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 chooseCars, computers, land, homesStart and operate the business of your choiceThe 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 CompetitionThe 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 productsService and financingBusiness locationReputation
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 ProfitThe 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 GovernmentThe Government plays four roles in our Free Enterprise SystemThey are:Provider of ServicesSupporter of BusinessRegulatorCompetitor
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 AssistanceSBA – Small Business AdministrationAll government purchased items must be purchased from US companiesThe government is the single largest consumer of goods and services in the USTariffs 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 CommissionOSHA – Occupational Safety and Health AdministrationCPSC – Consumer Product & Safety CommissionFEMA – Federal Emergency Management AgencyDEA – Drug Enforcement AgencyEPA – Environmental Protection AgencyFDIC – Federal Deposit Insurance CorporationFTC – Federal Trade Commission (truth in advertising, labeling, monopolies)LicensingMinimum Wage
18 Competitor Agencies operated by government that competes with private enterprise TVAUSPSAmtrakParks and Campgrounds
19 The Role of the Consumer SupplyDemandShortageSurplusEquilibrium
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 goodShortages occur when demand exceeds supply.Think GASOLINE!!! We pay whatever they charge because we have to have it
23 EQUILIBRIUMWhen 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.