1. Chapter 2.3 Capitalism and Economic Freedom
Objective: To explore the characteristics of a free enterprise system
Describe the role of the entrepreneur, the consumer and government in a free enterprise economy

2. Introduction
A market economy is normally based on system of capitalism, where private citizens, many of whom are entrepreneurs, own the factors of production
Free enterprise is another term used to describe the American economy
In a free enterprise economy, competition is allowed to flourish with a minimum of government interference

3. Competition and Free Enterprise
With economic freedom, people and businesses make their own economic choices
The result of voluntary exchange, in which buyers and sellers are free to decide whether or not to complete a transaction, results in both buyers and sellers believing that the good or service obtained is of more value than the money or product given up

4. Competition & Free Enterprise
The profit motive encourages entrepreneurship and is largely responsible for the growth of a free enterprise economy
Competition among sellers helps lower prices

5. Thinking Critically
Q: Understanding Cause and Effect How has the development of transportation and communication systems affected the type of economy that exists in the U.S.?
A: Freedom of movement of people and ideas has allowed the U..S. to develop a strong Market economy

6. Thinking Critically
Q: Making Inferences what incentive does owning private property give people?
A: Private property gives people the incentive to work harder, to save, to invest and to succeed

7. Competition and Free Enterprise

8. The role of the Entrepreneur
Entrepreneurs use land, capital and labor to make a profit
When an entrepreneur is successful, everybody benefits. Successful entrepreneurs attract other firms to the industry
The entrepreneur’s search for profits leads to new products, greater competition, more production, higher quality and lower prices for consumers

9. The Role of the Consumer
The consumer has much power in a free market economy. Consumer sovereignty describes the role of the consumer as ruler of the market
Consumers in the American economy express their wants in the form of purchases in the market place. The dollars they spend are the “votes” used to select the most popular products

10. Discussion Questions
Q: How are entrepreneurs and consumers dependent on each other?
A: Entrepreneurs make goods available to consumers, while consumers guide entrepreneurs regarding what will and will not successfully sell

11. The Role of Government
As a protector, a government may pass and enforce laws meant to prevent the abuse of consumers and workers
Governments are both providers and consumers. The U.S. government provides education and welfare and is the second largest consuming group in the economy after consumers

12. Role of Government
As a regulator, the government works to preserve competition
The promoting of national goals is an important role of any government. In the U.S., achieving economic equity and security has resulted in a mixed economy, or modified private enterprise economy

13. Market Systems Private Ownership 2. Interaction of market forces
(supply and demand) determines
what will be made, how and for whom.
What gets produced is “voted” on by people’s money (prices)
Founder: Adam Smith
Examples: U.S., England, etc. Unless Mixed distinction
Vocab: Laissez Faire: “let it be” =
keep gov’t out of it, A.K.A Pure Capitalism

14. Mixed Systems
USA: Mostly Market Economy, but with some Gov’t interference
1. US GOV: produces
some goods/services
National Defense
Interstate Highway system

15. Mixed Systems 1. US GOV: produces some goods/services Public Works
Hoover Dam
Public Works
Golden Gate Bridge
Erie Canal

16. Mixed Systems
USA: Mostly Market Economy, but with some Gov’t interference
2. Influences What/How/For Whom
only when national need or for
minimum standards