1. ECONOMICS FREE ENTERPRISE SYSTEM & SUPPLY AND DEMAND

2. Review  Three fundamental economic questions

3. Review  Three fundamental economic questions  What should be produced?  How should they be produced?  For whom should they be produced?

4. Review  Three fundamental economic questions?  What should be produced?  How should they be produced?  For whom should they be produced?  Market Economy

5. Review  Three fundamental economic questions?  What should be produced?  How should they be produced?  For whom should they be produced?  Market Economy  Limited/no government involvement (free enterprise)

6. Review  Three fundamental economic questions?  What should be produced?  How should they be produced?  For whom should they be produced?  Market Economy  Limited/no government involvement (free enterprise)  Command Economy

7. Review  Three fundamental economic questions?  What should be produced?  How should they be produced?  For whom should they be produced?  Market Economy  Limited/no government involvement (free enterprise)  Command Economy  Government makes all decisions (dictator/communism)

8. Review  Three fundamental economic questions?  What should be produced?  How should they be produced?  For whom should they be produced?  Market Economy  Limited/no government involvement (free enterprise)  Command Economy  Government makes all decisions (dictator/communism)  Mixed Economy

9. Review  Three fundamental economic questions?  What should be produced?  How should they be produced?  For whom should they be produced?  Market Economy  Limited/no government involvement (free enterprise)  Command Economy  Government makes all decisions (dictator/communism)  Mixed Economy  Combination of market & command economies

10. Free Enterprise System  Free Enterprise System: “A system that encourages individuals to start and operate their own businesses without government involvement”  Which Factor of Production is related to this?

11. Characteristics of Free Enterprise  Freedom of Ownership  Risk  Profit  Competition

12. Freedom of Ownership  Freedom of Ownership: “Individuals are free to own personal property”  personal property: car, home, computer  Can do what you want with property  lease, sell or give away  Encourages individuals to own their own businesses

13. Risk  Risk: “Potential for loss or failure”  What risks do businesses take?  Possibility to be sued  Loss of all personal savings used to start-up the business  Natural disasters

14. Profit  Profit:  “Money earned from conducting business after all costs and expenses have been paid”  Profit is:  motivation for taking risk  reward for taking risk  reward for meeting customer wants &needs  used to pay owners, stockholders  Profit is the driving force of free enterprise!

15. Competition  Competition:  “The struggle between companies for customers”  Competition:  essential part of free enterprise  forces businesses to produce better quality products  keeps prices “in check”  results in wider selection of products & services

16. Competition  Business Rivalries  Coke vs. Pepsi  Ford vs. GM  AT&T vs. MCI  Nike vs. Reebok  Bill Gates (Microsoft) vs. Steve Jobs (Apple)  Airbus vs. Boeing  McDonald’s vs. Burger King  CVS vs. Walgreen’s  UPS vs. FedEx

17. Types of Competition  Price Competition:  “focuses on the sale price of a product”  Assumption behind this: “if all else is equal, the customer will buy the product with the lowest cost” WHAT DO YOU THINK?

18. Types of Competition  Non-Price Competition:  “focuses on factors that are NOT related to price”  Assumption behind this: “if all else is equal, the customer will buy the product with better quality & closer sales location”  WHAT DO YOU THINK?

19. Monopoly  Monopoly: “no competition and one company controls the entire market”  Can charge what they want  Quality may not be biggest concern

20. Review  Free Enterprise System  Freedom of Ownership  Risk  Profit  Competition  Price Competition  Non-Price Competition  Monopoly