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Free Enterprise System

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Presentation on theme: "Free Enterprise System"— Presentation transcript:

1 Free Enterprise System
Encourages individuals to start and operate their own businesses without government involvement.

2 Basic Principles of the Free Enterprise System
Freedom to own personal property and do with it whatever we choose Cars, computers, land, homes Start and operate the business of your choice The government allows you to run your business however you see fit and without interference

3 Competition The struggle between companies for customers
The government will not compete against you. Why does the government want us to open new businesses? How does this improve our economy?

4 Two types of competition
Price Competition The business focuses on the sale price of the product. The assumption is that with all other factors being equal, customers will purchase the item with the lowest price.

5 Non-price competition
Businesses choose to compete on the basis of factors that are not related to price. Factors include: Quality of the products Service and financing Business location Reputation

6 MONOPOLY – It’s illegal!!!
No, not the board game!!! The exclusive control over a product or the means of producing it. Examples: AT&T Microsoft

7 Risk is defined as the potential for loss or failure in relation to the potential for improved earnings. Whenever individuals choose to operate their own business, they run the risk of losing (or gaining) all that they invest. As the potential for earnings gets greater, the risk increases accordingly.

8 Profit The money earned from conducting business after all costs and expenses have been paid. If you sell a coke for $1.09 your profit is not $1.09, you must first deduct the amount the store paid to stock the drinks and a percentage for overhead.

9 What is an economy? An economy is defined as….the way a nation makes its economic choices. What exactly does that mean?? Just think MONEY!!! How does our money move through the economy? What do we do to keep it moving through the economy?

10 How does the government get money?
Did you say taxes? Yes, they get money through our tax dollars. If we are paying in so much money, what do we get in return? The answer to these questions can be answered by learning the roles of government in our economy.

11 The Role of Government The Government plays four roles in our Free Enterprise System They are: Provider of Services Supporter of Business Regulator Competitor

12 Provider of Services What services does the government provide?
Roads, bridges, free education, public libraries, military, fire department, police, Medicare, Medicaid, WIC, and sanitation centers.

13 Supporter of Businesses
Disaster Assistance SBA – Small Business Administration All government purchased items must be purchased from US companies The government is the single largest consumer of goods and services in the US Tariffs and trade agreements

14 Regulator Making laws is one of the principal functions of government.
In the US, most laws are made to protect the safety, health, and welfare of individuals and the freedom of businesses to operate in our free enterprise system.

15 Regulators – Consumer & Worker Protection
Agencies that are specifically set-up to protect the individuals while they are at work and to protect the consumer when purchasing products.

16 Consumer & Worker Protection
FDA – Food & Drug Administration (proper labeling of food & drugs, lack of contaminents, research into new drugs and their benefits) EEOC – Equal Employment Opportunity Commission OSHA – Occupational Safety and Health Administration CPSC – Consumer Product & Safety Commission FEMA – Federal Emergency Management Agency DEA – Drug Enforcement Agency EPA – Environmental Protection Agency FDIC – Federal Deposit Insurance Corporation FTC – Federal Trade Commission (truth in advertising, labeling, monopolies) Licensing Minimum Wage

17 Regulators – Business Protection
Patents Copyrights Trademarks Licensing Agreements Sherman Antitrust Act (1890) Clayton Antitrust Act (1914) Predatory Pricing, Monopolies, FTC

18 Competitor Agencies operated by government that competes with private enterprise
TVA USPS Amtrak Parks and Campgrounds

19 The Role of the Consumer
Supply Demand Shortage Surplus Equilibrium

20 Supply The amount of goods producers are willing to make and sell.
As prices rise, producers are willing to produce more. As prices go down, producers are willing to produce less

21 Demand Consumer willingness and ability to buy products
As price goes up, consumers are not as willing to buy. As price goes down, consumers are willing to buy more.

22 Surplus & Shortage Surpluses occur when supply exceeds demand.
If prices are too high or quality not good Shortages occur when demand exceeds supply. Think GASOLINE!!! We pay whatever they charge because we have to have it

23 EQUILIBRIUM When the amount of product being supplied is equal to the amount being demanded, equilibrium occurs. Customers are able to purchase products at a fair price and businesses are able to maintain a steady flow of business.


25 Federal Reserve System
Great Depression When? Why? Federal Reserve System Who are they? What do they do? Interest rates How do interest rates affect the economy?

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