1. The Free Enterprise System
Chapter 13
Our Economic System
Lesson 13.1
The Free Enterprise System

2. The meaning of free enterprise How the free enterprise system works
Discover
The meaning of free enterprise
How the free enterprise system works
continued

3. How you fit into our economic system
Discover
How you fit into our economic system

4. Why It’s Important
The more you understand about our economy, the better your chances are of reaching your career goals.

5. economics economic system capitalism free enterprise regulate
Key Terms
economics
economic system
capitalism
free enterprise
regulate
command economy
continued

6. Key Terms
socialist economy
consumers
producers
profit
supply
demand

7. The Free Enterprise System
What do you know about how the prices for goods and services are set?
Do you understand why prices rise or fall?

8. Economic Systems
Economics is the study of how people produce, distribute, and use goods and services.

9. Economic Systems Producing means creating good or services.
Distributing means making goods and services available to the people who need them.

10. Economic Systems
Using is what people do with goods and services.

11. Economic Systems
An economic system is a country’s way of making choices about how to use its resources to produce and distribute goods and services.

12. The Free Enterprise System
The economic system of the United States is known as capitalism.
Capitalism is also known as a market economy or free enterprise system.

13. The Free Enterprise System
Free enterprise means that individuals or businesses may buy and sell goods and services and set prices with little government control.

14. The Free Enterprise System
The government passes laws to regulate, or set rules for, some prices and wages.
Laws passed by the government protect everyone who buys and uses goods and services.

15. Other Economic Systems
In a command economy, the government makes all of the key economic decisions.
In a command economy, there is little economic freedom and little incentive to increase productivity.

16. Other Economic Systems
In a socialist economy, there is private enterprise, but the government controls key industries and makes many economic decisions.

17. How the U.S. Economy Works
People who buy and use goods and services are consumers.
Every time consumers make a purchase, they are “voting” with their dollars.

18. The Producer’s Goal: Making a Profit
Producers and consumers have very different goals.
Producers try to make goods or provide services that consumers will buy.

19. The Producer’s Goal: Making a Profit
All businesses must earn a profit to keep operating.
A profit is the amount of money left after the business pays its expenses.

20. Q and A
I don’t want to work for a business whose main goal is making a profit. Am I a misfit?
continued

21. Perhaps a job in a nonprofit organization would be perfect for you.
Q and A
Perhaps a job in a nonprofit organization would be perfect for you.
Some nonprofit organizations exist to serve charitable causes.

22. Graphic Organizer The Pattern of the Economy People
Pay wages and salaries from profit earned
Provide goods and services to consumers
Provide labor and skills
Spend money for goods and services
Business and Industry

23. Factors That Affect Prices
A consumer’s main goal is to get the most for his or her money.
Consumers note changes in prices and compare prices.

24. Graphic Organizer Factors That Cause Prices to Change
Supply and Demand
Production Costs
Competition
Supply is the amount of goods and services available for sale.
The more it costs to make a good or provide a service, the higher its price.
When producers offer similar goods or services for sale, they are in competition.
Demand is the amount of goods and services that consumers want to buy.
Producers must sell their goods or services for more than it costs to produce them.
When competition is great, prices are lower. When there is little competition, prices are higher.

25. The Big Picture
The global economy links the free enterprise system of the United States to all the other economic systems of the world.
You already have a role in the global economy.

26. Evaluate International Career Opportunities
Try This Activity
Evaluate International Career Opportunities
Knowing the similarities and differences between our economy and the economies of other countries will help you compare employment opportunities in our free enterprise system to those available in the international job market.
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27. Try This Activity
Evaluate International Career Opportunities
Create a Venn Diagram Prepare a Venn diagram comparing and contrasting the employment opportunities in the U.S. free enterprise system to those in the economic system of another country.

28. Critical Thinking Review
Why does the government regulate prices and wages?
So that businesses can’t develop monopolies, charge excessive prices to consumers, pay less than the minimum wage, and refuse to pay overtime.
Critical Thinking Q A
continued

29. Critical Thinking Review
What happens to prices when supply is greater than demand? When demand is greater than supply? Explain why this happens.
Critical Thinking Q
continued

30. Critical Thinking Review
Prices go down when supply is greater than demand because producers have an excess amount of goods or services available; prices go up when demand is greater than supply because consumers want more goods or services than are available for sale.
Critical Thinking A
continued

31. Critical Thinking Review
Why would workers in a command economy have less incentive to be productive than workers in the free enterprise system?
Critical Thinking Q
continued

32. Critical Thinking Review
Workers in a command economy always have a job and get paid regardless of their productivity. Even if they are more productive, they will not earn more money nor will they necessarily be promoted. Workers in the free enterprise system must be productive to keep their jobs, earn more money, and advance in their careers.
Critical Thinking A

33. The Free Enterprise System
End of Chapter 13
Our Economic System
Lesson 13.1
The Free Enterprise System