1. Capitalism and Free Enterprise Market economy is based on capitalism – Capitalism thrives on competition – Free enterprise is another term to describe US economy – Competition is allowed to flourish

2. Characteristics of Capitalism Economic Freedom – People can chose their occupation and what to buy – Businesses can decide what to produce and how much Voluntary Exchange – Buyers and sellers exchange freely in market transactions

3. Characteristics of Capitalism Private Property – People control their possessions as they wish Profit Motive – People risk their money to gain more money Profit – extent to which persons or organizations are better off than they were before a transaction

4. The Role of the Entrepreneur Manage land, labor, and capital Many will fail – But dream of success helps ignore failure If an entrepreneur is profitable, it attracts more people to that industry

5. The Role of the Consumer Hold power in the economy – If they buy, producers will produce Consumer sovereignty Wants change as they are exposed to more products

6. The Role of Government 4 Roles 1. Protector – Laws protect consumers – Prohibits abusing freedoms 2. Provider and Consumer – Provide goods and services 3. Regulator – Preserves competition Promoter of National Goals – US operates under a modified private enterprise economy people are economically free, but government intervenes and regulates