Free Enterprise is the freedom of individuals and businesses to operate and compete with a minimum of government interference or regulation. Capitalism

Unit 8 Compare and contrast how different economic systems address key economic factors. 8.02 Describe how the free enterprise system encourages private ownership of property and promotes individual initiative. Capitalism: economic system based on private citizens owning and using the factors of production in order to seek a profit. Free Enterprise: another term used to describe the American economy. Competition is allowed to operate with minimum government interference.

How does Capitalism work? What is the connection between the market factor called capital and the economic system called capitalism? Answer: Capitalism uses capital (the funds needed to equip and run businesses) to flourish as an economic system. How does Capitalism work? A: Markets: Places where the prices of goods and services are determined as exchanges take place. Markets can be local, regional, national, or global. Examples: Charlotte, Southeast, US, North America.

B: Private Property rights: Freedom to own, use, or dispose of our own property as we choose as long as it does not interfere with the rights of others. Private property drives our incentive to work, save, and invest because we can keep any gains we might earn. People take care of things they own.

Competition rewards the most efficient producers. C: Competition: the struggle between buyers and sellers to get the best products at the lowest prices. Competition rewards the most efficient producers. Competition between sellers keeps the cost of production low and the quality of the goods higher than they otherwise be. Buyers likewise compete among themselves to find the best products at the lowest prices.

D: Profit: amount of money left over after all costs of production have been paid. People are free to take risks with their savings, or any part of their wealth to enter into business ventures. Profit motive is the driving force that inspires people and companies to improve their material well-being.

E: Voluntary Exchange: the act of buyers and sellers freely and willingly engaging in market transactions. In a capitalistic free enterprise system there is no coercion or mandate to buy or sell items. People are free to choose who, what, when, where, and how to buy and sell goods based on making a profit.

Economic freedom competition Capitalism Voluntary exchange markets Private property rights competition Capitalism Voluntary exchange markets Profit motive

History of Capitalism: Adam Smith is the father of capitalism. 1776, Adam Smith (Scottish philosopher and economist) wrote The Wealth of Nations. Wealth of Nations detailed life and trade in British society. Outlined scientifically the basic principles of economics for the first time in history.

Smith’s philosophy “Individuals left on their own would work for their own self-interest.” “They will be guided by an “invisible hand” to use resources wisely and efficiently.” From Smith’s writings came the idea of “laissez-faire economics”- to let alone. The government should not interfere in the marketplace. It should encourage free competition. America’s founders were influenced by Smith’s view on economics.