CAPITALISM FREE ENTERPRISE Chapter 2 Section 3 CAPITALISM

CAPITALISM & FREE ENTERPRISE Chapter 2, Section 3

CAPITALISM � A MARKET SYSTEM IN WHICH PRIVATE CITIZENS OWN THE FACTORS OF PRODUCTION – � RESOURCES � � � ARE NOT OWNED BY GOVT EMPHASIS ON COMPETITION FREE ENTERPRISE IS ANOTHER NAME FOR AMERICA’S ECONOMIC SYSTEM IN THEORY, LITTLE GOVERNMENT INTERVENTION (IN REAL LIFE, NOT TRUE)

4 Characteristics of Capitalism �Economic Freedom �Voluntary Exchange �Private Property �Profit Motive

ECONOMIC FREEDOM � � � INDIVIDUAL FREEDOM FOR BUSINESSES MAKE ECONOMIC DECISIONS FOR YOURSELF �OCCUPATION �CHOOSE YOUR EMPLOYER �WORK FOR YOURSELF �SPEND MONEY AS YOU WISH

VOLUNTARY EXCHANGE � � � BUYERS AND SELLERS FREELY AND WILLINGLY ENGAGE IN MARKET TRANSACTIONS EVERYONE IS BETTER OFF – MUTUAL BENEFIT YOU AGREE TO SPEND THE MONEY OR SELL THE GOOD/SERVICE

Voluntary Exchange

PRIVATE PROPERTY � � PEOPLE HAVE THE RIGHT AND PRIVILEGE TO CONTROL THEIR POSSESIONS OWNERSHIP INCENTIVE – TO WORK, SAVE, INVEST, SUCCEED, IF YOU EARN IT, YOU KEEP THE REWARD INTANGIBLE � SKILLS, � TANGIBLE � HOUSE, � TALENTS – LIKE A DOCTOR CAR, ARTWORK, CELL PHONE INHERITANCE - to pass on property when you die

PROFIT MOTIVE � � � The drive to improve your material well being Profit is the extent to which you are better off - measured in dollars or other benefits People are free to RISK their wealth in business ventures RISK is assumed by the individual – you succeed or fail on your own If you succeed, you keep the profit If you fail, you may lose your investment

Role Players in Capitalism � � � Entrepreneurs Consumers Government �Protector – law enforcement �Provider/Producer – provides G/S �Consumer – buys G/S �Regulator – preserve competition �Promotes National Goals

Name that Role Player 1. 2. 3. 4. 5. 6. 7. 8. 9. ___ create jobs and new goods or services. ___ love shopping for new clothes and shoes. ____write laws to protect consumers against defective products. ___ require that automobiles have safety belts and air bags. _______ educates citizens, a service. _____ provides police and fire service. ____ buys office supplies, like a consumer. ____ regulates competition to prevent monopolies. ____ help grow the economy with new ideas.

Entrepreneurs � � Organize the use of Land, Labor and Capital Start new businesses Many businesses fail Everyone benefits when they succeed – employees, consumers, government (taxes for roads, schools, libraries, police, fire)

ENTREPRENEURS

CONSUMERS Consumer sovereignty – the buyers rule the market by choosing what sells and what fails � Consumers vote with their dollars � Examples of successful products? � Examples of failed products? �

CONSUMER SOVEREIGNTY

GOVERNMENT � � � Protector: laws are passed to protect consumers and create rules for contracts, safety, etc. Producer: Defense services, education, parks Consumer: Buys office supplies, food, property Regulator: Preserve competition (no monopolies), monitors banks, automobiles (registration, licenses), use of property Promoter of National Goals: creates programs desired by citizens

MIXED ECONOMY or MODIFIED FREE ENTERPRISE ECONOMY � � The US is NOT a pure market system We are largely based on Market system The US is subject to a great deal of government intervention in their economic affairs Examples?