Free Enterprise

Free Enterprise – Basic Principles An economic system based on limited Government intervention. BASIC PRINCIPLES: Freedom of Ownership Competition Risk Profit

Free Enterprise FREEDOM OF OWNERSHIP

Freedom of Ownership Individuals Businesses We can own property / goods We can choose what property we buy We can choose what we do with property We can own business (keep money) Businesses Businesses can sell what they want Businesses can sell for what they want

Free Enterprise COMPETITION

Competition Essential part of Free Enterprise !! WHY? Motivation: Companies make better products / cheaper Individuals work harder / improve

Competition Two ways businesses compete: Price Competition Non-Price Competition

Competition Price Competition All other things being equal, customers will buy the lowest price. Wal-Mart: “Always the lowest price – always”

Competition Non-Price Competition Quality of Products - Rolex Features of Products - Whopper Service and Financing - Wallside Business Location - 7-Eleven Reputation - Coca-Cola

Competition Monopoly - One firm controls the market for a given product. - NO COMPETITION - Why is it Bad? Can control price Can control choice, quality, who get it

Free Enterprise ASSIGNMENT

Non-Price Drawing Consider as many non-price factors as possible that McDonalds’s uses to compete (Minimum five factors) 20 points Illustrate each factor on construction paper List the factors on the back of the drawing or incorporated in drawing.

Free Enterprise RISK

Risk the potential for loss or failure. Necessary hazard of Free Enterprise. Risk involved with: Personal investment (products / money) New Business New products / technology (high cost)

Elected President of United States – Age 51 Who am I ? Ran for Speaker - Lost – Age 29 Failed in Business – Age 22 Elected to Congress – Age 37 Ran for Vice President - Lost – Age 47 Failed in Business AGAIN – Age 24 Girlfriend Dies – Age 26 Ran for Congress - Lost – Age 34 Ran for Senate AGAIN - Lost – Age 49 Elected to Legislature – Age 25 Ran for Senate - Lost – Age 46 Ran for Legislator - Lost – Age 23 Ran for Elector - Lost – Age 31 Has Nervous Breakdown – Age 27 Ran for Re-election - Lost – Age 39 Elected President of United States – Age 51

Free Enterprise PROFIT

Profit Money earned from business AFTER all costs and expenses are paid. Is the incentive for people to take risk. THE DRIVING FORCE OF FREE ENTERPRISE

Economic Cost of Unprofitable Firms In groups of 3 or 4: Brainstorm all the potential ECONOMIC COSTS you can think of if a firm is unprofitable. (What bad things can happen?) 3 minutes

Profit Economic COST of unprofitable firms: Lay-offs Investors lose money Research cutbacks (technology) Purchases get cut back (suppliers suffer) Government suffers (less taxes)

Economic Cost of Unprofitable Firms In groups of 3 or 4: Brainstorm all the potential ECONOMIC BENEFITS you can think of if a firm is profitable. (What good things can happen?) 3 minutes

Profit Economic BENEFIT to successful firms. Hire More People / Higher Pay Investors make money New Technology Government makes more (taxes) Give to Charities Attract Competition (Beneficial to customer)

Free Enterprise ASSIGNMENT

Current Event Find article relating to Free Enterprise 100 word response Describe why the article relates Article showing U.S. inhibiting Free Enterprise Describe why the event is inhibiting Free Enterprise