Capitalism and Free Enterprise

What is Free Enterprise Free enterprise – freedom of individuals and businesses to operate and compete with a minimum of government interference IT results in the greatest efficiency and the lowest costs of any economic system. Men and women have the opportunity to own economic resources (land, material) and to use tools to create goods and services for sale

Why do people start businesses? PROFIT MOTIVE – the main reason that people take risks to start a business is to earn more money. In a free enterprise system, people are able to offer their labor and resources to businesses.

Building Blocks of Free Enterprise Households – the owners Businesses – the organizers Markets – the brokers Government – the protectors

Households Own most economic resources Number one resource is labor. Households sell it to existing firms or use it to create new businesses. Households act as consumers. Households purchase two thirds of all production in the United States. This creates consumer sovereignty. Consumers get to guide production by using their money. Producers want to create product that consumers will like and purchase.

Businesses Businesses organize resources to produce a good or service. People who start businesses are entrepreneurs. They want to produce new goods to continue to make a profit.

Markets Markets are the Brokers of the economy. Markets bring buyers and sellers together. Any place or any way that buyers and sellers can exchange goods, services, resources, or money. 3 Categories of Markets Resource Markets Product Markets Financial Markets

Government Government is the Protector in a free enterprise economy. The nature of a free enterprise economy is economic freedom without government interference. But peoples freedoms sometimes conflict with one another. The government’s job is to provide an umbrella so that the freedoms of the most individuals can be protected.