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2. Characteristics of Free Enterprise3
Section 1
Characteristics of Free Enterprise
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3. How Does Free Enterprise Answer the Three Economic Questions?
What is produced: Market -interaction of supply (producer’s decision) and demand (consumer decisions)
How it is produced: market
Who gets the good/service: market
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4. How Does Free Enterprise Answer the Three Economic Questions? (cont.)
In a free enterprise economy, goods are produced for people who are both willing and able to buy them.
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5. Five Features of Free Enterprise
Free enterprise has five major characteristics: private property, choice, voluntary exchange, competition, and economic incentives
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6. Exhibit 3-1 from the Student Text
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7. Laws, Institutions, and Regulations
Free enterprise takes place in many countries, and the economic climate may vary from country to country.
Legal systems and institutions can either help or hinder free enterprise.
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8. The Circular Flow Model that demonstrates the interaction of
Households
Governments
Firms
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9. Exhibit 3-2 from the Student Text
The economy is composed of businesses, households, and the government.
Relationships between these groups create the circular flow of economic activity.
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