Lesson 1: American Free Enterprise Capitalism

Chapter 3: The American Free Enterprise System

Bellringer

• What risk does an entrepreneur assume when opening a business in a market economy?

• An entrepreneur may experience business failure.

Bellringer

• What incentive does a market economy offer that encourages entrepreneurs to accept a risk of business failure?

• A market economy offers the incentive to earn and keep profits.

Characteristics of Free Enterprise Capitalism3-1

Characteristics of Free Enterprise Capitalism

• A free enterprise economy has both capitalism and free markets.

• Characteristics of a capitalistic free enterprise economy include economic freedom, voluntary exchange, private property rights, the profit motive, and competition.

• Economic freedom allows you to choose your occupation, employer, and job location.

Characteristics of Free Enterprise Capitalism

(con’t)

• Capitalism allows voluntary exchange between buyers and sellers.

• Private property rights allow people to own and control possessions, which gives them the incentive to work, save, and invest.

• The profit motive is largely responsible for the growth of a free enterprise system.

• Competition benefits both consumers and the economy.

Open for BusinessCharacteristics of Free Enterprise Capitalism

Open for Business

• The profit motive encourages individuals to open new businesses. Small businesses, ones with fewer than 500 employees, in the U.S. are growing in number.

• The profit motiveencourages individuals to start their own businesses.

• Economic freedom allows individuals to select the skills, markets, and merchandise that will maximize their chances for success.

Open for Business 1

• The promise of profit inspires many successful small businesses. The 23 million small businesses in America account for 54% of all U.S. sales.

Open for Business 2

• Small businesses also provide 55% of all jobs in the United States. The promise of profit helps small businesses stimulate the economy and provide employment opportunities.

Benefits of Free Enterprise Capitalism3-1

Benefits of Free Enterprise Capitalism• Individual freedom is closely related to economic freedom.

• Market economies produce a huge variety of goods.

• Market economies adjustdaily, mainly through the ever-changing prices of goods and services.

Benefits of Free Enterprise Capitalism• Intense competition in a free market capitalist economy promotes economic progress in the form of a continuing supply of newer and better products.

• When more and better products are produced in a free market capitalistic system, wealth is created.

Disadvantages of Free Enterprise3-1

Disadvantages of Free Enterprise

• Periods of uneven economic growth are one of the disadvantages of free enterprise capitalism.

• In free enterprise capitalism, the gapsbetween rich and poor citizens seem to increase.

Disadvantages of Free Enterprise

• In free enterprise economies, suppliers tend to combine to avoid competition, which results in fewer participants on the supply side of the market.

• Businesses such as corporations have most of the same rights as individuals, but they also have many responsibilities as a result of government-imposed regulations.

Ford Struggles to Stay Profitable3-1

Ford Struggles to Stay Profitable

1. Constructing ArgumentsHow is being in a free enterprise economy pushing Ford to improve its product?

2. Apply Knowledge How is profit motive at work at Ford? List at least three things the company is doing as a result.

3. Explain Why did Ford sell off Jaguar, Volvo, and Land Rover?