Transcript Capitalism and Free Enterprise

The American Free Enterprise
System
Chapter 3
Lesson 1: American Free
Enterprise Capitalism
Essential Question:
What are the benefits of a free
enterprise economy?
Free Enterprise: an economic system
in which privately owned businesses
have the freedom to operate for a
profit with limited government
intervention
Capitalism
A market economy is based on capitalism, a
system in which private citizens own the
factors of production.
Capitalism thrives on competition, the
struggle among sellers to attract consumers
while lowering costs.
Buyers also compete to find the best
products at the lowest prices.
Free Enterprise
Free Enterprise is another term used
to describe the American economy.
In a free enterprise economy,
competition is allowed to flourish with
a minimum of government
interference.
Five Characteristics of Free
Enterprise
1. Economic Freedom
People have the freedom to choose their
occupation and their employer.
People can choose to have their own
business or to work for someone else.
Businesses are free to hire the best
workers, and they have the freedom to
produce the goods and services they feel
will be the most profitable.
Five Characteristics of Free
Enterprise
2. Voluntary Exchange
The act of buyers and sellers
freely and willingly engaging in
market transactions.
Both the buyer and seller are
better after the transaction than
before.
Five Characteristics of Free
Enterprise
3. Private Property
People have the right and privilege to
control their possessions as they wish.
They have the right to use or abuse their
property as long as they do not interfere
with the rights of others.
This gives people the incentive to work,
save, and invest.
Five Characteristics of Free
Enterprise
4. Profit Motive
The driving force that encourages people
and businesses to improve their material
well-being.
People are free to risk their wealth in a
business venture.
If things go poorly, they lose part or all of
the investment.
If things go well, they will earn rewards.
Five Characteristics of Free
Enterprise
5. Competition- Capitalism thrives on
competition.
Competition is the struggle that goes on
between buyers and sellers to get the best
products at the lowest prices.
Competition between sellers keeps the costs
of production low and the quality of goods
high.
Buyers compete among themselves to find the
best products at the lowest prices petition
Benefits of the Free
Enterprise System
Individual freedom of consumers
and producers
Variety of goods
Adapting to change
Promoting Progress
Creation of wealth
Watch Ford video
How is being in a free enterprise
economy pushing Ford to improve its
product?
How is profit motive at work at Ford?
Why did Ford sell off Jaguar, Volvo,
and Land Rover?
Disadvantages of Free
Enterprise Capitalism
Uneven economic growth-sometimes the growth
is fast and at other times it takes a step back
Growing gaps between rich and poor- the rich
seem to get richer and the poor seem to stay
poor
Large “supply-side” tendencies-works best when
there area large number of players-buyers and
sellers
Rights and responsibilities of business-protects
consumers against harm from products
Review minimum wage picture - discuss
Lesson 1 Assignment – Complete
handout
Lesson 2: Roles and
Responsibilities in a Free
Enterprise Economy
Essential Question:
What are the benefits of a free
enterprise economy?
The Role of the Entrepreneur
The entrepreneur is
one of the most
important people in
the economy.
The entrepreneur
organizes land, labor,
and capital in order to
seek the reward called
profit.
Cont..
The entrepreneur’s search for profits
can lead to a chain of events that
involves new products, greater
competition, more production, higher
quality, and lower prices for
consumers.
The Role of the Consumer
Consumers have the power
in the economy because
they determine which
products are likely
produced.
If consumers like a
product, it will sell, and
the producer will be
rewarded for his or her
efforts.
Cont…
 If consumers reject the product,the
firm may go out of business.
 This is known as consumer
sovereignty.
The Role of Government
Government has an
economic role to play
that reflects the
desires, goals, and
aspirations of its
citizens.
The role of
government is
normally justified
whenever its benefits
outweigh its costs.
The Role of Government
1. Protector
Government enforces laws such as
those against false and misleading
advertising, impure food and drugs,
environmental hazards, and unsafe
automobiles.
It also enforces laws against abuses
of individual freedom.
The Role of Government
2. Provider and Consumer
Government provides goods and services
for citizens.
For example: national defense,
education, parks, and libraries.
In the process government consumes
factors of production just like any
business.
The Role of Government
3. Regulator
The government is charged with
preserving competition in the
market place.
It tries to ensure everyone follows
the “rules of the game” to ensure
an efficient and fair economy.
The Role of Government
4. Promoter of National Goals
Government reflects the will of the
majority of its people.
Government programs such as Social
Security, child labor laws, and minimum
wage reveal how Americans have
modified their free enterprise economy.
The Role of Government
(cont)
Because of these modifications, the
United States is said to have a mixed
economy.
This is one in which people carry on
their economic affairs freely but are
subject to some government
intervention and regulation.
Copy an answer the following questions
1. Why do entrepreneurs try to start
businesses or develop new products? Are
they more likely to succeed or fail?
2. Who benefits from the activities or
entrepreneurs, and how?
3. Why is the customer always right?
4. Explain how consumer sovereignty helps
drive progress?
How does the government act as protector
of the economy?
6. What services and goods does the United
States government supply its citizens?
7. What services do state and local
governments provide?
8. Why is government regulation important?
9. Why do all levels of government consume
so much?
10.Why is a mixed economy necessary? Why
not do away with government regulation?
5.
Lesson 3: Evaluating Economic
Performance
Essential Question:
What are the major economic and
social goals of the American free
enterprise system?
Economic Goals
In answering these questions, societies
must consider their economic goals
Economic Freedom
Economic Efficiency
Economic Equity
Economic Security and Predictability
Full Employment
Price Stability
Economic Growth and Innovation
Economic Freedom
Freedom to make your own economic
decisions
Allowing individuals to make economic
choices about
Earning income
Owning property
Purchasing goods and services
Economic Efficiency
Maximizing output of goods and
services from the resources
available
Economic Equity
Strong sense of justice, impartiality
and fairness
Dividing resources in a way that is
considered fair
Economic Security and
Predictability
Assuring people that goods and
services will be available
Providing aid for retirement and in
difficult times (social Security,
Unemployment, Welfare)
Full Employment
Economic system should provide as
many jobs as possible
No job = people can’t support
themselves/family, nor can they
produce goods & services for others
Desirable unemployment rate = 4%
- 5%
Price Stability
Stable prices help avoid inflation (a
rise in the general level of prices)
Stability makes budgeting easier &
adds a degree of certainty about
the future
Economic Growth
Standard of living—level of econ. wellbeing of people
Necessary to provide more jobs and
income for people
Resolving Trade-Off Among
Goals
#Trade-offs Necessary
Some goals mutually conflict
Can’t have full economic freedom and full
economic security or equity
# When goals are at odds, people must
compare costs to benefits before resolving
#the conflict.
#The flexibility of the American economic
system allows choices and compromises.
Complete the questions for sec. 3
Make a crossword puzzle
Voluntary Exchange Incentives
Profit Motive
GDP
Competition
Mixed Economy
Consumer Sovereignty Price Stability
Economic
Minimum Wage
Freedom
Social Security
Economic Equity
Inflation
Fixed Income