Celebrate Freedom Week and Free Enterprise

©2012, TESCCC

Celebrate Freedom Week

©2012, TESCCC

"We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain

unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness--That to

secure these Rights, Governments are instituted among Men, deriving their just

Powers from the Consent of the Governed."

Socialism

Controlled Economy

Government Control

Free MarketFree Enterprise

Low degree of

government control

Public Ownership (land and/or

natural resources

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Communism(command economy)

SocialismCapitalism

(Free-Market Economy; Free

EnterpriseHow much control over the means of

production (how much to produce/what to produce, to whom/how it is distributed and

the overall decision making process

Economic Systems

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Capitalism• Free Enterprise or Modified

Market Economy

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Objectives

1. Explain basic principles of capitalism.

2. Identify the role of the consumer in the U. S. free enterprise economic system.

3. Describe the role of an entrepreneur in a free enterprise system

4. Describe the role of government in capitalism.

©2012, TESCCC

Private Property Rights• Private individuals and private businesses are

allowed to own as much property as they can purchase. This gives them some rights to prohibit others from using their property. This also provides

incentives to owners to

take care of the property and

to invest in it which encourages

the efficient allocation of resources

and economic growth.

©2012, TESCCC

Private Property Rights

The right to own private property is guaranteed in the Constitution.

The Constitution states in the Fifth Amendment that no person ” be deprived of life liberty, or property, without due process of law; nor shall private property be taken for public use, without compensation.”

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Self Interest Motive• Everyone in the economy is out for their

own self interest or they make decisions based on what will benefit them. This allows resources to be used in the most efficient manner. Adam Smith says it is like an “invisible hand” guides us and it all works out for best of the economy and society as a whole.

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Voluntary Exchange in the Market Place

• This the act of buyers and sellers coming together willingly in the market place exchanging goods and services for money. Both parties feel they will gain or they would not engage in the transaction.

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Freedom of Choice• In a market economy such as the

United States people are free to choose their jobs or careers. They make their own economic decisions.

• They are free to engage in contracts.

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Competition• Competition is the regulating force in

our economy. It allows new producers to enter a market in search of profits. This will keep prices low. It also brings us the best quality product.

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Profit Motive• Every individual and group are out to

improve their material well being. We work and do a good job because we want to keep our job and to be able to get a good raise. Businesses make choices that will allow them to make the most profit. This attracts new entrepreneurs to start new

businesses because they can

earn a profit.©2012, TESCCC

Consumer Sovereignty

• This means consumers hold the power in this system.

• They tell businesses what to produce when they vote in the marketplace with their dollars.

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Limited Role of Government

Most market or free enterprise economies can operate without too much government interference. There are some limited roles for the government to play.

1.Define and enforce property rights

2.Provide some public goods and services such as national defense.

©2012, TESCCC

Market

• A free enterprise economy is based on markets. This is where there is private ownership of resources and the economic questions are answered in the market place by the interaction of buyers and sellers. There are some important characteristics in a capitalistic economy. They are: self interest motive, voluntary exchange, freedom of choice, private property rights, profit motive and competition.

©2012, TESCCC