1.2 How People Interact
1.2 a. Principle 5: Trade is better for everyone
The increase or decrease in the total cost of a production run for making one additional unit of an item. [11]
Example: A farmer produces enough crops for his family, he has the option to trade if it sets him better off but it is voluntary, and he does not have to do it. In this way, trades makes everyone better off.
Trade makes everyone better off [12]
1.2 b. Principle 6: Market Economy
Free market system in which decisions regarding resource allocation, production, and consumption, and price levels and competition, are made by the collective actions of individuals or organizations seeking their own advantage. [13]
Example: The United States is a free market economy which has a lesser government influence than most, and the prices rely on the efficiency of the market.
Market Economy [14]
1.2 c. Principle 7: Government Intervention
Regulatory actions taken by a government in order to affect or interfere with decisions made by individuals, groups, or organizations regarding social and economic matters. [15]
Example: A government-run health systems of some developed nations are successful government-sponsored economic activities. [16]
Government Intervention [17]
