The Free Enterprise System Chapter 13 Our Economic System Lesson 13.1 The Free Enterprise System

The meaning of free enterprise How the free enterprise system works Discover The meaning of free enterprise How the free enterprise system works continued

How you fit into our economic system Discover How you fit into our economic system

Why It’s Important The more you understand about our economy, the better your chances are of reaching your career goals.

economics economic system capitalism free enterprise regulate Key Terms economics economic system capitalism free enterprise regulate command economy continued

Key Terms socialist economy consumers producers profit supply demand

The Free Enterprise System What do you know about how the prices for goods and services are set? Do you understand why prices rise or fall?

Economic Systems Economics is the study of how people produce, distribute, and use goods and services.

Economic Systems Producing means creating good or services. Distributing means making goods and services available to the people who need them.

Economic Systems Using is what people do with goods and services.

Economic Systems An economic system is a country’s way of making choices about how to use its resources to produce and distribute goods and services.

The Free Enterprise System The economic system of the United States is known as capitalism. Capitalism is also known as a market economy or free enterprise system.

The Free Enterprise System Free enterprise means that individuals or businesses may buy and sell goods and services and set prices with little government control.

The Free Enterprise System The government passes laws to regulate, or set rules for, some prices and wages. Laws passed by the government protect everyone who buys and uses goods and services.

Other Economic Systems In a command economy, the government makes all of the key economic decisions. In a command economy, there is little economic freedom and little incentive to increase productivity.

Other Economic Systems In a socialist economy, there is private enterprise, but the government controls key industries and makes many economic decisions.

How the U.S. Economy Works People who buy and use goods and services are consumers. Every time consumers make a purchase, they are “voting” with their dollars.

The Producer’s Goal: Making a Profit Producers and consumers have very different goals. Producers try to make goods or provide services that consumers will buy.

The Producer’s Goal: Making a Profit All businesses must earn a profit to keep operating. A profit is the amount of money left after the business pays its expenses.

Q and A I don’t want to work for a business whose main goal is making a profit. Am I a misfit? continued

Perhaps a job in a nonprofit organization would be perfect for you. Q and A Perhaps a job in a nonprofit organization would be perfect for you. Some nonprofit organizations exist to serve charitable causes.

Graphic Organizer The Pattern of the Economy People Pay wages and salaries from profit earned Provide goods and services to consumers Provide labor and skills Spend money for goods and services Business and Industry

Factors That Affect Prices A consumer’s main goal is to get the most for his or her money. Consumers note changes in prices and compare prices.

Graphic Organizer Factors That Cause Prices to Change Supply and Demand Production Costs Competition Supply is the amount of goods and services available for sale. The more it costs to make a good or provide a service, the higher its price. When producers offer similar goods or services for sale, they are in competition. Demand is the amount of goods and services that consumers want to buy. Producers must sell their goods or services for more than it costs to produce them. When competition is great, prices are lower. When there is little competition, prices are higher.

The Big Picture The global economy links the free enterprise system of the United States to all the other economic systems of the world. You already have a role in the global economy.

Evaluate International Career Opportunities Try This Activity Evaluate International Career Opportunities Knowing the similarities and differences between our economy and the economies of other countries will help you compare employment opportunities in our free enterprise system to those available in the international job market. continued

Try This Activity Evaluate International Career Opportunities Create a Venn Diagram Prepare a Venn diagram comparing and contrasting the employment opportunities in the U.S. free enterprise system to those in the economic system of another country.

Critical Thinking Review Why does the government regulate prices and wages? So that businesses can’t develop monopolies, charge excessive prices to consumers, pay less than the minimum wage, and refuse to pay overtime. Critical Thinking Q A continued

Critical Thinking Review What happens to prices when supply is greater than demand? When demand is greater than supply? Explain why this happens. Critical Thinking Q continued

Critical Thinking Review Prices go down when supply is greater than demand because producers have an excess amount of goods or services available; prices go up when demand is greater than supply because consumers want more goods or services than are available for sale. Critical Thinking A continued

Critical Thinking Review Why would workers in a command economy have less incentive to be productive than workers in the free enterprise system? Critical Thinking Q continued

Critical Thinking Review Workers in a command economy always have a job and get paid regardless of their productivity. Even if they are more productive, they will not earn more money nor will they necessarily be promoted. Workers in the free enterprise system must be productive to keep their jobs, earn more money, and advance in their careers. Critical Thinking A

The Free Enterprise System End of Chapter 13 Our Economic System Lesson 13.1 The Free Enterprise System