[ 2.5 ] Benefits of Free Enterprise

[ 2.5 ] Benefits of Free Enterprise Learning Objectives Explain the basic characteristics of the U.S. free enterprise system. Describe the role of the consumer and the entrepreneur in the American economy. Identify the protections in the U.S. Constitution that underlie free enterprise. Describe the role of government in the U.S. free enterprise system.

[ 2.5 ] Benefits of Free Enterprise Key Terms profit motive open opportunity legal equality Private property rights free contract voluntary exchange interest group patriotism eminent domain public interest public disclosure laws

Basic Characteristics of Free Enterprise Picture the dozens of services and products you use every week. Somebody had to think of each one and put it into action. Somebody figured out that people would rather rent movies from a Web site that offers tens of thousands of choices than go to a store that offers far fewer. Somebody invented a way to send photos as well as messages with cellphones.

Basic Characteristics of Free Enterprise Opportunity Incentives Profit Motive Competition Legal Equality Private Property Rights Economic Freedom

Basic Characteristics of Free Enterprise Living in a country with a free enterprise system means that anyone, including you, can become an entrepreneur, start a business, and have a “grand opening.”

Basic Characteristics of Free Enterprise While 1990 to 2007 was generally a time of solid economic growth, a deep recession occurred in 2007–2009. Analyze Graphs What does this graph tell you about productivity in the period 2007–2012?

Key Roles in the Free Enterprise System You have learned about the powerful dynamics that drive the free enterprise system. Now you will meet two key actors who fill critical roles and exert a strong influence on the economy.

Key Roles in the Free Enterprise System The Role of the Consumer The Role of the Entrepreneur

Key Roles in the Free Enterprise System The Ford Motor Company had high hopes for the Edsel, a model introduced in 1957. Consumers, however, did not like the car. Ford stopped producing the Edsel in 1960.

Economic Freedom and the Constitution The economic freedoms that American consumers and producers enjoy are an important benefit of the U.S. free enterprise system and a source of patriotism, or love of one’s country. In the free enterprise system, the right to own property or to become an entrepreneur is as basic to liberty as freedom of speech or the right to vote. According to a leading economist, these rights cannot be separated:

Economic Freedom and the Constitution Property Rights Taxation Contracts

Economic Freedom and the Constitution The free enterprise system gives all Americans the right to own property. This couple is pursuing the American dream by looking for a home to purchase.

The Limited Role of Government in the Marketplace The government plays a limited but important part in the American free enterprise system. The government’s primary role is to carry out its constitutional responsibilities to protect property rights, contracts, and other business activities. Over time, Americans have come to expect the government to take other actions to promote the public interest, or the concerns of society as a whole. The government has passed laws to protect us from economic problems that affect us all, such as pollution or unsafe foods and medicines.

The Limited Role of Government in the Marketplace Information and Free Enterprise Protecting Public Health, Safety, and Well-Being Negative Effects of Regulation

The Limited Role of Government in the Marketplace The role of government in protecting consumers includes regulations directing car companies to provide detailed information about the vehicles they sell.

The Limited Role of Government in the Marketplace Over time, government has increased its regulation of the economy. Determine Relevance How might the Consumer Financial Protection Bureau help protect the public?

Quiz: Basic Characteristics of Free Enterprise Which of the following is an example of the profit motive as an incentive? A. A business owner expands a factory to make more goods. B. A shopper chooses a product because of its low price. C. A producer starts a benefits program for workers. D. A consumer engages in a voluntary exchange.

Quiz: Key Roles in the Free Enterprise System When consumers choose not to purchase a good, what is one likely response by the producer of that good? A. raise the price of the good B. keep the price of the good at the current level C. return the price of the good to an earlier level D. lower the price of the good

Quiz: Economic Freedom and the Constitution The due process clauses of the Constitution support the principle that A. no legislature can keep an owner from selling his or her private property. B. only through a public trial can government take someone’s private property. C. private property can never be taken from an owner. D. government can take private property only to meet a public need.

Quiz: The Limited Role of Government in the Marketplace How might government water-pollution regulations serve the public interest? A. by keeping waterways open for the transport of goods B. by restricting the watering of lawns during a drought C. by limiting the amount of water a business could use D. by ensuring that water does not contain toxins that could endanger people