1. Capitalism and Free Enterprise
the economy of the United States is built largely on free markets and private ownership
Capitalism is an economic system in which private citizens own and use the factors of production in order to seek a profit
Free Enterprise is where competition is allowed to flourish with a minimum amount of government interference

2. Markets One important part of our economic system
Places where the prices of goods and services are determined when the exchange takes place
Markets are also the mechanisms that connect different sectors of the economy
The main places where buyers and sellers meet to negotiate product prices
The consumer determines what products will be produced

3. Economic Freedom Choice is a key element of the Free Enterprise system
Each person chooses the job that they want to have and when and where we want to work
As consumers, we choose which products to buy
Businesses choose which products they will sell
Individuals must normally accept the consequences of their decision in the Free Enterprise System
If an entrepreneur starts a business that fails, the government typically does not bail them out

4. Private Property Rights
We have the freedom to own and use, or dispose of, of our property as we choose as long as it does not interfere with the rights of others
Gives people the incentive to work, save, invest, because we keep any gains that are earned
People tend to take better care of things that they own so they tend to last longer

5. Competition
Capitalism thrives on the struggle between buyers and sellers to get the best products at the lowest price
Competition between sellers keeps the cost of production low and the quality of goods higher
Buyers compete to find the best product at the lowest price
Competition rewards the most efficient producers and forces the least efficient producer out of business
Makes for efficient production, higher-quality products, and satisfies consumers

6. The Profit Motive
People are free to risk their money into business ventures
If the venture goes well, the person will earn rewards for their efforts… if the venture fails, the person could loose all or part of their investment
The possibility of financial gain lures many to take risks in order to earn profit
Profit is where people who invest are better off at the end of the period than they were at the beginning
Largely responsible for the Free Enterprise System

7. Voluntary Exchange
The act of buyers and sellers freely and willingly engaging in market transactions
As long as a transaction in the market place is voluntary both the consumer and seller benefit
Buyer gives up money to seller to obtain item and seller gives up item to obtain money

8. The Spread of Capitalism
Developed gradually from the changes in medieval and early modern Europe over hundreds of years
2 concepts laid the foundation
1. the idea that people could work for economic gain
2. the idea that government should have a very limited role in the economy
Major changes in economic development of Europe happened in 1200 with the opening of trade with the East

9. As trade increased, people began to invest to make profits, thus spreading populations
By 1700s, Europe had nation-states, wealthy middle class families with money and markets, and a new attitude towards work and wealth
Carried to the United States

10. Adam Smith and Capitalism
Scottish economist and philosopher
Published The Wealth of Nations in 1776
-offered a detailed description of English society in life and trade
-scientifically described the basic principles of economics for the first time
-was read by many of America’s founders, such as Madison, Hamilton, and Jefferson
Believed that individuals seeking a profit, benefited society as a whole

11. Established the laissez-faire concept of economics
governments role is strictly limited to those actions needed to ensure free competition in the marketplace