Download Economic Systems and Decision Making

Capitalism and Free Enterprise

Market economy is based on capitalism
–
Capitalism thrives on competition
–
Free enterprise is
another term to
describe US
economy
Competition is
allowed to flourish
–
Characteristics of Capitalism
 Economic
Freedom
People can chose their occupation and
what to buy
– Businesses can decide what to produce
and how much
–
 Voluntary
–
Exchange
Buyers and sellers exchange freely in
market transactions
Characteristics of Capitalism

Private Property
–

People control their
possessions as they
wish
Profit Motive
–
People risk their money
to gain more money
– extent to which
persons or organizations
are better off than they
were before a
transaction
 Profit
The Role of the Entrepreneur
Manage land, labor, and capital
 Many will fail

–

But dream of success helps ignore failure
If an entrepreneur is
profitable, it attracts
more people to that
industry
The Role of the Consumer

Hold power in the
economy
–
If they buy, producers
will produce
 Consumer

sovereignty
Wants change as
they are exposed to
more products
The Role of Government


4 Roles
1. Protector
–
–

2. Provider and Consumer
–

Provide goods and services
3. Regulator
–

Laws protect consumers
Prohibits abusing freedoms
Preserves competition
Promoter of National Goals
–
US operates under a modified private enterprise economy

people are economically free, but government intervenes and
regulates