1. The Private Enterprise System
Principles of Business
Project 2 :: What Would You Do?

2. Economic Systems
Every society develops a system for making decisions about how it will use its resources
These economic systems must answer the following questions:
What goods and services will be produced?
How will these goods and services be produced?
How will these goods and services be distributed to the consumer?

3. Private Enterprise System
In this system, the questions are answered by individuals and businesses, not the government
Individuals and groups own or control the economic resources – human and natural resources and capital goods – to produce goods and services
The characteristics of the private enterprise system has enabled the nation to produce more goods and services than any other single county

4. Freedom in the Marketplace
In economic terms, marketplace refers to any place where buyers and/or selling of goods and services occur
Private enterprise is often called a market economy or a market system because markets answer the questions of what, how, and for whom to purchase

5. Free to Choose
Markets in private enterprise are self-regulated and self-controlled
They are free to choose:
What they wish to produce
Which resources to purchase
What techniques of production to use
How their goods or services will be marketed
What price(s) they will charge
When to close down or go out of business

6. Economic Vote
Each time a consumer makes a purchase, s/he is casting an economic vote (dollar vote) in the marketplace
These economic votes enable consumers to control what will be produced
If consumers do not buy a product, the producer must change it, replace it, or go out of business
It is the responsibility of the consumer to be well informed and to make educational choices

7. Private Property
Anything of value that people own is considered private property
Business property
Buildings, land, equipment, etc.
Personal property
Furniture, jewelry, money, clothing, etc.
Ownership includes the results of your work

8. Private Property Farmers’ ownership of the crops they raise
Workers’ ownership of the wages they earn
Businesses’ ownership of the goods or services they provide
Individuals’ ownership of the profit that comes from the sale of private property

9. Private Property
Individuals and businesses in a private enterprise economy are free to decide how to use their private property and when and how to sell it
Enter freely into contracts involving their private property
Stop others from using their private property

10. Private Property
Abuse their private property as long as they are not stepping on the rights of others
Control their private property in any way they choose
Use their private property to make income
Keep any income earned by renting, leasing, or selling their private property

11. Limited Government Control
The private enterprise system in the U.S. is not a pure private enterprise system because there is a limited amount of government control
Mixed system – individuals and businesses are the primary economic decision makers, while government helps to regulate and control the system

12. Mixed System Government steps in to protect citizens
The role of government has gradually expanded partly because Americans want certain problems, like inflation, pollution, and unemployment, solved

13. Competition
The rivalry between two or more businesses to attract scarce customer dollars
Businesses compete by offering better credit options, improving goods and services, creating new goods and services, and providing better service

14. The Profit Motive
Profit is the monetary reward business owners receive in return for taking the risk involved in starting a business
The desire to make a profit is called the profit motive (forms the economic basis for the private enterprise system)
Many people consider making a profit the greatest motivating factor in the private enterprise system

15. The Price-directed System
A private enterprise system is often called the price-directed system because price determines what consumers buy, which jobs they will take, the success or failure of businesses, and the types of products that will be produced
Supply and demand work together to determine prices

16. Weaknesses
While the private enterprise system is the most productive in the world, it does have some negative aspects, or disadvantages
Production drops when sales are low; companies may lay off workers or go out of business; results in periods of unemployment

17. Weaknesses
Poverty has not been eliminated
Property and income are not distributed equally; some own a lot, others own nothing
In a private enterprise system, individuals and groups (rather than the government) own or control the economic resources

18. Summary Characteristics include:
Freedom in the marketplace
Private property
Limited government control
Competition
The profit motive
Price-directed system
Still, unemployment, poverty, and unequal distribution of wealth occur in the private enterprise system

19. Economic Freedom Freedom to choose Your own personal economic goals
The kind of work you do
Whether you want to become an entrepreneur, to own a business by yourself
Important to private enterprise system; without entrepreneurs, the system would have much less change, fewer new products, and less efficient use of resources

20. Economic Freedom Freedom to own, use, buy, and sell property
Private property is anything of value that you own (business or personal property)
Make decisions about how your private property will be used
How much of your income you want to save, spend, or invest

21. Economic Freedom Freedom to compete
Free to buys goods and services anywhere
Freedom to compete
Free to use your abilities to compete for a job, scholarship, etc.
Allows you to market your assets to your best advantage

22. Limits to Economic Freedom
Cannot buy anything and everything you might like to
Limiting factor is competition among buyers; always people wanting to buy the same things
Limited by own choices; if you choose to buy one thing you may not have money to buy another

23. Limits to Economic Freedom
Laws that have been created to protect people; workers in medicine, construction, etc.; laws require specialized training or must pass examinations; cannot sell illegal drugs, stolen property, or services for which s/he is not trained or licensed to perform
Taxes collected from the government restricts economic freedom since taxpayers cannot use all of their income for their own purposes
Taxes are important, however, because they help pay for highways, public schools, & police