1. Chapter 3
Free Enterprise

2. Warm-up
Turn to page 63 in your textbook and copy down the 5 characteristics of a Free Enterprise Economy in Exhibit 3-1. Write a brief explanation for each characteristic.

3. Warm-up: Where will you open up your restaurant?
You’ve decided to open a restaurant. You can lease one of two buildings. One is in a busy mall next to a highway exit. However, there are already 6 restaurants in that mall.
The other location is in a small strip mall in a quiet neighborhood with no other restaurants nearby. Consider the chance to make profits and the level of competition, and choose.
Also list some advantages and disadvantages for both locations.

4. Circular Flow with Government
Turn to page 66, sketch the chart 3-2 into your notebook. Write down examples of the government providing specific benefits for households and businesses.
What else do you believe the government should provide to the people?

5. Understanding Competition Group Activity
Students will pair up and identify a product that they both know well and then come up with a competing product.
Each pair will follow the 4 part instructions and turn in the activity on a separate sheet of paper after some class presentations. You will have about minutes to complete this activity.

6. Understanding Competition Cont.
Part 1: is a description of the existing product. Detail as many strengths and weaknesses for the product and the benefits it gives consumers. (Use computers to help if needed)
Part 2: is a description of your competing product. Detail as many strengths and weaknesses for the product and the benefits it give consumers.
Part 3: A strong paragraph explaining why your product will be a better value to the consumers than the original.
Part 4: A strong paragraph using the example of your competing product to explain why competition is an essential part of free enterprise.

7. Understanding Comp. Scoring Rubric
Understanding Competition
Presentation of Information 16
Excellent
All parts well done 12
Good
Mostly well done 8
Fair
Some parts well done 4
Poor
Incomplete

8. Warm-up
Look back at the circular flow diagram in Exhibit 3-2 on page 66 and answer the following questions.
1. Where do households get the funds to buy goods and services from businesses?
2. Where do businesses get the funds to pay for the resources they purchase from households?
3. Where does the government get the funds to provide benefits to businesses and households?

9. Warm-up Answers
1. Households get funds from selling resources to businesses
2. Businesses get funds from households that buy their goods and services
3. The government gets funds from businesses and households paying their taxes

10. Section 5 Vocab
Private good: good for which one person’s consumption. Ex an apple or computer.
Public good: good for which one person’s consumption does not take away from another person’s consumption. (What are some examples of public goods?)
Public goods can be excludable or nonexcludable; A public good is excludable if individuals can be excluded (physically prohibited) from consuming it (movie theatre owner can kick you out if you don’t pay ticket price). A public good is nonexcludable if individuals cannot be excluded from consuming it (national defense).

11. Vocab Continued
Free riders: a person who receives the benefits of a good without paying for it. (think 4th of July fireworks)
Negative externality: An adverse side effect of an act that is felt by others.
What are some examples?
Positive externality: A beneficial side effect of an action that is felt by others.

12. Discussion Questions
Many view public education as a positive externality. Do you believe that your education generates a positive externality for others? If true, give some examples of how others benefit from your education.
Look at the picture on page 87, what negative externality is represented in this photo? How does the government attempt to minimize this negative externality?