Presentation on theme: "The Basic Principles of Free Enterprise"— Presentation transcript:
1 The Basic Principles of Free Enterprise 1. Profit Motivedrive for the improvement of material well-being.2. Open opportunityanyone can compete in the marketplace.3. Legal equalityEqual rights to all.4. Private property rightscontrol your possessions as you wish.5. Free contractdecide what you want to take part in.6. Voluntary exchangedecide how and when you want to buy or sell a product.7. Competitionrivalry among sellers to attract consumers.
2 The Consumer’s RoleThe free enterprise system gives consumers the freedom to make their own choices.consumers make their desires known by buying products. This tells producers what to produce and how much.Consumers also make their desires known by joining interest groups(private organizations that try to persuade public official’s votes)
3 Public Disclosure Laws The Government’s RoleGovernment protection:Public Disclosure Lawsrequire companies to provide important information.(such as fuel efficiency of automobiles, side-effects of medication)
4 Tracking Business Cycles A business cycle is a period of a macroeconomic expansion and contraction.One way to measure of a nation’s macroeconomy is gross domestic product (GDP)GDP is the total value of all goods and services produced in an economy.Government Policymakers pursued outcomes:Employment (4 to 6%)GrowthStability
5 Encouraging Innovation The government encourages the development of new TechnologyFederal agencies fund research and development- A patent gives the exclusive right to produce and sell inventions. (usually 20 years)Helps maintain a high standard of living
6 Public GoodsA public good is a shared good or service that is impractical to pay individually and to exclude nonpayers.funded by the public sectorExamples include:Public parksAirportsDamsRoad systems
7 Externalitiesa side effect of a good or service that generates benefits or costs to others. (side effect)The building of a new road system:Positive ExternalitySmoother flow of trafficNegative ExternalitiesPollution cased by cars
8 The Poverty Problempoverty threshold is an income level below what is needed to support families.determined by the federal government and is adjusted periodically.Welfare is a general term that refers to government aid to the poor.
9 Redistribution Programs Cash transfers are direct payments of money to eligible people.Temporary Assistance for Needy Families (TANF)allows states to decide how to use federally provided funds.Social Securitydirect cash transfers of retirement income to the elderly and living expenses to the disabled.Stabilitymoney to eligible workers who have lost their jobs.Workers’ Compensationcash transfer of state funds to employees injured on the job.
10 Other Redistribution Programs In-kind benefitsfree or reduced prices (food stamps, subsidized housing)Medical benefitsfor the elderly and disabled (Medicare)for people who are unemployed or are not covered by their employer’s insurance (Medicaid).Education benefitsfree educational opportunities.