Capitalism & Free enterprise

1. Capitalism & Free enterprise Chapter 2, Section 3

2. CAPITALISM • A MARKET SYSTEM IN WHICH PRIVATE CITIZENS OWN THE FACTORS OF PRODUCTION – • RESOURCES ARE NOT OWNED BY GOVT • EMPHASIS ON COMPETITION • FREE ENTERPRISE IS ANOTHER NAME FOR AMERICA’S ECONOMIC SYSTEM • IN THEORY, LITTLE GOVERNMENT INTERVENTION (IN REAL LIFE, NOT TRUE)

3. 4 Characteristics of Capitalism • Economic Freedom • Voluntary Exchange • Private Property • Profit Motive

4. ECONOMIC FREEDOM • INDIVIDUAL FREEDOM • FREEDOM FOR BUSINESSES • MAKE ECONOMIC DECISIONS FOR YOURSELF • OCCUPATION • CHOOSE YOUR EMPLOYER • WORK FOR YOURSELF • SPEND MONEY AS YOU WISH

5. VOLUNTARY EXCHANGE • BUYERS AND SELLERS FREELY AND WILLINGLY ENGAGE IN MARKET TRANSACTIONS • EVERYONE IS BETTER OFF – MUTUAL BENEFIT • YOU AGREE TO SPEND THE MONEY OR SELL THE GOOD/SERVICE

6. Voluntary Exchange

7. PRIVATE PROPERTY • PEOPLE HAVE THE RIGHT AND PRIVILEGE TO CONTROL THEIR POSSESIONS • OWNERSHIP INCENTIVE – TO WORK, SAVE, INVEST, SUCCEED, • IF YOU EARN IT, YOU KEEP THE REWARD • INTANGIBLE • SKILLS, TALENTS – LIKE A DOCTOR • TANGIBLE • HOUSE, CAR, ARTWORK, CELL PHONE • INHERITANCE - to pass on property when you die

8. PROFIT MOTIVE • The drive to improve your material well being • Profit is the extent to which you are better off - measured in dollars or other benefits • People are free to RISK their wealth in business ventures • RISK is assumed by the individual – you succeed or fail on your own • If you succeed, you keep the profit • If you fail, you may lose your investment

9. Role Players in Capitalism • Entrepreneurs • Consumers • Government • Protector – law enforcement • Provider/Producer – provides G/S • Consumer – buys G/S • Regulator – preserve competition • Promotes National Goals

10. Name that Role Player • ___ create jobs and new goods or services. • ___ love shopping for new clothes and shoes. • ____write laws to protect consumers against defective products. • ___ require that automobiles have safety belts and air bags. • _______ educates citizens, a service. • _____ provides police and fire service. • ____ buys office supplies, like a consumer. • ____ regulates competition to prevent monopolies. • ____ help grow the economy with new ideas.

11. Entrepreneurs • Organize the use of Land, Labor and Capital • Start new businesses • Many businesses fail • Everyone benefits when they succeed – employees, consumers, government (taxes for roads, schools, libraries, police, fire)

12. ENTREPRENEURS

13. CONSUMERS • Consumer sovereignty – the buyers rule the market by choosing what sells and what fails • Consumers vote with their dollars • Examples of successful products? • Examples of failed products?

14. CONSUMER SOVEREIGNTY

15. GOVERNMENT • Protector: laws are passed to protect consumers and create rules for contracts, safety, etc. • Producer: Defense services, education, parks • Consumer: Buys office supplies, food, property • Regulator: Preserve competition (no monopolies), monitors banks, automobiles (registration, licenses), use of property • Promoter of National Goals: creates programs desired by citizens

16. MIXED ECONOMY or MODIFIED FREE ENTERPRISE ECONOMY • The US is NOT a pure market system • We are largely based on Market system • The US is subject to a great deal of government intervention in their economic affairs • Examples?