Chapter 3 American Free Enterprise Chapter 3 Notes

Chapter 3 – American Free Enterprise Chapter 3 Notes American Free Enterprise

Chapter 3 – American Free Enterprise Today’s Objectives: q I can explain how the American free enterprise system functions q I can connect how consumers influence business decisions in a modified free enterprise q. I can differentiate between public and private goods Key Terms: Public goods Positive Externality Private Goods Negative Externality

Chapter 3 – American Free Enterprise Should people give up some of their economic independence or personal liberties for the benefit of all?

Chapter 3 – American Free Enterprise Modified Free Enterprise: a type of mixed economic system that includes some government protections, provisions, and regulations to adjust the free enterprise system

Chapter 3 – American Free Enterprise Modified Free Enterprise: Another name for capitalism: economic system based on private ownership with some government oversight. How it functions:

Chapter 3 – American Free Enterprise Free. Factor Enterprise

Chapter 3 – American Free Enterprise

Chapter 3 – American Free Enterprise Consumers- Businesses- “vote” for products with their wallets Driven by profit motive respond to consumer demands Producers allocate their resources by seeking to earn a profit

Chapter 3 – American Free Enterprise How it Functions Part 2: Profit Motive: the incentive that encourages people and organizations to improve their material well being by seeking to gain from economic activities - Profit is determined by subtracting the costs of producing a product from the revenue gained by selling it.

Chapter 3 – American Free Enterprise Today’s Objectives: q I can explain the roles that government plays in a mixed economy and the problems that occur in a free enterprise system q I can differentiate positive and negative externalities q I can connect public transfer payments with government safety net programs q I can evaluate the role of government in a mixed economic system Key Terms: Transfer Payment Infrastructure Positive Externality Free Rider Public Transfer Payment Subsidy Negative Externality Safety Net

Chapter 3 – American Free Enterprise How can people and companies driven by a profit motive potentially cause harm to an economy or other citizens?

Chapter 3 – American Free Enterprise Negative Externality: an economic side effect of a good or service that generates a cost to someone other than the person deciding how much to produce and consume

Chapter 3 – American Free Enterprise Positive Externality: an economic side effect of a good or service that generates a benefit to someone other than the person deciding how much to produce and consume

Chapter 3 – American Free Enterprise Positivebrings renewable energy Negative. Pollution, harm to the environment, etc.

Chapter 3 – American Free Enterprise Please open your textbooks to chapter 3 section 3 and locate and define the following vocabulary terms: Ø Infrastructure Ø Public Transfer Payment Ø Subsidy Ø Safety Net

Chapter 3 – American Free Enterprise Public Goods and services provided through the government and consumed by the public - Funded through taxes (or the public) Private Goods and services provided through the private individuals or businesses

Chapter 3 – American Free Enterprise Infrastructure: The goods and services that are necessary for smooth functioning of society, such as: highways, power, water, sewer systems, education, health care, police, fire protection, and seaports Infrastructure

Chapter 3 – American Free Enterprise Market Failures Market Failure: Situation in which the free market does not distribute resources efficiently Public Good: shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers. – Funded by taxes

Chapter 3 – American Free Enterprise Problems With Public Goods Free Rider Problem: someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good.

Chapter 3 – American Free Enterprise Public Transfer Payment Is a transfer a payment in which the government transfers income from taxpayers to recipients who do not provide anything in return Usually occurs with people who are aged and disabled… the people who can’t necessarily rely on themselves

Chapter 3 – American Free Enterprise Transfer Payment Transfers of income from one person or group to another even though the receiver does not provide anything in return

Chapter 3 – American Free Enterprise Subsidy: Government payment that helps cover the cost of an economic activity that has the potential to benefit the public as a whole

Chapter 3 – American Free Enterprise Safety Net: Government program designed to protect people from economic hardship

Chapter 3 – American Free Enterprise Political Cartoon Analysis

Chapter 3 – American Free Enterprise Political Cartoon Analysis