Transcript American Free Enterprise

American Free Enterprise
Chapter 3
Essential Question
• What are the benefits
of a free enterprise
society?
Essential Question
• Think of a product that you use that was
developed or modified as a result of some
change in the marketplace.
• Would this product have been developed in a
command economy? Why or why not?
• How does this product demonstrate a strength
of the free enterprise system?
Think about……………………
• Why do you think
competition helps
consumers?
Guiding Question
• How does the American
economy incorporate the main
characteristics of a free
enterprise economy?
American Free Enterprise
Capitalism
• Characteristics of Free
Enterprise Capitalism
• Economic Freedom
• you have the freedom to choose
your occupation, your employer,
and your job location.
• Businesses also enjoy
considerable economic freedom.
• free to hire the workers of their
choice, and they are free to
produce the products they think
will be the most profitable.
American Free Enterprise
Capitalism
• Characteristics of Free
Enterprise Capitalism
• Voluntary Exchange
• the voluntary act of buyers and
sellers freely and willingly
engaging in market transactions
• when buyers spend their money
on a product, they act on a belief
that the item they purchase is of
greater value than the money they
give up—or they would not make
the purchase.
American Free Enterprise
Capitalism
• Characteristics of Free
Enterprise Capitalism
• Private Property
• allow people to own and control
their possessions as they wish.
• gives people the incentive to
work, save, and invest.
• the Fourteenth Amendment to the
U.S. Constitution protects private
property rights
• Private property makes borrowing
possible and investing attractive
American Free Enterprise
Capitalism
• Characteristics of Free
Enterprise Capitalism
• Profit Motive
• people are free to risk any part of
their wealth in a business venture.
• If it goes well, they will earn
rewards for their efforts = Profit
• Profit Motive allows for the
business to always want to
improve.
American Free Enterprise
Capitalism
• Characteristics of Free
Enterprise Capitalism
• Competition
• the struggle among sellers to
attract consumers with the best
products at the lowest prices.
• Forces businesses to choose what
products are the best
American Free Enterprise
Capitalism
• Benefits of Free Enterprise Capitalism
• Individual Freedom
• Individual freedom is almost the same as the “economic
freedom”
• Our individual freedom is evident in many different ways,
from choices we make in the market to choices we make in
the voting booth.
• A Variety of Goods
• Market economies everywhere are renowned for producing
a huge variety of goods of almost all shapes, colors, and
sizes, depending on the type of product.
American Free Enterprise
Capitalism
• Benefits of Free Enterprise Capitalism
• Adapting to Change
• takes place mainly through the price system, and a change
in the price of one product can affect changes in other
industries.
• Turn & Talk – How, when oil prices were high, did other
industries adapt to these high prices?
• Must be observed over a lengthy period of time to really
notice
• Promoting Progress
• Spending freely promotes progress due to consumers
always wanting newer, better products.
American Free Enterprise
Capitalism
• Benefits of Free Enterprise Capitalism
• Creation of Wealth
• Economists think of wealth as the accumulation of products
that are tangible, are scarce, have utility, and are
transferable from one person to another
• Wealth happens when more and better goods are produced
• The Gross Domestic Product—the dollar value of all final
goods, services, and structures produced within a country’s
borders in a 12-month period—of the U.S. economy is the
largest in the world. It is about twenty percent larger than
China’s GDP, even though China’s population is more than
four times larger than the population of the United States.
American Free Enterprise
Capitalism
• Disadvantages of Free Enterprise Capitalism
• Uneven Economic Growth
• not always smooth and uninterrupted.
• Periods of uneven economic growth are not pleasant, but
they do remove some of the “fat” or unneeded activities in
businesses and public services
• Growing Gaps Between Rich and Poor
• rich seem to get richer while the poor seem to stay poor.
• Some of this is due to the fact that some people—if they are
able to devise a product that meets the consumer’s
economic need—can grow very rich in a very short period
of time.
American Free Enterprise
Capitalism
• Supply Side vs. Demand Side
• Ideal is for both to be relatively even
• Supply side is where there can be a problem
• suppliers tend to combine with other suppliers in order to
avoid competition
• Bad for suppliers
• Government intervention – Break up
Roles and Responsibilities in a
Free Enterprise Economy
• Lesson 2
• The role and responsibilities fall into 3
distinct groups
• Entrepreneurs
• Consumers
• The Government
• Complete the handout/chart from lesson 2
Evaluating Economic
Performance
• Lesson 3
• Complete the chart on the following slide from
the information located in lesson 3 of Chapter 3
Seven Goals of Economic Performance
Economic Freedom
Economic Efficiency
Economic Equity
Economic Security
Full Employment
Price Stability
Description
Economic Freedom
-Decisions (individual and business)
-Cornerstone of American Society
Economic Efficiency
-Not wasting resources
Economic Equality
-Illegal to discriminate on the basis of age, sex,
race, religion, or disability in employment
-Minimum Wage
Economic Security
--Unemployment, Social Security, Disability
-Medicare
Full Employment
-Ideal
-Most people want their economic system to
provide as many jobs as possible
Price Stability
-Inflation affecting people on a fixed income,
higher inflation leads to higher interest rates
and higher costs – less spending.
-Price stability adds a degree of certainty to the
future for businesses and consumers alike
Economic Growth
Most people hope to have a better job, a newer
car, their own home, and a number of other
things in the future