Section 3.2 Government and Consumer Functions Marketing Essentials n Chapter 3 The Free Enterprise System Section 3.2 Government and Consumer Functions

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions What You'll Learn The roles government plays in our free enterprise system Supply and demand theory

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Why It's Important As a consumer, you need to understand your power to affect the prices you pay for products. As a voter, you have a responsibility to understand how decisions made by the government affect you, your investments, and your life in general.

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Key Terms demand supply equilibrium surpluses shortages

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions The Role of Government The United States is a modified free enterprise system. In such a system, the government acts as: provider of services supporter of business regulator competitor

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Government as Provider of Services To ensure the safety and general welfare of people in the United States, the government provides: military protection police protection fire protection free public education job training roads and bridges public libraries welfare system health care for the elderly and poor

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Government as Supporter of Business The government provides disaster assistance to help both businesses and homeowners rebuild after disasters. The Small Business Administration provides counseling and educational materials to support business. The government is the largest consumer of goods and services in the U.S.

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Government as Regulator In the United States, most laws are designed to protect the safety, health, and welfare of individuals and the freedom of businesses to operate in our free enterprise economic system.

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Government as Regulator: Consumer and Worker Protection The government protects workers and consumers through the following federal agencies: Food and Drug Administration (FDA) Equal Employment Opportunity Commission (EEOC) Occupational Safety and Health Administration (OSHA) Consumer Product Safety Commission (CPSC) Slide 1 of 2

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Government as Regulator: Consumer and Worker Protection Environmental Protection Agency (EPA) The Securities and Exchange Commission (SEC) Slide 2 of 2

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Government as Regulator: Business Protection The government provides laws and regulations regarding patents, copyrights, and trademarks. The government regulates trade with other countries to protect national security and to protect U.S. companies from unfair competition. Slide 1 of 3

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Government as Regulator: Business Protection The Sherman Antitrust Act, passed in 1890, outlawed monopolies in business, protecting competition. The Clayton Antitrust Act, passed in 1914, closed loopholes in the Sherman Antitrust Act. The Federal Trade Commission (FTC) enforces both acts. Slide 2 of 3

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Government as Regulator: Business Protection The Federal Reserve System is the nation's banking system. The Federal Reserve Board of Governors controls interest rates, increasing or decreasing rates to manipulate economic activity and inflation. Slide 3 of 3

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Government as Competitor The federal government runs three businesses: Tennessee Valley Authority provides electricity to the rural South U.S. Postal Service provides national mail delivery Amtrak provides passenger rail service, established under the Rail Passenger Act of 1970.

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions The Role of the Consumer Consumers do two major things in the marketplace: They pick the winners—the products and businesses that will be in the marketplace tomorrow. They determine the demand for any given product, and therefore help determine prices.

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Deciding Which Businesses Survive Consumers decide which businesses will survive by "voting" with each purchase. The more votes (sales) a product gets, the more likely that product or company will survive.

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Determining Prices Prices in a free enterprise system are determined by supply and demand. Supply and demand interact to determine the price customers are willing to pay for the number of products producers are willing to make. Slide 1 of 4

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Determining Prices Demand refers to consumer willingness and ability to buy products. According to the law of demand, if the price is low enough, demand for a product usually increases. Slide 2 of 4

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Determining Prices Supply is the amount of goods producers are willing to make and sell. higher prices = more products for sale lower prices = less products for sale Slide 3 of 4

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Determining Prices Equilibrium exists when the amount of product supplied is equal to the amount of product demanded. Slide 4 of 4

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Surpluses Surpluses of goods occur when supply exceeds demand. When this happens, businesses respond by lowering their prices in order to encourage people to buy more of the product. Example: When grocery stores have lots of produce, they price the produce low to encourage people to buy.

Government and Consumer Functions SECTION 3.2 Government and Consumer Functions Shortages When demand exceeds supply, shortages of products occur. When shortages occur, businesses can raise prices and still sell their merchandise. Example: An oil shortage increases the price of gasoline, so consumers who want to drive their vehicles pay the higher price.

Reviewing Key Terms and Concepts ASSESSMENT 3.2 Reviewing Key Terms and Concepts 1. Name four ways government is involved in our free enterprise system. 2. Why is the United States said to have a modified free enterprise system? 3. What is the FTC, and what does it do? Slide 1 of 2

Reviewing Key Terms and Concepts ASSESSMENT 3.2 Reviewing Key Terms and Concepts 4. In the U.S. free enterprise system, who decides which businesses will survive and what prices will be charged for the goods sold? 5. What is the equilibrium point in supply and demand theory? Slide 2 of 2

ASSESSMENT Thinking Critically 3.2 A new airline starts up with low fares and many new routes. At the same time, established airlines drop their fares and add new flights to match the routes of the new airline. Is this against the law? Explain your position.

Graphic Organizer 3.2 The Determinants of Demand Demand Existence of Substitutes Prices of Complimentary Goods Tastes and Preferences Demand Changes in Population Income

Marketing Essentials End of Section 3.2