1. Bell Activity
Think of a product that you use that was developed or modified as a result of some change in the marketplace.
Would this product have been developed in a command economy? Why or why not?
How does this product demonstrate a strength of the free enterprise system?

2. In Lak’ech by Luis Valdez
Tu eres me otro yo
Si te hago daño a ti,
Me hago daño a mi mismo
Si te amo y respeto
Me amo y respeto yo
You are my other me
If I do harm to you,
I do harm to myself
If I love and respect you
I love and respect myself

3. Bell Activity
Think of a product that you use that was developed or modified as a result of some change in the marketplace.
Would this product have been developed in a command economy? Why or why not?
How does this product demonstrate a strength of the free enterprise system?

4. The American Free Enterprise System

5. Students Will Be Able To:
Explain how the American economy incorporates the five main characteristics of a free enterprise economy.
Summarize the opportunities and benefits for individuals in an American free enterprise economy.
Describe the disadvantages of a free enterprise economy.

6. Characteristics of the Free Enterprise Capitalism
Capitalism is an economic system in which private citizens own and use the factors of production to make and generate profits.
If an economy has both capitalism and free markets, the economy is based of free enterprise.
Under free enterprise, resources are privately owned and competition is allowed to flourish with a minimum of government interference.
Capitalistic free economy has five characteristics: economic freedom, voluntary exchange, private property rights, profit motive, and competition.

7. Economic Freedom Means that you are able to buy things you want.
You have the freedom to choose your occupation, your employer, and your job location.
Business also enjoy economic freedom.
They are free to
hire the workers of their choice.
Produce the products they think will be the most profitable.
make as many items as they want.
Sell them wherever they please.
Charge whatever price they choose.
They risk success of failure.

8. Voluntary Exchange
Act of buyers and sellers freely and willingly engaging in market transactions.
Voluntary transaction benefits both the buyer and the seller, or the exchange would never occur.
When buyers spend their money on a product, they act on a belief that the item they purchase is of greater value than the money they gave up.
Sellers exchange their products for cash, they believe that the money they receive is more valuable than the product.

9. Private Property
Private property rights- fundamental feature of capitalism, which allows individuals to own and control their possessions as they wish.
As long as they don’t interfere with the rights of others.
Gives people the incentive to work, save, and invest.
People are not afraid to accumulate, improve, use, or lend it.
People keep any rewards they might earn.
Makes borrowing possible and investing attractive.
Can use property as collateral, or security for loans.
Proof of ownership allows people to invest in a business or private enterprise with confidence

10. Profit Motive
Profit is the extent to which the revenue from sales exceeds the full opportunity cost of the resources involved in producing the products sold.
Profit motive- the incentive to improve one’s material well-being- is largely responsible for the growth of a free enterprise system.
Freedom to seek profits helps to guarantee that there is a never-ending stream of products, new and old, being offered to attract consumers dollars.

11. Competition
Capitalism thrives on competition- the struggle among sellers to attract consumers with the best products at the lowest prices.
Competition benefits consumers by assuring them unpopular products will cease to be produced if consumers do not buy them.
Also benefits consumers by assuring them that producers are always working to bring newer, better, and less expensive products to market.
Benefits the economy by ensuring that the most efficient producers of a product will survive.
In a world of scarce resources, competition helps to assure that these resources are used as efficiently as possible.

12. Benefits of Free Enterprise Capitalism
Economic freedom is both a characteristic and a benefit of capitalism.
Choices we make in the market to the choices we make in the voting booth.
Strong and stable democratic traditions are also present in countries with free enterprise capitalism.
Market economies everywhere are renowned for producing a huge variety of goods of almost all shapes, colors, and sizes, depending on the type of product.
All of this comes about because of competition.

13. Benefits of Free Enterprise Capitalism
Market economies adjust daily to the forces of change.
Adjustment takes place mainly through the price system.
Changes in the price of one product can affect changes in other industries.
For example the rising cost of oil.
Allowed the change in fuel economy of autos.
Other changes also have taken place because of the rising cost of oil.
Wind farms
Solar energy
Biofuels- fuels whose energy is derived from renewable plant and animal materials, vegetable oils, and municipal and industrial wastes.

14. Benefits of Free Enterprise Capitalism
Buildings are now becoming more energy efficient.
All of these developments are because of the rising cost of oil.
Economists think of wealth as the accumulation of products that are tangible, scarce, have utility and are transferable from one person to another.
The creation of wealth happens when more and better products are produced in a free market capitalist system.
Free market capitalism is the most efficient wealth-generating system the world has ever seen.

15. Disadvantages of Free Enterprise Capitalism
Great Recession- started in December 2007 and lasted until mid-2009.
U.S. Gross Domestic Product (GDP) shrank about 4.5 to 5 percent.
Growing gaps between rich and poor.
Minimum wage worker’s protested for higher wages in 2013 to present.
Free enterprise economies work best when there are a large number of players- buyers and sellers- on both sides of the market.
Supply side of the market is different because suppliers tend to combine with other suppliers in order to avoid competition.
They become more efficient by eliminating some overlapping operations.

16. Disadvantages of Free Enterprise Capitalism
When similar firms combine- the result is fewer participants on the supply side of the market.
Participation of the demand side are now focused on a diminished number of suppliers.
This makes competition less efficient.
Corporations have the same rights as individuals.
They can sue, and be sued.
Enter into contracts.
Can own property.

17. Disadvantages of Free Enterprise Capitalism
Businesses have many responsibilities.
Most are due to government regulations. That limit their scope of operations.
Federal Immigration and Nationality Act (INA) requires all employees be treated equally.
Unless citizenship is required by a federal, state, or local law, or by government contract.
Government regulations protect consumers against harm from products on the market.
Ranging from baby seats and cribs to ignition switches on cars.
Consumer Product Safety Commission (CPSC) regulates these concerns.

19. Activity Working as a group:
Review the 5 characteristics of free enterprise capitalism
Which do you think is the most important and why?
Create and present a poster that promotes this characteristic