1. Capitalism & Free enterprise
Chapter 2, Section 3

2. CAPITALISM
A MARKET SYSTEM IN WHICH PRIVATE CITIZENS OWN THE FACTORS OF PRODUCTION –
RESOURCES ARE NOT OWNED BY GOVT
EMPHASIS ON COMPETITION
FREE ENTERPRISE IS ANOTHER NAME FOR AMERICA’S ECONOMIC SYSTEM
IN THEORY, LITTLE GOVERNMENT INTERVENTION (IN REAL LIFE, NOT TRUE)

3. 4 Characteristics of Capitalism
Economic Freedom
Voluntary Exchange
Private Property
Profit Motive

4. ECONOMIC FREEDOM INDIVIDUAL FREEDOM FREEDOM FOR BUSINESSES
MAKE ECONOMIC DECISIONS FOR YOURSELF
OCCUPATION
CHOOSE YOUR EMPLOYER
WORK FOR YOURSELF
SPEND MONEY AS YOU WISH

5. VOLUNTARY EXCHANGE
BUYERS AND SELLERS FREELY AND WILLINGLY ENGAGE IN MARKET TRANSACTIONS
EVERYONE IS BETTER OFF – MUTUAL BENEFIT
YOU AGREE TO SPEND THE MONEY OR SELL THE GOOD/SERVICE

6. Voluntary Exchange

7. PRIVATE PROPERTY
PEOPLE HAVE THE RIGHT AND PRIVILEGE TO CONTROL THEIR POSSESIONS
OWNERSHIP INCENTIVE – TO WORK, SAVE, INVEST, SUCCEED,
IF YOU EARN IT, YOU KEEP THE REWARD
INTANGIBLE
SKILLS, TALENTS – LIKE A DOCTOR
TANGIBLE
HOUSE, CAR, ARTWORK, CELL PHONE
INHERITANCE - to pass on property when you die

8. PROFIT MOTIVE The drive to improve your material well being
Profit is the extent to which you are better off - measured in dollars or other benefits
People are free to RISK their wealth in business ventures
RISK is assumed by the individual – you succeed or fail on your own
If you succeed, you keep the profit
If you fail, you may lose your investment

9. Role Players in Capitalism
Entrepreneurs
Consumers
Government
Protector – law enforcement
Provider/Producer – provides G/S
Consumer – buys G/S
Regulator – preserve competition
Promotes National Goals

10. Name that Role Player ___ create jobs and new goods or services.
___ love shopping for new clothes and shoes.
____write laws to protect consumers against defective products.
___ require that automobiles have safety belts and air bags.
_______ educates citizens, a service.
_____ provides police and fire service.
____ buys office supplies, like a consumer.
____ regulates competition to prevent monopolies.
____ help grow the economy with new ideas.

11. Entrepreneurs Organize the use of Land, Labor and Capital
Start new businesses
Many businesses fail
Everyone benefits when they succeed – employees, consumers, government (taxes for roads, schools, libraries, police, fire)

12. ENTREPRENEURS

13. CONSUMERS
Consumer sovereignty – the buyers rule the market by choosing what sells and what fails
Consumers vote with their dollars
Examples of successful products?
Examples of failed products?

14. CONSUMER SOVEREIGNTY

15. GOVERNMENT
Protector: laws are passed to protect consumers and create rules for contracts, safety, etc.
Producer: Defense services, education, parks
Consumer: Buys office supplies, food, property
Regulator: Preserve competition (no monopolies), monitors banks, automobiles (registration, licenses), use of property
Promoter of National Goals: creates programs desired by citizens

16. MIXED ECONOMY or MODIFIED FREE ENTERPRISE ECONOMY
The US is NOT a pure market system
We are largely based on Market system
The US is subject to a great deal of government intervention in their economic affairs
Examples?