economic System: External Element

Learning Objectives:

• To identify and describe the different types of economic systems

• To define and describe the nature of the American business system

• To learn how the American economic system affects the success and failure of

American businesses

• To relate supply and demand to the success and failure of enterprises

• To understand the various degrees of competition in the U.S. economic system

• To understand how competition relates to the success and failure of American enterprises
• To understand the criteria for evaluating the success of an economic system and its business enterprises
• To understand how the federal government attempts to manage the U.S. economy

Why Study …show more content…

The function of any marketplace is to provide a setting in which supply and demand can operate to establish price (Bangs & Pinson, 1999, p. 22).
Having knowledge of the laws of supply and demand will help entrepreneurs make sound business decisions. If an entrepreneur thinks the demand for a product is going to rise, it would be wise to start selling that product, because the price that people are willing to pay for is going to rise. For example, the price of heating oil generally rises in the winter because the demand for heating oil in certain areas rises as well depending on the severity of the winter weather. Naturally, as demand dissipates, prices also decrease—thus the law of supply and demand.
It is important for entrepreneurs to note that the laws of supply and demand work best in competitive markets. When businesses are competing with one another, they try to attract consumers by lowering prices, improving quality, and developing new products and services (Mariotti, 2000, p. 69)
Government regulations, or anything else that keeps entrepreneurs from entering a market, will make the market less competitive. Less competition leads to higher prices, poorer quality, and fewer new products and services (Mariotti, 2000, p.

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