Standard 8 - Prices send signals and provide incentives to buyers and sellers. When supply or demand changes, market prices adjust, affecting incentives. Standard 9 - Competition among sellers lowers costs and prices and encourages producers to produce more of what consumers are willing and able to buy. Competition among buyers increases prices and' allocates goods and services to those people who are willing and able to pay the most for them. Standard 14 - Entrepreneurs are people who take the risks of organizing productive resources to make goods and services.
Profit is an important incentive that leads entrepreneurs to accept the risks of business failure.
Standard 15 - Investment in factories, machinery, new technology, and in the health, education, and training of people can raise future standards of living. The entrepreneur takes whatever profit or loss results from an enterprise. Governments encourage entrepreneurial activity when they secure clear property rights and protect freedom of exchange. When there is no residual claimant, there is less incentive to reduce the costs of providing goods and services or to improve product quality and service. Examples of collective ownership or government providers of services, like the Department of Motor Vehicles, illustrate the problems associated with the absence of these incentives.