Transcript Chapter 3
Chapter 3 American Free Enterprise Constitutional Protections The Bill of Rights provides for the following Property Rights We are entitled to hold land which cannot be taken Taxation Government can only tax within reason a person or business Principles of Free Enterprise Profit Motive Why people engage in free enterprise (make $$) Open Opportunity anyone can compete/get in the game Economic Rights Legal equality (all get treated the same) Property rights Free Contract Voluntary exchange (decided what to buy and sell) Competition (multiple sellers) Consumers The purpose of free enterprsie is to get consumers to make economic choices How do companies know what to produce? Interest groups The Government’s Role in Free Enterprise Protection – make sure that products are safe Make sure entrepreneurs/producers share information about products (disclosure laws) Products made an a factory that uses peanuts Fuel efficiency disclaimers The Government’s Role (cont’d) Protecting Health, Safety, and Well-being Restrictions keep the consumers and the market safe Environmental restrictions on the disposal of hazardous materials Public Interest The concerns of the public as a whole Why Regulation is Bad Competition can be effected by regulations What is meant by this? Can you think of examples? Chapter 3 Section 2 Promoting Growth and Stability Macroeconomics vs Microeconomics Macroeconomics Economics of the entire economy Microeconomics Economics of small units Individuals Families Businesses The Business Cycle A period of macro economic expansion followed by a period of contraction Government actions try to limit fluctuations Promoting Economic Strength & Stability 3 Ways to Stabilize: 1) Employment Government attempts to provide jobs (the Great Depression and the TVA) 2) Growth Increase the Gross Domestic Product (GDP) Total value of all final goods and services produced in a particular economy 3) Stable Prices The government monitors and regulates certain institutions to attempt to keep prices stable Governments can take actions to attempt to counter fluctuations How Can We Increase Productivity? Instill a higher Work Ethic the commitment to the value of work and purposeful activity Technology Makes the process to produce a good or a service better The government pushes for technological advancement because it eventually increases the national GDP. Attempt to explain the fluctuations of this chart Chapter 3 Section 3 Providing Public Goods Questions to Consider What would it be like if the government decided to leave the task of road building up to private citizens? What problems would arise? PUBLIC GOODS shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers Examples: Dams, Roads, How are public goods funded? Yellowstone National Park Taxes was created by the government What does it cost to go there? Little to nothing Benefits of Public Goods Value Not changed by multiple uses You can drive on a road thousands of others have used Costs and Benefits Benefits must outweigh the costs in order for a public good to be created Why was the Grand Canyon Skywalk built by a Native America Tribe and not the government? Public Versus Private Sector Public Sector The part of the economy that involves the transactions of the government Public Goods are financed by the Public Sector Private Sector Part of the economy that involves transactions of individuals and businesses Free Rider Someone who wants to get the benefits of public goods without paying for a good or service EXAMPLE Firemen protect your home whether you would pay for it or not. Free Riders!! Everyone wants it but a few people Result: Other peoples homes are protected from your fire next door because everyone benefits from public goods Military Those who didn’t want it will use it and therefore become “Free riders” Market Failures A situation in which the market does not distribute resources efficiently You cant just build roads where there are the most people because it neglects areas in need of transportation EXTERNALITIES Economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume Can be both positive and negative DAM EXTERNALITIES Intended Purpose: Power What are to positive effects? Boating Fishing Lakefront views Swimming What are the negative effects? Loss of habitat Overcrowding Noise Fish migration disruption How the Government deals with Externalities Encourage positive externalities Limit negative externalities via regulations and things like “pollution permits” What do you think a pollution permit is? Chapter 3 Section 4 Providing a Safety Net Read aloud intro to Section 4 (67) The Poverty Problem Free markets result in uneven distribution of resources Poverty Threshold income level below what is needed to support a family or household The GOVERNMENTS Role Provide a safety net Welfare – the US safety net of government aid for the poor Created following the Great Depression Positive: A safety net for the poor Negative: Some feel people become dependent upon welfare and are unable or unwilling to get off of assistance. Government Redistribution Programs CASH TRANSFERS Direct payments of money to people eligible poor people 1. Temporary Assistance For Needy Families 2. Social Security 3. Unemployment Insurance 4. Workers Compensation Government Redistribution Programs IN-KIND BENEFITS Goods and services provided for free or at greatly reduced prices Food giveaways, food stamps, subsidized housing, legal aid MEDICAL BENEFITS Medicare – people over 65 Medicaid – poor who are unemployed or not employer’s insurance Government Redistribution Programs EDUCATION Government funding for basic and advanced education FAITH BASED INITIATIVES Religious organizations can qualify for federal funding as of 2003 to help the poor