Being an Economically Smart Citizen

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Chapter 18.3

• Being an Economically Smart Citizen

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Understanding Your Role in the Economy

• The U.S. has a market economy. Most economic
  decisions are not made by the government, but by
  individuals looking out for their own and their
  families self-interests.
• A market economy is participatory. The choices
  you make as a consumer affect the products that
  businesses make and the prices they receive for
  their products. Likewise, the products offered
  and their prices affect the choices you make.

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continued

• A market economy is based on capitalism, a system
  in which citizens own most of the means of
  production. It is also based on free enterprise
  businesses compete for profit with a minimum of
  government interference.
• Keeping informed means reading news stories,
  listening to news reports, and gathering
  information about economic activities of
  businesses and government.

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continued

• Incentives are rewards offered to try to persuade
  people to take certain economic actions. Price
  is one incentive. Others are bonuses for
  salespeople and low credit rates for consumers.
  Knowing how incentives work will help you make
  wise choices.
• One role of govt in the economy is to help
  maintain competitive markets. Another role is to
  provide services, such as education and national
  defense, that the private sector does not provide.

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continued

• Competition forces businesses to use societys
  resources efficiently to produce goods and
  services people prefer to produce quality
  products at low costs. Low production costs keep
  prices low for consumers.
• Govt can use incentives to encourage people and
  businesses to take certain actions. For example,
  offering scholarships encourages more people to
  get higher education.
• Govt can also discourage certain actions. For
  example, tax laws can punish companies that cause
  pollution.

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Making Wise Choices

• Rational choice is choosing the alternative that
  has the greatest value from among
  comparable-quality products. You make a rational
  choice when you buy the goods and services that
  you believe will best satisfy your wants for the
  lowest possible cause.

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continued

• Wise consumers will not all make the same
  choices. A rational choice is one that generates
  the greatest perceived value for any given
  expenditure.
• Wise decision making by individuals also benefits
  society by making the best use of scarce
  resources.
• Being fully informed is the best way to make the
  best economic as well as political decisions.