Capitalism and Free Enterprise Ch 2 S 3

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Capitalism and Free Enterprise Ch. 2 S. 3 Main Idea: Under capitalism, the basic

Capitalism and Free Enterprise Ch. 2 S. 3 Main Idea: Under capitalism, the basic economic decisions are made through the free interaction of individuals looking out for their own best interest

Capitalism and Free Enterprise � Capitalism – where private citizens own the factors of

Capitalism and Free Enterprise � Capitalism – where private citizens own the factors of production. � Free Enterprise – competition is allowed to flourish with a minimum of government interference

The 5 Characteristics of Competition and Free Enterprise �Characteristic One • Economic Freedom -

The 5 Characteristics of Competition and Free Enterprise �Characteristic One • Economic Freedom - people and businesses make their own economic choices. �People are free to choose their occupation and their employer �Businesses are free to hire the best workers and they have the freedom to produce goods and services they feel will be most profitable

The 5 Characteristics of Competition and Free Enterprise � Characteristic Two • Voluntary Exchange

The 5 Characteristics of Competition and Free Enterprise � Characteristic Two • Voluntary Exchange – Buyers and sellers freely engaging in market transactions. �Transactions are made in such a way that the buyer and seller are both better off after the exchange.

The 5 Characteristics of Competition and Free Enterprise � Characteristic Three • Private Property

The 5 Characteristics of Competition and Free Enterprise � Characteristic Three • Private Property Rights – Individuals are allowed to own and control their possessions as they wish. �Tangible and intangible items �Houses and cars �Skills and talents �Motivate people to succeed. Any rewards they earn are kept

The 5 Characteristics of Competition and Free Enterprise � Characteristic Four • Profit Motive

The 5 Characteristics of Competition and Free Enterprise � Characteristic Four • Profit Motive - encourages entrepreneurship and is largely responsible for the growth of a free enterprise economy. • Profit – the extent to which persons or organizations are better off at the end of a period than they were at the beginning.

The 5 Characteristics of Competition and Free Enterprise � Characteristic Five • Competition –

The 5 Characteristics of Competition and Free Enterprise � Characteristic Five • Competition – lowers the prices that consumers pay. �since sellers compete for buyers they try to offer their goods at the lowest possible price

The Role of the Entrepreneur • Entrepreneurs use land labor and capital to make

The Role of the Entrepreneur • Entrepreneurs use land labor and capital to make profit. • Successful entrepreneurs attract other firms to the industry. • The desire to make a profit motivate entrepreneurs to invent new products, compete aggressively, increase productivity, keep prices low and produce high quality products.

The Role of the Consumer • The consumer is all powerful in a free

The Role of the Consumer • The consumer is all powerful in a free market economy. • In the American economy, consumers express their wants in the form of purchases in the marketplace. The dollars they spend are the “votes’ used to select the most popular products.

The Role of the Government • The government passes laws and regulations to prevent

The Role of the Government • The government passes laws and regulations to prevent the abuse of the consumer and workers. • The U. S. Government provides education and welfare and is the single largest consumer in the economy. • The U. S. Government works to protect and preserve competition. • The promoting of national goals is an important role of any government. In the U. S. , achieving economic equity and security has resulted in a mixed economy, or modified free enterprise economy.

Discussion Questions � In your opinion, which of the 5 characteristics of the free

Discussion Questions � In your opinion, which of the 5 characteristics of the free market system is most important? � How are entrepreneurs and consumers dependent on each other? � How would our economy be different if it were a pure free enterprise economy rather than a mixed economy? � How is the U. S. Constitution a statement of our national economic goals? � What would you find most attractive about owning your own business? What would be least attractive?