American free enterprise system chapter 3

Advantages and disadvantages of American Free Enterprise System. Economic freedom, efficiency, security, social goals, inflation, fixed income.

1. American Free EnterpriseAmerican Free Enterprise
Chapter 3Chapter 3

2. Essential QuestionEssential Question
•What are the benefits What are the benefits
of a free enterprise of a free enterprise
society?society?

3. Essential QuestionEssential Question
•Think of a product that you use that was Think of a product that you use that was
developed or modified as a result of some developed or modified as a result of some
change in the marketplace.change in the marketplace.
•Would this product have been developed in a Would this product have been developed in a
command economy? Why or why not?command economy? Why or why not?
•How does this product demonstrate a strength How does this product demonstrate a strength
of the free enterprise system?of the free enterprise system?

4. Think about……………………Think about……………………
•Why do you think Why do you think
competition helps competition helps
consumers?consumers?

5. Guiding Question Guiding Question
•How does the American How does the American
economy incorporate the main economy incorporate the main
characteristics of a free characteristics of a free
enterprise economy?enterprise economy?

6. American Free Enterprise American Free Enterprise
CapitalismCapitalism
•Characteristics of Free Characteristics of Free
Enterprise CapitalismEnterprise Capitalism
•Economic FreedomEconomic Freedom
•you have the freedom to choose you have the freedom to choose
your occupation, your employer, your occupation, your employer,
and your job location.and your job location.
•Businesses also enjoy Businesses also enjoy
considerable economic freedom.considerable economic freedom.
•free to hire the workers of their free to hire the workers of their
choice, and they are free to choice, and they are free to
produce the products they think produce the products they think
will be the most profitable.will be the most profitable.

7. American Free Enterprise American Free Enterprise
CapitalismCapitalism
•Characteristics of Free Characteristics of Free
Enterprise CapitalismEnterprise Capitalism
•Voluntary ExchangeVoluntary Exchange
•the voluntary act of buyers and the voluntary act of buyers and
sellers freely and willingly sellers freely and willingly
engaging in market transactionsengaging in market transactions
•when buyers spend their money when buyers spend their money
on a product, they act on a belief on a product, they act on a belief
that the item they purchase is of that the item they purchase is of
greater value than the money they greater value than the money they
give up—or they would not make give up—or they would not make
the purchase.the purchase.

8. American Free Enterprise American Free Enterprise
CapitalismCapitalism
•Characteristics of Free Characteristics of Free
Enterprise CapitalismEnterprise Capitalism
•Private PropertyPrivate Property
•allow people to own and control allow people to own and control
their possessions as they wish.their possessions as they wish.
•gives people the gives people the incentiveincentive to to
work, save, and invest.work, save, and invest.
•the Fourteenth Amendment to the the Fourteenth Amendment to the
U.S. Constitution protects private U.S. Constitution protects private
property rights property rights
•Private property makes borrowing Private property makes borrowing
possible and investing attractivepossible and investing attractive

9. American Free Enterprise American Free Enterprise
CapitalismCapitalism
•Characteristics of Free Characteristics of Free
Enterprise CapitalismEnterprise Capitalism
•Profit MotiveProfit Motive
•people are free to risk any part of people are free to risk any part of
their wealth in a business venture. their wealth in a business venture.
•If it goes well, they will earn If it goes well, they will earn
rewards for their efforts = Profitrewards for their efforts = Profit
•Profit Motive allows for the Profit Motive allows for the
business to always want to business to always want to
improve.improve.

10. American Free Enterprise American Free Enterprise
CapitalismCapitalism
•Characteristics of Free Characteristics of Free
Enterprise CapitalismEnterprise Capitalism
•CompetitionCompetition
•the struggle among sellers to the struggle among sellers to
attract consumers with the best attract consumers with the best
products at the lowest prices. products at the lowest prices.
•Forces businesses to choose what Forces businesses to choose what
products are the bestproducts are the best

11. American Free Enterprise American Free Enterprise
Capitalism Capitalism
•Benefits of Free Enterprise CapitalismBenefits of Free Enterprise Capitalism
•Individual FreedomIndividual Freedom
•Individual freedom is almost the same as the “economic Individual freedom is almost the same as the “economic
freedom”freedom”
•Our individual freedom is evident in many different ways, Our individual freedom is evident in many different ways,
from choices we make in the market to choices we make in from choices we make in the market to choices we make in
the voting booth.the voting booth.
•A Variety of GoodsA Variety of Goods
•Market economies everywhere are renowned for producing Market economies everywhere are renowned for producing
a huge variety of goods of almost all shapes, colors, and a huge variety of goods of almost all shapes, colors, and
sizes, depending on the type of product.sizes, depending on the type of product.

