Chapter 2: Free Enterprise in the

United States

How It Works…

We have a MIXED-MARKET Economy, and it is run by a FREE ENTERPRISE SYSTEM

What is a FREE ENTERPRISE SYSTEM?

People are free to make their own choices and the government only intervenes when necessary.

What is a Pillar?

Pillars support our free enterprise system…There are six total but three of those we will discuss today:

Private Property

Specialization

Voluntary Exchange

Price System

Market Competition

Entrepreneurship

Private Property

The desire to take care of, make decisions for, and produce income from your own personal property!

Price System

Prices act as messengers. Prices communicate to businesses how will customers are to produce the product.

Second, prices provide strong incentives to businesses and consumers

Rising Prices=Increase in Production------Increase in Prices=Consumers Looking for Bargains (Vice Versa)

Market Competition

Competition in Resource Markets

Fighting over who gets what resources

Competition in Markets for Products

Buyers competing with Buyers

Sellers competing with Sellers

Competition in Life

With school mates, in career choices, etc.

Circular Flow of Money

Functions of Money

Medium of Exchange—EVERYONE wants money; easy to exchange goods and services because money is a happy medium

Store of Value—Easy to hold on to and use in the future; you can place in a bank or pockets; doesn’t lose value!

Measure of Value—when used in an exchange, each product or resource has a single money price; able to compare prices to find the best value!

Goals of Our Economic System

Full Employment

Economic Growth

Price Stability

Economic Freedom

Economic Security

Economic Equity

Efficiency