Free Enterprise Free Enterprise Basic Principles An economic
Free Enterprise
Free Enterprise – Basic Principles An economic system based on limited Government intervention. BASIC PRINCIPLES: o Freedom of Ownership o Competition o Risk o Profit
Free Enterprise FREEDOM OF OWNERSHIP
Freedom of Ownership o Individuals n n We can own property / goods We can choose what property we buy We can choose what we do with property We can own business (keep money) o Businesses n n Businesses can sell what they want Businesses can sell for what they want
Free Enterprise COMPETITION
Competition o Essential part of Free Enterprise !! WHY? Motivation: Companies make better products / cheaper Individuals work harder / improve
Competition Two ways businesses compete: o Price Competition o Non-Price Competition
Competition o Price Competition All other things being equal, customers will buy the lowest price. Wal-Mart: “Always the lowest price – always”
Competition o Non-Price Competition Quality of Products - Rolex Features of Products - Whopper Service and Financing - Wallside Business Location - 7 -Eleven Reputation - Coca-Cola
Competition o Monopoly - One firm controls the market for a given product. - NO COMPETITION Why is it Bad? Can control price Can control choice, quality, who get it
Free Enterprise ASSIGNMENT
Non-Price Drawing o Consider as many non-price factors as possible that Mc. Donalds’s uses to compete (Minimum five factors) 20 points p Illustrate p List each factor on construction paper the factors on the back of the drawing or incorporated in drawing.
Free Enterprise RISK
Risk o the potential for loss or failure. o Necessary hazard of Free Enterprise. Risk involved with: Personal investment (products / money) New Business New products / technology (high cost)
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Free Enterprise PROFIT
Profit o Money earned from business AFTER all costs and expenses are paid. o Is the incentive for people to take risk. o THE DRIVING FORCE OF FREE ENTERPRISE
Economic Cost of Unprofitable Firms o In groups of 3 or 4: Brainstorm all the potential ECONOMIC COSTS you can think of if a firm is unprofitable. (What bad things can happen? ) 3 minutes
Profit o Economic COST of unprofitable firms: n n n Lay-offs Investors lose money Research cutbacks (technology) Purchases get cut back (suppliers suffer) Government suffers (less taxes)
Economic Cost of Unprofitable Firms o In groups of 3 or 4: Brainstorm all the potential ECONOMIC BENEFITS you can think of if a firm is profitable. (What good things can happen? ) 3 minutes
Profit o Economic BENEFIT to successful firms. n n n Hire More People / Higher Pay Investors make money New Technology Government makes more (taxes) Give to Charities Attract Competition (Beneficial to customer)
Free Enterprise ASSIGNMENT
Current Event o Find article relating to Free Enterprise p 100 word response p Describe why the article relates o Article showing U. S. inhibiting Free Enterprise p 100 word response p Describe why the event is inhibiting Free Enterprise
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