Capitalism & Economic Freedom 2.3

Price Stability Where on the graph was the U.S. economy the best?

INFLATION? DEMAND-PULL COST-PUSH QUANTITY THEORY

GROWTH The US stock market has always grown over a 10 year period. However, the type of TOP industries has changed considerably. The chart below shows samples of the largest 100 U.S. companies. (Primary v. Secondary v. Tertiary)

Not sure where, but…

HONG KONG Employment

CAPITALISM & FREE ENTERPRISE –Capitalism : Private citizens control the factors of production –Free enterprise : Competition w/o interference

ECONOMIC FREEDOM Main idea—people and businesses can do what they want (work/shop/sell/etc.) when and where they want On a scale of 1-100, how much economic freedom do people actually have? Who in society has the MOST freedom? Why?

2008 Index of “Economic Freedom” ntries.cfm

PRIVATE PROPERTY Examples? “Private property gives people the incentive to work, save, and invest.” (p. 48) –True or False? The fact that people own goods such as cars, watches, and furniture is not really controversial. However, ownership of LAND can be quite controversial. How? Which is better—private or public ownership of land? Do people that own land tend to think in the long- term or the short-term? –Mr. Patel –Others

Profit and Profit Motive Does profit mean “money earned”? Let’s name some effects of profit motive? –On goods and services –On workers –On the environment –On Standard of living

3 Major Roles in a Capitalist Society

WHAT IS AN ENTREPRENE UR?

“When an entrepreneur is successful, everybody benefits.” p. 49 –Here’s why! Entrepreneur gets profits, a growing business, and the satisfaction of a job well done. Workers are rewarded with more and better-paying jobs. Consumers are rewarded with new and better products. The government is rewarded with a higher level of economic activity and larger tax receipts which can be used to build roads, schools, and libraries for people not even connected with the original entrepreneur. Successful entrepreneurs attract other firms to the industry who try to “grab a share” of the profit. To remain competitive, the original entrepreneur may have to improve the quality or cut prices which means that the customer can buy more for less.

Role #2: Consumer –How are dollars/won/etc. seen as economic “votes?” Key concept: Consumer sovereignty Why are consumers considered the most important of the 3 roles in a free market society? “The customer is always right” –True or False: Consumers’ wants constantly change. Today, more Americans purchase home computers than tvs though computers were barely known just 20 years ago. Recent successes: SUVs, home video games, pcs Recent failures: “New coke,” Celery flavored Jell-O, etc.

Role #3: The Good Ole Ye Ole Government Role of the Government –Protector (against what?) False/misleading ads, unsafe food/drugs, environmental hazards, unsafe automobiles, discrimination Drug dilemma/FDA – (defnition: Snake Oil salesman) –Provider & Consumer (of what?) Defense services Education/Public welfare Parks, libraries, public transportation Gov’t becomes a large CONSUMER in order to PROVIDE –Regulator (of what?) Preserving competition Directly oversees some industries such as banking & nuclear power Also regulates communications, insurance rates, building/zoning ordinances Most controversial of the roles –Promoter of National Goals Not really important

WHAT IS THE PROPER ROLE OF GOVERNMENT IN THE ECONOMY?