1. Capitalism and Free Enterprise
The American Economy
Capitalism and Free Enterprise
Chapter 17
Sec 3

2. Capitalism and Free Enterprise
Capitalism- An economic
system in which private
citizens own and use the
factors of production in order
to seek a profit .
Free Enterprise- Another term
to describe the American
economy. Competition is
allowed to flourish with a
minimum of government
interference
- (Characteristic)- nation’s
economy ability to grow and
accumulate, or collect wealth

3. 6 Features of Free Enterprise --US
Markets
Economic Freedom
Private Property
Competition
Profit Motive
Voluntary Exchanges

4. Capitalism and Free Enterprise What makes Capitalism Work
Markets- Markets connect
different sectors of the
economy
- Consumer Sovereignty- Used
to describe the consumer as the
“king,” or ruler, of the market,
the one who determines what
product to produce.
Economic Freedom- Freedom to
make our own economic
decision.
- choose the type of occupation
- choose the products we want
- produce the products we want
- consequences of our choices

5. Capitalism and Free Enterprise
What makes Capitalism
Work continued
Private Property Rights- The
right we have the freedom to
own and use, or dispose of
our own property as we
choose.
- Incentive to work, save and
invest.
Competition- The struggle
between buyers and sellers
to get the best products at
the lowest price.
- cost of production is low
and quality is high
- rewards efficient producers

6. Capitalism and Free Enterprise
What makes Capitalism
Work continued
The Profit Motive-
Profit – The amount of money
left over after all the costs of
production have been paid.
Profit Motive- The driving
force that encourages
individuals and organization to
improve their material well-
being.
- Responsible for the growth of
a free enterprise system.
Voluntary Exchange- The act of
buyers and sellers freely
engaging in market
transactions.

7. Capitalism and Free Enterprise
History of Capitalism
In 1776 Adam Smith, a Scottish
philosopher and economist
provide a philosophy for the
capitalist system in his book The
Wealth of Nations.
-individuals would work for their
own self interest.
- They would be guided by an
“invisible hand” to use
resources efficiently.
Laissez-faire Economics- a
French term, means “to let
alone”
- Gov’t should not interfere in
the market place. (competition)

8. Capitalism and Free Enterprise

9. 6 Features of Free Enterprise --US
Markets
Economic Freedom
Private Property
Competition
Profit Motive
Voluntary Exchanges