esson 2: Page 36
Specialization in a field or area makes the economy more efficient because it’s typically better to master one skill than trying to incorporate other skills in practice. Concentration on one particular field leads to efficient work ethics and improved results which save resources and avoids wastes.
Self-interests affect the free market by allowing the people the liberty to produce and make whatever they desire. It is one’s best interest to do what they do to sell a product or provide a service that they are passionate about. Competition affects the free market in the sense that there are many out there trying to do the same things as other people which creates competition. Those that provide superior services and quality will win. This is why businesses continue to strive and are very competitive.
The “invisible hand” of the marketplace is what pushes people’s interest and competition in the economic world. Self-interest incentivizes consumers to buy certain goods and products and competition are what companies produce more of and regulate their prices. Prices are typically dictated by the forces of the market than the choices of individuals.
Specialization benefits both producers and consumers in a free market economy in the sense that producers produce what they’re best at thus, crafting a valuable and worthy product and consumers will purchase these products if they deem them worthy enough. Consumers persuade what the producers make because they will buy the products they want.
Incentives are related to the principle of consumer sovereignty in the idea that producers are incentivized to create products that the consumers want and will buy. This system shapes how the free market system flows.