Explain how changes in the level of competition in different markets can affect price and output levels. A different kind of institution, clearly defined and well enforced property rights, is essential to a market economy. Describe the roles of various economic institutions. Explain how their lives would be more difficult in a world with no money or in a world where money sharply lost its value. What workers earn depends, primarily, on the market value of what they produce and how productive they are.
Profit is an important incentive that leads entrepreneurs to accept the risks of business failure.
Governments often provide for national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Most government policies also redistribute income. This may occur because of incentives facing voters, government officials, and government employees, because of actions by special interest groups that can impose costs on the general public, or because social goals other than economic efficiency are being pursued. Explain why the policies exist. Unexpected inflation imposes costs on many people and benefits some others because it arbitrarily redistributes purchasing power.