Download Chapter 2, Section 2 – Features of the U

Chapter 2, Section 2 – Features of the U.S. Economy
Our economic system (Capitalism) gives individuals opportunities that other systems do not. Use your
text to complete the following:
We can own private property How is this different from other economic systems?
and enter into contracts.
What are some items that are your private property?
What might be considered a business’s private property?
What role does a contract play in protecting property rights?
We can make individual
choices.
List the groups that are allowed to make choices in our economy.
Give examples of the types of choices that these groups can make.
We can engage in economic
competition.
What does competition between producers encourage?
What does competition between consumers encourage?
We can make decisions based
on self-interest.
Why is this important? How does this help the economy?
We can participate in an
economy with limited
government involvement and
regulation.
Who makes most production decisions in our economy?
What limited role does government play in our economy?
(Government involvement is
what separates our capitalist
system from a pure market
economy where anything goes!)
Economic Actors in Free Enterprise
Producers use factors of production to satisfy wants and needs of society. Consumers influence
production by purchasing certain goods and services, but not others. Government oversees and
regulates economic activity. All three interact in a market system. The goal of this market system is to
answer the questions – what, how, and for whom to produce. The system uses exchange to
accomplish this goal. Economists call this market system the Circular Flow of Goods and Services.
The Circular Flow Model
Look at Figure 2.2 at the top of page 34. This is a very simplified view of the way the U.S. economy
functions. Notice that there are two markets illustrated here. The product market is colored green and
the resource market is colored gold. Also notice that the three basic economic actors are included in
the chart: 1. Government (the regulators); 2. Business (producers); 3. Households (consumers). Let’s
take a look at how it operates.
Product Market
1. What is being exchanged between government and business?
2. What is being exchanged between business and households?
3. What is being exchanged between households and government?
Resource Market
1. What is being exchanged between government and business?
2. What is being exchanged between business and households?
3. What is being exchanged between households and government?