The Free Enterprise System

As Americans, What Freedoms Do We Have? Speech Religion Assembly What else?

Free Enterprise System We are free to own property and start a business in an economy based on the free enterprise system.

What is an Economy? An economy is a system for producing and distributing goods and services.

What are Goods? Goods are THINGS you can buy, like shoes, soccer balls and CDs. What are some other goods?

What is a Service? Service is WORK that people do for others. Hair stylists, plumbers, and doctors sell their services. Can you name others?

O.K.…back to Free Enterprise You can decide what product you’ll sell and how much money to charge for it.

Free Enterprise The United States operates in a free enterprise system. In a free enterprise system, businesses sell their goods and services in a MARKET ECONOMY.

Market Economy A market economy is one in which business owners and customers make decisions about what they make, buy, and sell.

Traditional Economy A traditional economy is one based on customs, beliefs, habits, and traditions that have been carried on in a society over time.

Command Economy A command economy is one in which the government controls the factors of production and decides what and how much will be produced, and who can sell it.

Factors of Production Natural Resources Capital Labor Entrepreneurs

Natural Resources

Labor

Capital

Capital Goods

Entrepreneurs People who start businesses in a free enterprise system

Types of Economic Activities Industries can be divided into 4 groups: Primary Industries Secondary Industries Tertiary Industries Quaternary Industries

Primary Industries Primary Industries involve natural resources or raw materials. Examples of primary industries are farming, mining, and logging.

Secondary Industries Secondary industries change raw materials into finished products. Examples are: sawmills making lumber, factories making copper wire, companies bottling orange juice.

Tertiary Industries Tertiary industries handle goods that are ready to be sold to consumers. Stores, banks, insurance companies, and government agencies are examples of tertiary industries.

Quaternary Industry Quaternary industries are those parts of the economy concerned with research, the gathering of information, and administration. They are a specialized part of the tertiary sector of the economy.

Economic Development Countries can be divided into two categories: Developed – Countries that have strong primary, secondary, tertiary, and quaternary industries. These countries have citizens who have high literacy rates, large urban populations, have good health care systems, and access to telecommunication systems.

Economic Development Developing Countries – These are countries moving toward development. They often have large rural populations or many people who work in primary industries. They have low literacy rates, poor health care systems, and low rates of employment.

What’s a Profit? Profit is the money a business has left after it has paid all its costs. Your goal at Enterprise City will be to pay off your bank loan and make a profit.

What are Costs? Taxes Rent Advertising Supplies Businesses must spend money on certain things. Taxes Rent Advertising Supplies

What’s Supply and Demand? Supply is how much of a product is available. Demand is the amount of a product that people are willing to buy. If LOTS of people want it, you can charge a higher price. If NOT MANY people want it, you’ll need to lower the price.

Benefits of Free Enterprise: Choice You, the consumer, can choose from many different kinds of things to buy.

Benefits of Free Enterprise: Choice Companies are free to choose the goods they wish to make.

Benefits of Free Enterprise: Profit and High Wages Employees can seek the highest paying job for their work and entrepreneurs pursue ideas to make the most profit.

Benefits of Free Enterprise: Control People, rather than the government, control the factors of production.

Benefits of Free Enterprise: Progress The free enterprise system inspires people to invent things. Remember Thomas Edison? His studio produced the first talking motion picture in 1912.

Scarcity The availability of certain factors of production can affect international trade and interdependence among societies.

Scarcity Think of the availability of oil. Oil is a natural resource that is used in the production of many products.

We hope you’ll make the most of your opportunities at Enterprise City! Good Luck! We hope you’ll make the most of your opportunities at Enterprise City!