The Private Enterprise System People Power The Private Enterprise System Economics LAP 15

Objectives Discuss the characteristics of a private enterprise system. Describe the economic freedoms that exist in a private enterprise system.

Discuss the characteristics of a private enterprise system. Objective Discuss the characteristics of a private enterprise system.

Sam wants to make extra money. Classmates are working on graduation scrapbooks. Sam has artistic talent. She makes $250 creating scrapbook pages for them. A good example of the private enterprise system The freedom to offer a product or service and to profit from it Not all economic systems allow such freedoms.

Private Enterprise In private enterprise, these questions are answered by: Economic systems must answer three basic questions: What goods and services will be produced? How will these goods and services be produced? How will these goods and services be distributed to consumers? Individuals and businesses Not the government

Characteristics of Private Enterprise Freedom in the marketplace Market is self-regulated and self-controlled. Marketplace—anywhere the buying and/or selling of goods and services takes place Private enterprise—often called market system or market economy because the market answers the basic economic questions With each purchase, consumers are casting an economic vote in the marketplace.

Characteristics of Private Enterprise Private property Individuals and businesses are free to use their private property any way they choose, as long as they do not violate the law or others’ rights. Anything of value that people own May be business property or personal property May be in many different forms, such as: Land Furniture Buildings Jewelry Money Equipment Clothing Stocks

Characteristics of Private Enterprise Limited government control Government steps in only to protect citizens. U.S. economic system is a mixed system—individuals and businesses are primary decision makers, while government helps regulate and control. Role of government has gradually expanded because of issues such as: Inflation Pollution Unemployment

Characteristics of Private Enterprise Competition Rivalry between two or more businesses to attract scarce customer dollars Many ways to compete, including: Offering lower prices Offering better credit options Improving goods and services Creating new goods and services Providing better service

Characteristics of Private Enterprise The profit motive Profit—the monetary reward business owners receive in return for taking the risk involved in starting a business Profit motive The desire to make a profit The economic basis for the private enterprise system

Characteristics of Private Enterprise The price-directed system Price determines: What consumers buy Which jobs they will take The success or failure of businesses The types of products that will be produced Prices are determined by supply and demand. Demand Prices

Disadvantages of Private Enterprise Periods of unemployment Poverty Unequal distribution of wealth

Objective Describe the economic freedoms that exist in a private enterprise system.

Economic Freedoms in Private Enterprise This benefits them, and because it increases production, it benefits the economic system as a whole. Private enterprise—based on idea that everyone is better served when individuals are free to set their own goals When people are free to make personal economic choices and to set economic goals for themselves, they work harder to achieve those goals. Economic freedom does not guarantee success to individuals or to businesses, but it does provide the opportunity for success.

Economic Freedoms in Private Enterprise Freedom to choose: If you want to become an entrepreneur Your own personal economic goals Standard of living How hard you want to work What you want to do for a living Limited only by your own interests, abilities, and training You may: Apply for any job you like Accept or reject job offers Determine what salary is acceptable Move to take a new job if you wish

Economic Freedoms in Private Enterprise Freedom to own, use, buy and sell private property You may use your private property (including your time and talents) however it best benefits you. You are free to save, spend, invest, or lend your income.

Economic Freedoms in Private Enterprise Freedom to compete You are free to use your abilities to compete for scholarships, jobs, etc. Almost no competition exists in other economic systems.

Limits to Economic Freedom in Private Enterprise Competition among buyers Personal choices Laws created to protect citizens Taxation

Keep track of examples, and discuss them with the class. Pay attention to examples of private enterprise all around you, such as: Store going out of business “For rent” sign Price of milk changing Keep track of examples, and discuss them with the class.

Private enterprise system—wealth and income not distributed equally What do you think about charitable giving in a private enterprise system? Private enterprise system—wealth and income not distributed equally Poverty People who cannot afford the very basics of life—even when receiving assistance from the government United States’ citizens and businesses give over $250 billion to charity each year. Should those with a great deal of money feel obligated to donate some of their wealth? No laws requiring Americans to give to the less fortunate A person may make millions each year, but s/he has the right to keep every penny.

MarkED Acknowledgments Original Developers Christopher C. Burke, Sarah Bartlett Borich, MarkED Version 1.0 Copyright © 2008 MarkED Resource Center

Digital-based photography sources: ARTVILLE; The Big Idea Obj. A: #BIG041 Photos copyright 2000 Artville, LLC 701 North 34th Street, Suite 400, Seattle, Washington 98103 DIGITAL STOCK CORP.; Business and Agriculture Obj. A: #060, #077 Manufacturing and Industry 1 Obj. A: #084, #089 Photos copyright 1998 Corbis Corp. 750 Second Street, Encinitas, CA 92024

Digital-based photography sources: DIGITAL VISION; Teenagers Today Obj. B: #130271 Photos copyright Digital Vision Ltd., all rights reserved. 833 Fourth Ave. SW, Suite 800 Calgary, AB, Canada T2P 3T5

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