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Capitalism and Free Enterprise

Capitalism and Free Enterprise. Ch.19 Section 3. Capitalism. The economic system of the United States is known as capitalism, in which private citizens own and use the factors of productions to seek a profit Free enterprise is another term to describe American economy

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Capitalism and Free Enterprise

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  1. Capitalism and Free Enterprise Ch.19 Section 3

  2. Capitalism • The economic system of the United States is known as capitalism, in which private citizens own and use the factors of productions to seek a profit • Free enterprise is another term to describe American economy • Little government interference • What Makes Capitalism Work? • Markets- places where the prices of goods and services are dtermined as exchange takes place (local, regional, national or global) • When you work, your labor is sold at factor markets • When you shop, the goods and services you buy are being purchased in product markets • Consumer sovereignty to refer to the fact that the consumer decides what businesses will produce based on demand

  3. Capitalism cont. • What makes Capitalism work? • Economic Freedom- we have the ability to choose our job, when and where we work, what we buy and what we sell. There are costs to each decision. One cost of starting your own business is that it might fail and the government will not help out (typically). • Private Property rights- People have the freedom to own their own property and use or dispose of that property when they want. These rights exist as long as they do not hurt others. It provides incentive to work, save and invest. • Competition- Capitalism thrives on competition. This keeps prices low and quality of goods higher. Buyers also compete to find best prices for lowest prices • Profit motive- Driving force that encourages individuals and organization to improve their material well-being.

  4. Capitalism cont. • What makes Capitalism work? • Voluntary Exchange- the act of buyers and sellers freely and willingly engaging in market transactions who benefits when you buy something? Both the buyer and the seller as long as you understand you could have bought something else, which is why it is voluntary. • A Brief History • In 1776, Adam Smith, a Scottish Philosopher and economist, created the philosophy for Capitalism in his book The Wealth of Nations. • Idea is that individuals left on their own would work for own self-interest • “Laissez-Faire” is a French term meaning “to let alone”. According to this, government should have little interference in marketplace except to ensure free competition

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