US Government March 2011

Basic Factors: US citizens have great # of economic freedoms Market model: driven by individuals Capitalist Free-enterprise: system under which business can be conducted freely with little government intervention

Under Free-Enterprise Individuals Can: Own private property and enter into contracts Engage in economic competition Make decisions from self-interests Participate with limited gov. involvement and regulation (this feature separates US from pure market model)

Private Property Goods owned by individuals and businesses Books, iPods, clothes Use and dispose of as you wish Contracts: agreements between individuals to buy and sell goods and services Written or oral, it is legally binding (can be taken to court!)

Competition When 2 or more businesspeople make the same production choices Economic rivalry between similar products How can competition benefit the consumer?

Government Role Establishes health and safety laws Monitors banking practices Prohibits workplace discrimination Holding down prices Provides public services Raises funds through taxation Public education

Circular Flow Model Product Market: Exchanges of goods and services in the economy Resource Market: Exchange of resources between households (individuals who own factors of production) and business firms and the government (users of the resources) Income: $$ paid to households by business firms and the government in exchange for household resources