1. US Capitalism
Macdonald
Economics

2. U.S. Economy
- Market economy is based on system of capitalism which means private citizens own factors of production and operate to make a profit.
Also known as free enterprise
Competition is allowed to flourish w/ minimal gov’t interference

3. Characteristics of Free Enterprise
Free enterprise is based on five characteristics:
1. Economic freedom
2. Voluntary exchange
3. Private property rights
4. Profit motive
5. Competition

4. Economic Freedom Ppl & businesses have economic freedom
Ppl choose occupations, employers, where want to work, when to quit
Businesses choose who to hire, what to produce, how to charge prices

5. Voluntary Exchange Buyers & sellers freely engage in buying & selling
Both are better off after the exchange
Buyers can do many things w/ $ (save, hide it, exchange) – must believe that spending it will be better than alternative
Sellers must feel that $ they receive is more valuable than goods they are selling

6. Private Property Rights
Ppl own & control own possessions
Includes both things that are tangible (cards, houses, food) & things that are intangible (skills & talents)
Can use possessions however they want as long as doesn’t interfere with others
Gives ppl incentive to work, save, invest

7. Profit Motive Ppl free to risk wealth in businesses
If businesses goes well, earn rewards
If not, lose wealth
Possibility of financial gain motivates economy

8. Competition
Struggle among sellers to attract buyers while lowering costs
Possible b/c private ppl own factors of production & have economic freedom
Buyers compete to buy best products at lowest prices
Result is goods & services are produced at lowest cost

9. US Economy
US economy is based on three groups with specific roles, goals and motives:
Entrepreneurs
Consumers
Government

10. Role of Entrepreneur Organizes and manages factors of production
Start up new businesses
Make decisions regarding businesses
Most fail, but dream of success often causes many pp to start businesses

11. Role of Consumer
Have power in econmy b/c determine what products are produced
If a company tries to sell an item, but no one buys, company will try something else (celery Jell-O, chewable toothpaste, bacon in toaster)
Consumer sovereignty describes consumers as sovereigns or rulers of the market

12. Role of Government
Regulator – preserves competition by making sure no one has unfair advantage, no “price fixing”, etc.
Promoter of Goals – tries to balance economic freedom w/ other goals such as full employment, etc. (Social Security)
Protector – against false advertising, unsafe food/ drugs, etc.
Provider & Consumer – provides education, defense, parks