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Free Enterprise System

Consumers drive production by signaling their desires through purchases, entrepreneurs bring together resources, and the government ensures fairness and public welfare in the economy.

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Free Enterprise System

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  1. Free Enterprise System

  2. Roles in Free Enterprise • Consumers • Consumers make their desires known through their economic dealings with producers • When consumers buy products, they signal to producers to produce more of that particular item • Review products to assist others in determining which products to purchase • Entrepreneurs • Bring together the factors of production

  3. Economics in the Constitution • “Economic freedom plays a dual role in the promotion of a free society. On the one hand, freedom in economic arrangements is . . . an end in itself. In the second place, economic freedom is also an indispensable means toward the achievement of political freedom.” — Milton Friedman, Capitalism and Freedom

  4. Economics in the Constitution • “no person shall be . . . deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” — Fifth Amendment of the Constitution • Eminent Domain: the right of a government to take private property for public use • the government must pay the person the fair value of the property that has been taken

  5. Economics in the Constitution • Taxation • Article I gives Congress the power to levy taxes • both individuals and corporations must pay federal income tax • Contracts • guarantees people and businesses the right to make contracts • individuals or businesses cannot use the political process to be excused from their contracts

  6. Role of the Government • Americans have come to expect the government to take other actions to promote the public interest • One of the government’s important roles in the economy is to make sure that producers provide consumers with information • Congress has passed public disclosure laws, which require companies to give consumers important information about the products or services that they offer

  7. Role of the Government • Protecting Public Health and Safety • Environmental regulations • Quality standards • Usage restrictions • Regulation increased in the 1960s and 1970s, but decreased in the 1980s

  8. Review • What roles do consumers play in the Free Enterprise System? • Explain the concept of eminent domain. • What roles do the American people expect the government to play when it comes to the economy?

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