1. American Free Enterprise
Chapter 3

2. What are the benefits of a free enterprise society?
Essential Question
What are the benefits of a free enterprise society?

3. Essential Question
Think of a product that you use that was developed or modified as a result of some change in the marketplace.
Would this product have been developed in a command economy? Why or why not?
How does this product demonstrate a strength of the free enterprise system?

4. Why do you think competition helps consumers?
Think about……………………
Why do you think competition helps consumers?

5. Guiding Question
How does the American economy incorporate the main characteristics of a free enterprise economy?

6. American Free Enterprise Capitalism
Characteristics of Free Enterprise Capitalism
Economic Freedom
you have the freedom to choose your occupation, your employer, and your job location.
Businesses also enjoy considerable economic freedom.
free to hire the workers of their choice, and they are free to produce the products they think will be the most profitable.

7. American Free Enterprise Capitalism
Characteristics of Free Enterprise Capitalism
Voluntary Exchange
the voluntary act of buyers and sellers freely and willingly engaging in market transactions
when buyers spend their money on a product, they act on a belief that the item they purchase is of greater value than the money they give up—or they would not make the purchase.

8. American Free Enterprise Capitalism
Characteristics of Free Enterprise Capitalism
Private Property
allow people to own and control their possessions as they wish.
gives people the incentive to work, save, and invest.
the Fourteenth Amendment to the U.S. Constitution protects private property rights
Private property makes borrowing possible and investing attractive

9. American Free Enterprise Capitalism
Characteristics of Free Enterprise Capitalism
Profit Motive
people are free to risk any part of their wealth in a business venture.
If it goes well, they will earn rewards for their efforts = Profit
Profit Motive allows for the business to always want to improve.

10. American Free Enterprise Capitalism
Characteristics of Free Enterprise Capitalism
Competition
the struggle among sellers to attract consumers with the best products at the lowest prices.
Forces businesses to choose what products are the best

11. American Free Enterprise Capitalism
Benefits of Free Enterprise Capitalism
Individual Freedom
Individual freedom is almost the same as the “economic freedom”
Our individual freedom is evident in many different ways, from choices we make in the market to choices we make in the voting booth.
A Variety of Goods
Market economies everywhere are renowned for producing a huge variety of goods of almost all shapes, colors, and sizes, depending on the type of product.

12. American Free Enterprise Capitalism
Benefits of Free Enterprise Capitalism
Adapting to Change
takes place mainly through the price system, and a change in the price of one product can affect changes in other industries.
Turn & Talk – How, when oil prices were high, did other industries adapt to these high prices?
Must be observed over a lengthy period of time to really notice
Promoting Progress
Spending freely promotes progress due to consumers always wanting newer, better products.

13. American Free Enterprise Capitalism
Benefits of Free Enterprise Capitalism
Creation of Wealth
Economists think of wealth as the accumulation of products that are tangible, are scarce, have utility, and are transferable from one person to another
Wealth happens when more and better goods are produced
The Gross Domestic Product—the dollar value of all final goods, services, and structures produced within a country’s borders in a 12-month period—of the U.S. economy is the largest in the world. It is about twenty percent larger than China’s GDP, even though China’s population is more than four times larger than the population of the United States.

14. American Free Enterprise Capitalism
Disadvantages of Free Enterprise Capitalism
Uneven Economic Growth
not always smooth and uninterrupted.
Periods of uneven economic growth are not pleasant, but they do remove some of the “fat” or unneeded activities in businesses and public services
Growing Gaps Between Rich and Poor
rich seem to get richer while the poor seem to stay poor.
Some of this is due to the fact that some people—if they are able to devise a product that meets the consumer’s economic need—can grow very rich in a very short period of time.

15. American Free Enterprise Capitalism
Supply Side vs. Demand Side
Ideal is for both to be relatively even
Supply side is where there can be a problem
suppliers tend to combine with other suppliers in order to avoid competition
Bad for suppliers
Government intervention – Break up

16. Roles and Responsibilities in a Free Enterprise Economy
Lesson 2
The role and responsibilities fall into 3 distinct groups
Entrepreneurs
Consumers
The Government
Complete the handout/chart from lesson 2

17. Evaluating Economic Performance
Lesson 3
Complete the chart on the following slide from the information located in lesson 3 of Chapter 3

18. Seven Goals of Economic Performance
Description
Economic Freedom
Economic Efficiency
Economic Equity
Economic Security
Full Employment
Price Stability
Economic Growth

19. Seven Goals of Economic Performance
Description
Economic Freedom
-Decisions (individual and business)
-Cornerstone of American Society
Economic Efficiency
-Not wasting resources
Economic Equality
-Illegal to discriminate on the basis of age, sex, race, religion, or disability in employment
-Minimum Wage
Economic Security
--Unemployment, Social Security, Disability
-Medicare
Full Employment
-Ideal
-Most people want their economic system to provide as many jobs as possible
Price Stability
-Inflation affecting people on a fixed income, higher inflation leads to higher interest rates and higher costs – less spending.
-Price stability adds a degree of certainty to the future for businesses and consumers alike
Economic Growth
Most people hope to have a better job, a newer car, their own home, and a number of other things in the future
-Overall growth enables more people to have more goods and services