Purpose:

Objectives:

1. People are motivated to buy and sell goods and labor services by their desire to improve their well-being.
   
   
   1. Consumers purchase products and services to maximize their well-being.
   2. Producers supply these products and services in a manner that maximizes their profits.
2. Prices are the mechanism that provides information and incentives to buyers and sellers.
   
   
   1. Prices tell producers how much they can produce at what profit.
   2. Prices indicate to consumers how much and what they can buy with their income.
   3. The market balance occurs at a price where the separately formed plans of buyers and sellers mesh so that the quantity demanded (at a particular price) and the quantity supplied (at that price) are the same.
   4. This equilibrium point encourages the efficient allocation of resources.
3. Interference with the natural market forces through the imposition of price controls, rationing, quotas, etc., can lead to an inefficient allocation of resources.
4. There are circumstances in which market intervention may be justifiable:
   
   
   1. Markets may exhibit unstable price behavior.
   2. Market forces may hurt the economically disadvantaged.
   3. Markets may not respond quickly enough during national emergencies.