1. The Private Enterprise System
People Power
The Private Enterprise System
Economics LAP 15

2. Objectives Discuss the characteristics of a private enterprise system.
Describe the economic freedoms that exist in a private enterprise system.

3. Discuss the characteristics of a private enterprise system.
Objective
Discuss the characteristics of a private enterprise system.

4. Sam wants to make extra money.
Classmates are working on graduation scrapbooks.
Sam has artistic talent.
She makes $250 creating scrapbook pages for them.
A good example of the private enterprise system
The freedom to offer a product or service and to profit from it
Not all economic systems allow such freedoms.

5. Private Enterprise
In private enterprise, these questions are answered by:
Economic systems must answer three basic questions:
What goods and services will be produced?
How will these goods and services be produced?
How will these goods and services be distributed to consumers?
Individuals and businesses
Not the government

6. Characteristics of Private Enterprise
Freedom in the marketplace
Market is self-regulated and self-controlled.
Marketplace—anywhere the buying and/or selling of goods and services takes place
Private enterprise—often called market system or market economy because the market answers the basic economic questions
With each purchase, consumers are casting an economic vote in the marketplace.

7. Characteristics of Private Enterprise
Private property
Individuals and businesses are free to use their private property any way they choose, as long as they do not violate the law or others’ rights.
Anything of value that people own
May be business property or personal property
May be in many different forms, such as:
Land
Furniture
Buildings
Jewelry
Money
Equipment
Clothing
Stocks

8. Characteristics of Private Enterprise
Limited government control
Government steps in only to protect citizens.
U.S. economic system is a mixed system—individuals and businesses are primary decision makers, while government helps regulate and control.
Role of government has gradually expanded because of issues such as:
Inflation
Pollution
Unemployment

9. Characteristics of Private Enterprise
Competition
Rivalry between two or more businesses to attract scarce customer dollars
Many ways to compete, including:
Offering lower prices
Offering better credit options
Improving goods and services
Creating new goods and services
Providing better service

10. Characteristics of Private Enterprise
The profit motive
Profit—the monetary reward business owners receive in return for taking the risk involved in starting a business
Profit motive
The desire to make a profit
The economic basis for the private enterprise system

11. Characteristics of Private Enterprise
The price-directed system
Price determines:
What consumers buy
Which jobs they will take
The success or failure of businesses
The types of products that will be produced
Prices are determined by supply and demand.
Demand
Prices

12. Disadvantages of Private Enterprise
Periods of unemployment
Poverty
Unequal distribution of wealth

13. Objective
Describe the economic freedoms that exist in a private enterprise system.

14. Economic Freedoms in Private Enterprise
This benefits them, and because it increases production, it benefits the economic system as a whole.
Private enterprise—based on idea that everyone is better served when individuals are free to set their own goals
When people are free to make personal economic choices and to set economic goals for themselves, they work harder to achieve those goals.
Economic freedom does not guarantee success to individuals or to businesses, but it does provide the opportunity for success.

15. Economic Freedoms in Private Enterprise
Freedom to choose:
If you want to become an entrepreneur
Your own personal economic goals
Standard of living
How hard you want to work
What you want to do for a living
Limited only by your own interests, abilities, and training
You may:
Apply for any job you like
Accept or reject job offers
Determine what salary is acceptable
Move to take a new job if you wish

16. Economic Freedoms in Private Enterprise
Freedom to own, use, buy and sell private property
You may use your private property (including your time and talents) however it best benefits you.
You are free to save, spend, invest, or lend your income.

17. Economic Freedoms in Private Enterprise
Freedom to compete
You are free to use your abilities to compete for scholarships, jobs, etc.
Almost no competition exists in other economic systems.

18. Limits to Economic Freedom in Private Enterprise
Competition among buyers
Personal choices
Laws created to protect citizens
Taxation

19. Keep track of examples, and discuss them with the class.
Pay attention to examples of private enterprise all around you, such as:
Store going out of business
“For rent” sign
Price of milk changing
Keep track of examples, and discuss them with the class.

20. Private enterprise system—wealth and income not distributed equally
What do you think about charitable giving in a private enterprise system?
Private enterprise system—wealth and income not distributed equally
Poverty
People who cannot afford the very basics of life—even when receiving assistance from the government
United States’ citizens and businesses give over $250 billion to charity each year.
Should those with a great deal of money feel obligated to donate some of their wealth?
No laws requiring Americans to give to the less fortunate
A person may make millions each year, but s/he has the right to keep every penny.

21. MarkED Acknowledgments Original Developers
Christopher C. Burke, Sarah Bartlett Borich, MarkED
Version 1.0
Copyright © 2008
MarkED Resource Center

22. Digital-based photography sources:
ARTVILLE;
The Big Idea
Obj. A: #BIG041
Photos copyright 2000 Artville, LLC
701 North 34th Street, Suite 400, Seattle, Washington 98103
DIGITAL STOCK CORP.;
Business and Agriculture
Obj. A: #060, #077
Manufacturing and Industry 1
Obj. A: #084, #089
Photos copyright 1998 Corbis Corp.
750 Second Street, Encinitas, CA 92024

23. Digital-based photography sources:
DIGITAL VISION;
Teenagers Today
Obj. B: #130271
Photos copyright Digital Vision Ltd., all rights reserved.
833 Fourth Ave. SW, Suite 800 Calgary, AB, Canada T2P 3T5

24. Copyright:
All photographic digital images on this CD are owned by the aforementioned photographic resources or their licensors and are protected by the United States copyright laws, international treaty provisions, and applicable laws. No title to or intellectual property rights to the images on this CD are transferred to you. These sources retain all rights and are not to be used, digitally copied, transferred, or manipulated in any way. To do so is a violation of federal copyright laws.