12. American Free Enterprise American Free Enterprise
Capitalism Capitalism
•Benefits of Free Enterprise CapitalismBenefits of Free Enterprise Capitalism
•Adapting to ChangeAdapting to Change
•takes place mainly through the price system, and a change takes place mainly through the price system, and a change
in the price of one product can affect changes in other in the price of one product can affect changes in other
industries. industries.
•Turn & Talk – How, when oil prices were high, did other Turn & Talk – How, when oil prices were high, did other
industries adapt to these high prices?industries adapt to these high prices?
•Must be observed over a lengthy period of time to really Must be observed over a lengthy period of time to really
noticenotice
•Promoting ProgressPromoting Progress
•Spending freely promotes progress due to consumers Spending freely promotes progress due to consumers
always wanting newer, better products.always wanting newer, better products.

13. American Free Enterprise American Free Enterprise
Capitalism Capitalism
•Benefits of Free Enterprise CapitalismBenefits of Free Enterprise Capitalism
•Creation of WealthCreation of Wealth
•Economists think of wealth as the accumulation of products Economists think of wealth as the accumulation of products
that are tangible, are scarce, have utility, and are that are tangible, are scarce, have utility, and are
transferable from one person to anothertransferable from one person to another
•Wealth happens when more and better goods are producedWealth happens when more and better goods are produced
•The Gross Domestic Product—the dollar value of all final The Gross Domestic Product—the dollar value of all final
goods, services, and structures produced within a country’s goods, services, and structures produced within a country’s
borders in a 12-month period—of the U.S. economy is the borders in a 12-month period—of the U.S. economy is the
largest in the world. It is about twenty percent larger than largest in the world. It is about twenty percent larger than
China’s GDP, even though China’s population is more than China’s GDP, even though China’s population is more than
four times larger than the population of the United States.four times larger than the population of the United States.

14. American Free Enterprise American Free Enterprise
Capitalism Capitalism
•Disadvantages of Free Enterprise CapitalismDisadvantages of Free Enterprise Capitalism
•Uneven Economic GrowthUneven Economic Growth
•not always smooth and uninterrupted. not always smooth and uninterrupted.
•Periods of uneven economic growth are not pleasant, but Periods of uneven economic growth are not pleasant, but
they do remove some of the “fat” or unneeded activities in they do remove some of the “fat” or unneeded activities in
businesses and public servicesbusinesses and public services
•Growing Gaps Between Rich and PoorGrowing Gaps Between Rich and Poor
•rich seem to get richer while the poor seem to stay poor.rich seem to get richer while the poor seem to stay poor.
•Some of this is due to the fact that some people—if they are Some of this is due to the fact that some people—if they are
able to devise a product that meets the consumer’s able to devise a product that meets the consumer’s
economic need—can grow very rich in a very short period economic need—can grow very rich in a very short period
of time.of time.

15. American Free Enterprise American Free Enterprise
Capitalism Capitalism
•Supply Side vs. Demand SideSupply Side vs. Demand Side
•Ideal is for both to be relatively evenIdeal is for both to be relatively even
•Supply side is where there can be a problemSupply side is where there can be a problem
•suppliers tend to combine with other suppliers in order to suppliers tend to combine with other suppliers in order to
avoid competitionavoid competition
•Bad for suppliersBad for suppliers
•Government intervention – Break upGovernment intervention – Break up

16. Roles and Responsibilities in a Roles and Responsibilities in a
Free Enterprise EconomyFree Enterprise Economy
•Lesson 2Lesson 2
•The role and responsibilities fall into 3 The role and responsibilities fall into 3
distinct groupsdistinct groups
•EntrepreneursEntrepreneurs
•ConsumersConsumers
•The GovernmentThe Government
•Complete the handout/chart from lesson 2Complete the handout/chart from lesson 2

17. Evaluating Economic Evaluating Economic
Performance Performance
•Lesson 3Lesson 3
•Complete the chart on the following slide from Complete the chart on the following slide from
the information located in lesson 3 of Chapter 3the information located in lesson 3 of Chapter 3

18. Seven Goals of Economic Performance Description
Economic Freedom
Economic Efficiency
Economic Equity
Economic Security
Full Employment
Price Stability
Economic Growth

19. Seven Goals of Economic Performance Description
Economic Freedom -Decisions (individual and business)
-Cornerstone of American Society
Economic Efficiency -Not wasting resources
Economic Equality -Illegal to discriminate on the basis of age, sex,
race, religion, or disability in employment
-Minimum Wage
Economic Security --Unemployment, Social Security, Disability
-Medicare
Full Employment -Ideal
-Most people want their economic system to
provide as many jobs as possible
Price Stability -Inflation affecting people on a fixed income,
higher inflation leads to higher interest rates
and higher costs – less spending.
-Price stability adds a degree of certainty to the
future for businesses and consumers alike
Economic Growth Most people hope to have a better job, a newer
car, their own home, and a number of other
things in the future
-Overall growth enables more people to have
more goods and services