The Governments role in the Free Enterprise System
Initially, the US began with a
policy toward business. This means: LAISSEZ FAIRE
LEAVE THINGS ALONE, HANDS OFF
This concept is often paired with ,
an economic system based onCAPITALISM
PRIVATE OWNERSHIP OF THE FACTORS OF PRODUCTION.
Why in theory is this supposed to work?
IT SHOULD WORK BECAUSE PRODUCERS WILL CREATE THE GOODS AND SERVICES THAT
CONSUMERS DEMAND.
When did this change?
DURING INDUSTRIALIZATION
Why?
https://beyond-english.wikispaces.com/file/view/rockefeller.JPG/39044570/rockefeller.JPG
BECAUSE ROBBER BARONS WERE CREATING MONOPOLIES AND BAD LABOR CONDITIONS
What is different about this diagram compared to the one we drew on p. 8?
THE GOVERNMENT IS REPRESENTED ON THIS CIRCULAR FLOW CHART
How does this new element interact with the circular flow model?
THE GOVERNMENT INTERACTS WITH BOTH THE FACTOR AND
PRODUCT MARKET AS WELL AS HOUSEHOLDS AND BUSINESSES
PUBLIC SECTOR GOODS & SERVICES:
TOLLS, PARKS, SCHOOLS, USPS
SOLE PROPRIETORSHIPS AND PARTNERSHIPS
WHY DO YOU THINK MARY KAY ASH PROVED SO SUCCESSFUL IN HER COSMETICS VENTURE?
• BECAUSE–Entrepreneurial skills–Innovation in sales
techniques and incentives
Sole ProprietorshipsAdvantages
• Easy to open and close
• Few regulations• Freedom and
control• Owner keeps Profit
Disadvantages• Limited funds• Limited life• Unlimited
liability
Why are sole proprietorships the most common form of business organization in the US?
• Easy to start up• Full control• Relative freedom from regulation• Ability to leave the business at any time• All profits to the sole proprietor
PartnershipsAdvantages
• Easy to open and close
• Few regulations• Access to resources• Joint Decision
Making• Specialization
Disadvantages• Potential for
conflict• Limited life• Unlimited
liability
What do stocks and dividends have to do with corporations?
Stocks are sold to people (shareholders) and those shareholders receive a dividend or check at the end of the year containing a percentage of the corporations profits.
CorporationsAdvantages
• Access to Resources
• Professional Managers
• Limited Liability• Unlimited Life
Disadvantages• Start-Up Cost
and Effort• Heavy Regulation
• Double Taxation• Loss of Control