Define these terms from Public Transfer Payment Warm Up #12 Define these terms from Chap. 3: Market Failure Public Goods Externality Negative Externality Positive Externality Subsidy Transfer Payment Public Transfer Payment

SSEF5 a The students will describe the roles of government in a market economy. a. You will be able to explain why government provides public goods and services, redistributes income, protects property rights, and resolve market failures. Determine and define vocabulary. Identify key terms within the standard. Define each term. ________________________________________

The American Free Enterprise System and the Role of the Government SSEF5 The students will describe the roles of government in a market economy.

What is a Free Enterprise System? EXAMPLE: United States Business people free to start business, choose how to use resources Managers and workers choose where to exchange labor for pay Consumers choose which goods and services to buy Zalia Cosmetics—2001 startup aimed at underserved Latina market Government protects or encourages competition, enforces contracts

What happens when businesses (firms) do not provide goods or services that the American people want? The Federal, State or Local Governments provide those services.

1. Provide Public Goods and Services Government and Free Enterprise 1. Provide Public Goods and Services KEY CONCEPTS Public sector—branches of government that make production decisions Market failure—outsiders benefit from or pay for marketplace interaction Public goods—products provided by the government, but consumed by the public Public goods are funded with taxes

Government and Free Enterprise 2. Redistributes Income KEY CONCEPTS Safety Net Government programs designed to protect people from economic hardships (old/sick) Public transfer payments (combats the issue of poverty) Is a payment in which the government transfers income from taxpayers to recipients who do not provide anything in return. See figure 3.8, P. 89

3. Protects Property Rights Government and Free Enterprise 3. Protects Property Rights KEY CONCEPTS The rights of individuals and groups to own businesses and resources.

4. Resolve Market Failures Government and Free Enterprise 4. Resolve Market Failures KEY CONCEPTS Market failure—outsiders benefit from or pay for marketplace interaction Public goods—products provided by government, consumed by public Public goods funded with taxes

Managing Externalities KEY CONCEPTS Market failure occurs when economic transactions cause externalities Externality—side effect on someone other than producer or buyer negative externality—people uninvolved in the transaction pay costs positive externality benefits people uninvolved in transaction

Think Pair Share What are some more examples of market failures? Industrial Pollution Second Hand Smoke Dam

Show What You Know! GEORGIA MILESTONE QUESTIONS Which of the following is Free Enterprise MOST connected with? Expenses Consumers Producers Consumer sovereignty

Show What You Know! GEORGIA MILESTONE QUESTIONS Public goods are funded by charitable donations collected by the government profits made by private businesses profits made by public companies taxes collected by the government

Show What You Know! GEORGIA MILESTONE QUESTIONS A person who chooses not to pay for a good or service but benefits from it when it is provided is called a(n) free consumer free rider investment risk subsidy risk

Show What You Know! GEORGIA MILESTONE QUESTIONS Government programs that protect people from economic hardship are called a free rider positive externality safety net public subsidy

Show What You Know! GEORGIA MILESTONE QUESTIONS A positive externality occurs when people who are not part of a marketplace interaction are not affected by it make no profit from it benefit from it pay all of the costs of it

Paying for Pollution Do page 87 Analyze Graphs 1 & 2 Closure Activity #8 Paying for Pollution Do page 87 Analyze Graphs 1 & 2

The End. Any Questions?

Definitions and Test Tomorrow. Capitalism Public Goods Externality Negative Externality Positive Externality Subsidy Transfer Payment Standard of living Specialization Free Rider Public Sector Redistribute Income Taxes Consumer sovereignty Profit Free contract Safety net Market failure Profit motive