1. The American Free Enterprise System
Dr. T. D. Mitchell
Bonneville High School
Idaho Falls, Idaho
Economics: concepts and choices, Holt McDougal

2. Advantages of the free enterprise system
Objectives in this section:
Explain why the Unites States is considered to have a capitalist or free enterprise system.
Identify the legal rights that safeguard the free enterprise system.
Analyze how the profit motive and competition help to make the free enterprise system work.
Economics: concepts and choices, Holt McDougal

3. The American Free Enterprise System
Concept Review
A market economy is and economic system based on individual choice, voluntary exchange, and the private ownership of resources.
Key Concept
Free enterprise is another name for capitalism, and economic system based on private ownership of productive resources. This name is sometimes used because in a capitalist system anyone is free to start a business or enterprise.
Economics: concepts and choices, Holt McDougal

4. What is a Free Enterprise System?
Business in America
Choices are the basis of a market economy.
Business owners can freely choose to start a business.
Managers and workers who operate these businesses voluntarily decide to exchange their labor for the pay the owners offer.
Consumers freely choose which products to purchase.
Economics: concepts and choices, Holt McDougal

5. Emerging markets Let’s look at the economies of Mexico and Singapore
In Mexico, government plays a much larger role.
Informal markets have grown up.
In Singapore, the government is so involved workers are required to contribute to a national savings account.
Economics: concepts and choices, Holt McDougal

6. Free Enterprise and legal Rights
Open Opportunity
Legal Equality
Free Contract
Economics: concepts and choices, Holt McDougal

7. How a free enterprise system Works
Economics: concepts and choices, Holt McDougal

8. Milton Friedman: Promoter of free markets
Spent most of his career teaching at the University of Chicago.
Central to his ideas was the belief that the market should be free to operate in all fields.
Easing government restrictions would bring more producers into the market.
Governments most important role in the economy is to control the supply of money.
Advised two presidents
Winner of the Nobel Prize.
Economics: concepts and choices, Holt McDougal

9. Milton Friedman talks about greed
Economics: concepts and choices, Holt McDougal

10. Reviewing Key Concepts
Explain the difference among the following terms.
Open opportunity
Legal equality
Free contract
How is a free enterprise linked to economic freedom?
Explain the role of competition in a free market. Illustrate you answer with examples of businesses in Idaho Falls.
What do you think might be the next new technology to compete with computers?
Economics: concepts and choices, Holt McDougal

11. How does free enterprise allocate resources
Objectives in the section:
Explain how consumers help determine the way resources are used.
Explain how producers help determine the way resources are used.
Analyze a circular flow model of the U. S. economy.
Economics: concepts and choices, Holt McDougal

12. The Roles of Producers and Consumers
Producers seek profit.
Consumers vote with their wallets.
Economics: concepts and choices, Holt McDougal

13. Government in the U. S. Economy
Modified free enterprise (circular flow)
Located in the center.
A consumer in the product market.
Also a consumer in the factor market.
Government is a producer.
Economics: concepts and choices, Holt McDougal

14. Review
Compare and contrast the role of consumers and producers in producing resources. Which do you think has the greater power?
Use the circular flow diagram on pg. 80 and what you have learned from this section to explain the ways in which government allocates resources.
What industries in today’s world do you think would be wise to make changes given consumers’ preferences? Give reasons for you selections.
Economics: concepts and choices, Holt McDougal

15. Government and Free Enterprise
Objectives in the section:
Understand that one role of government in the U. S. economy is to address market failures.
Analyze why governments provide public goods and infrastructure.
Explain how governments seek to decrease negative externalities and increase positive externalities.
Economics: concepts and choices, Holt McDougal

16. Public Goods Funded by taxes collected by the government. Free Riders
People cannot be excluded from the benefits.
One person’s use of the product does not reduce the usefulness to others.
Free Riders
Pubic and Private Sectors – shared responsibilities
infrastructure
Economics: concepts and choices, Holt McDougal

17. Managing Externalities
Negative externality
Paying for negative externalities
Positive externality
Spreading positive externalities
Subsidy
Economics: concepts and choices, Holt McDougal

18. Public Transfer Payments
Safety net
Redistributing income
Transfer payments
Public transfer payment
Economics: concepts and choices, Holt McDougal

19. Checking for understanding
Illustrate the two characteristics of public goods with examples.
How is infrastructure linked to the economy?
Give an example of a free rider.
In 2003, Congress passed laws to encourage private charitable organizations to provide social services. They would compete for government funds to carry out community services through their own networks. Do you think this is an effective way to address social issues? Use economic concepts, such as markets, efficiency, and opportunity costs in developing your response.
Economics: concepts and choices, Holt McDougal

20. Final Thoughts
Economics: concepts and choices, Holt McDougal