Define market - and discuss why they are our preferred method of rationing. Define incentives as both rewards and penalties for behavior. There are monetary and non-monetary incentives. The role of prices in markets. Prices provide information.
Prices act as a rationing mechanism.
Prices are incentives - for buyers and sellers. Define and develop examples of market clearing price. Clearly defined property rights and prices that move freely in response to changing conditions of demand and supply encourage exchange and the creation of wealth. Markets and prices encourage specialization and interdependence. In a society characterized by extensive specialization, people obtain most of what they want by supplying things that satisfy the wants of other people.