Transcript Free Enterprise System

Free Enterprise
System
Encourages individuals to start and
operate their own businesses
without government involvement.
Free Enterprise System…..What
other names does our economy
have?
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Private Enterprise System
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Market Economy
Capitalistic Economy
Basic Principles of the Free
Enterprise System
Freedom to own personal property
and do with it whatever we choose
Cars, computers, land, homes
Start and operate the business of
your choice
The government allows you to run
your business however you see fit
and without interference
Competition
• The struggle between companies for
customers
• The government will not compete
against you.
• Why does the government want us to
open new businesses? How does
this improve our economy?
Two types of competition
• Price Competition
– The business focuses on the sale price of the
product.
– The assumption is that with all other factors
being equal, customers will purchase the item
with the lowest price.
• Non-price competition
– Businesses choose to compete on the basis
of factors that are not related to price.
• Factors include:
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Quality of the products
Service and financing
Business location
Reputation
MONOPOLY – It’s illegal!!!
 No, not the board game!!!
 The exclusive control over a product or
the means of producing it.
 Examples: AT&T
Microsoft
 Risk is defined as the potential for loss or
failure in relation to the potential for
improved earnings.
Whenever individuals choose to
operate their own business, they
run the risk of losing (or gaining)
all that they invest.
As the potential for earnings
gets greater, the risk increases
accordingly.
Profit
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The money earned from conducting
business after all costs and expenses have
been paid.
If you sell a coke for $1.09 your profit is not $1.09, you must first
deduct the amount the store paid to stock the drinks and a
percentage for overhead.
Economic Cost
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What is the economic cost of an
unprofitable firm to the
community?
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What are the economic benefits
of having a successful firm in
the community?
What is an economy?
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An economy is defined as….the way a
nation makes its economic choices.
What exactly does that mean??
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Just think MONEY!!! How does our money
move through the economy? What do we do
to keep it moving through the economy?
 How
does the government get
money?
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Did you say taxes? Yes, they get money
through our tax dollars.
If we are paying in so much money, what do we
get in return?
The answer to these questions can be answered
by learning the roles of government in our
economy.
The Role of Government
The Government plays four roles in our
Free Enterprise System
They are:
– Provider of Services
– Supporter of Business
– Regulator
– Competitor
Provider of Services
• What services does the government
provide?
• Roads, bridges, free education, public
libraries, military, fire department,
police, Medicare, Medicaid, WIC, and
sanitation centers.
Supporter of Businesses
Disaster Assistance
 SBA – Small Business Administration
 All government purchased items must be
purchased from US companies
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The government is the single largest consumer of goods and services in the US
Tariffs and trade agreements
Regulator
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Making laws is one of the principal
functions of government.
In the US, most laws are made to protect
the safety, health, and welfare of
individuals and the freedom of businesses
to operate in our free enterprise system.
Regulators – Consumer & Worker
Protection

Agencies that are specifically set-up to
protect the individuals while they are at
work and to protect the consumer when
purchasing products.
 Consumer
& Worker Protection
FDA – Food & Drug Administration (proper labeling of food & drugs, lack of contaminents, research into
new drugs and their benefits)
EEOC – Equal Employment Opportunity Commission
OSHA – Occupational Safety and Health Administration
CPSC – Consumer Product & Safety Commission
FEMA – Federal Emergency Management Agency
DEA – Drug Enforcement Agency
EPA – Environmental Protection Agency
FDIC – Federal Deposit Insurance Corporation
FTC – Federal Trade Commission
Licensing
Minimum Wage
(truth in advertising, labeling, monopolies)
Regulators – Business Protection
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Patents
Copyrights
Trademarks
Licensing Agreements
Sherman Antitrust Act (1890)
Clayton Antitrust Act (1914)
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Predatory Pricing, Monopolies, FTC
Competitor
Agencies operated by government
that competes with private
enterprise
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TVA
USPS
Amtrak
Parks and Campgrounds
The Role of the Consumer
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Supply
Demand
Shortage
Surplus
Equilibrium
Supply
The amount of goods producers are
willing to make and sell.
As prices rise, producers are willing
to produce more.
As prices go down, producers are
willing to produce less
Demand
 Consumer willingness and ability to buy
products
 As price goes up, consumers are not as
willing to buy.
 As price goes down, consumers are willing
to buy more.
Surplus & Shortage
Surpluses occur when supply exceeds
demand.
 If prices are too high or quality not good
Shortages occur when demand exceeds
supply.
Think GASOLINE!!! We pay whatever
they charge because we have to have it
EQUILIBRIUM
 When the amount of product being supplied
is equal to the amount being demanded,
equilibrium occurs.
 Customers are able to purchase products at
a fair price and businesses are able to
maintain a steady flow of business.
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Great Depression
 When?
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Why?
Federal Reserve System
 Who
are they?
 What do they do?
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Interest rates
 How
do interest rates affect the economy?