1. Lesson Two: Free Enterprise in the United States

2. Free Enterprise -Based upon the ideas of Capitalism, a system that emphasizes the individual’s role in economic endeavors - Individual achievement seen as being the key to a strong economic system. -Within the ideology of Capitalism, we have what’s called a free enterprise. free enterprise system -Individuals and groups have the right to make choices when it comes to their economic roles in a society. -Economics studies choices that people make when deciding how to utilize resources. - Free enterprise= little or no government interference

3. Critical Exercise: -Pros and cons of a free enterprise system? -What do you think are some of the things we would need in a society for such a system to work perfectly?

4. The “Pillars” of Free Enterprise The Six “Pillars” of a Free enterprise system are: Private Property Specialization Voluntary Exchange The Price System Market Competition Entrepreneurship

5. 1). Private Property Defining Private Property: Resources and products owned by individuals or private businesses. -In the free enterprise, we have the right to own things. -Approximately 90% of goods distributed in the United States are made by privately-owned companies. -Some believe that without the existence of private property in an economy, individual rights would be an impossibility (Thomas Bethell, Pg. 17 Econ. Text) “Without private property, there can be no prosperity, no peace, and no freedom” -Bethell Example: One of Donald Trump’s many mansions. Without the concept of private property, such a possession would not exist. 

6. 2). Specialization -Another condition needed for a free enterprise to work is specialization. -Specialization means that companies produce certain types of products or services. -Also, individuals in a work place have certain jobs that are their responsibilities. This is another example of specialization. Examples: Someone working specifically as a lawyer, or a company producing a specific kind of product are both examples of specialization 

7. 3). Voluntary Exchange Purchasing goods and services must be a choice. Given that resources are limited, individuals and groups must cooperate in terms of exchanging them. Without this voluntary cooperation, people would be unable to get the resources they need in order to live comfortably. We can think of voluntary exchange as being like a contract between consumers and businesses, in that they both agree to the transaction 

8. 4). The Price System “Uses monetary prices as a message system to facilitate exchanges between buyers and sellers” – So what does that mean? Think about money as a translation! -The act of putting “prices” on items and services is an important part of the free enterprise system. **Our dollar bill was once a translation of worth in gold. The price system gives meaning to money.

9. 5). Market Competition In the free enterprise system, there must be competition between businesses and individuals In theory, competition lowers prices and improves the quality of products.

10. 6). Entrepreneurship Creativity! The ability to adapt to an ever- changing market This must exist in order for the free market to maintain itself Practiced by both individuals and businesses *Pictured right is famous inventor Thomas Edison. The market system has always relied upon the creativity of its citizens for survival.

11. Circular Flow of Money, Resources, and Products

12. Circular Flow, Cont. Important to note that the diagram is a simplified model of the economy at a macro- level Other factors are not mentioned on the chart. Government intervention (or lack thereof) and the creation of money systems also important!

13. In Summary The Free Enterprise system is seen by many as being the most fair and efficient way to run an economy In theory, the existence of a free market ensures equal opportunities for individuals and businesses in the marketplace. The market survives and thrives as a result of the participation of these groups.