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Free Enterprise

Exploring the basic economic questions and pillars of free enterprise, including private property, incentives, competition, and the price system. Delve into Adam Smith's Wealth of Nations, circular flow models, and relative scarcity in this engaging study.

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Free Enterprise

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  1. Free Enterprise Markets make the world go ‘round

  2. Review The Basic Economic Questions • What will be produced? • How will it be produced? • Who will get it? • How a country answers these questions will determine what type of economic system they have. • Traditional, Command, Market, Mixed

  3. The Pillars of Free Enterprise • Private Property • Incentives to use resources efficiently • The Price System • Market Competition • Entrepreneurship • Profit motive

  4. Price System • Information • Value customer places on products • Opportunity costs of using different resources • Measures relative scarcity • Incentives • Increased prices encourages more production • Higher wages (price of hunk of human capital) attracts workers

  5. Market Competition The Regulator • Market for resources • My hunka human capital is better than yours • How much do you want for that hunk of h.c. • Market for products • I’ll give you $7 for that Creed CD. • Anybody want a Big Cherry?

  6. The Circular Flow Model What comes around goes around • Market for Products (Goods and Services) • Markets for Resources (Hunka, Hunka) • Both based on voluntary exchange • Roles of Households (you and me) • Consumers—the cookie monster syndrome • Resource owners– want a hunk?

  7. Adam Smith’s Wealth of Nations "Give me that which I want, and you shall have this which you want..." • How can people who pursue their own self-interest through voluntary exchange also promote the best interest of society? • Profit is the motivator • Entrepreneurs are the risk-takers • Competitions is the regulator • And the invisible hand goes round and round

  8. Relative Scarcity and Value • Which is more valuable? • Insulin • Diamonds • Which is more scarce? • Insulin • Diamonds • Scarcity is relative • It all depends on other things

  9. Order these products in terms of relative scarcity • A candy bar • A yacht • A Jeep Cherokee • A room at Grand America • Lunch at McDonald’s • A laptop computer • Olympics opening ceremony tickets

  10. Order these resources in terms of relative scarcity • Someone who plays basketball like MJ • Agricultural land in New York • A teacher • Agricultural land in Utah • Electricity in Utah • Electricity in California

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