BR  What does a circular flow diagram show? (page 29-30)  What is the difference in factor and product market? (page 30)

Review, Discussion Last Class   1. Circular Flow diagram of free market 2. Compare/Contrast Adam Smith and Karl Marx 3. Economic Sytems/ Big 3 Questions every society must ask itself.

Today’s Objectives:  Explain the basic principles of the U.S. free enterprise system.  1. Explain the basic principles of the U.S. free enterprise system.  2.Explain the roles that Entrepreneurs, Consumers, and the Government has in the Free Enterprise System

Free Enterprise Free Enterprise- the social and political commitment to giving people the freedom and flexibility to try out their business ideas and compete in the market place. (more detailed definition on p.43)   How has this system brought wealth and advancement to our nation? Lets look at some examples.

Who are these people?  John D. Rockefeller:  Andrew Carnegie:  Bill Gates:

 John D. Rockefeller: founder of Standard Oil of New Jersey  Andrew Carnegie: Started Carnegie Steel Company  Bill Gates: Founder of Microsoft

 They have made themselves into the richest people of their time, helped fuel the economy, and contribute vast sums of money to programs and charities for the public good.

America Today  Today, there are over 18 million unincorporated businesses in America.  Many were started by a single entrepreneur or small group of friends hoping to earn a living and some turn out to be very successful.

America- Land of Opportunity?  What does this mean?  For centuries, people have considered America to be a “land of opportunity”- a place where anyone from any background can achieve success through hard work.

Why has America been such an economic success?  Besides the open land and natural resources, a key factor has also been the American tradition of free enterprise.

Characteristics of Free Enterprise  Economic Freedom (page 53) –Individuals as well as businesses enjoy this freedom to make decisions. (What decisions?)  Voluntary Exchange (page 53) –The buyer and seller freely engage in the market transaction

Characteristics Continued  Private Property (page 52) –People have the right and privilege to control their possessions as they wish –Private property gives people the incentive to work, save, and invest.  Profit Motive (page 52) –People are free to risk their savings for the possibility of financial gain

Role of the Entrepreneur  One of the most important parts of our economy are entrepreneurs.  Entrepreneur organizes and manages land, labor and capital in order to seek profit

Role of the Consumer  We as consumers have power because we determine which products are ultimately produced.  Consumer sovereignty describes the role of the consumer as sovereign ruler of the market.

Role of the Government  1. Protector enforces laws such as those against false and misleading information, impure food and drugs, environmental hazards and unsafe autos. –Enforces laws against individual freedoms  2. Provider and Consumer - All levels of government provide goods and services for citizens.

Role of the government (continued)  3. Regulator- Is charged with preserving competition in the market place.  4. Promoter of National Goals Functions of government reflect people desire to modify the economic systems to achieve the economic goals of freedom, efficiency, equity, full employment and economic growth. (p.25 chart)

Journal What are the four characteristics that make up the American Free Enterprise System?

Government Bailout Question   Should the government bail out financial institutions?   Should the government have bailed out the big 3 auto makers?   If Adam Smith was alive today what would he say about the bailout?   Why is the government going to do it?   Who is going to pay for it?