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Chapter 13
Our Economic System
Lesson 13.1
The Free Enterprise System
The Free Enterprise System
Discover
The meaning of free enterprise
How the free enterprise system
works
continued
Chapter 13 Our Economic System
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The Free Enterprise System
Discover
How you fit into our economic
system
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The Free Enterprise System
Why It’s Important
The more you understand
about our economy, the better
your chances are of reaching
your career goals.
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Key Terms
economics
economic system
capitalism
free enterprise
regulate
command economy
Chapter 13 Our Economic System
continued
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The Free Enterprise System
Key Terms
socialist economy
consumers
producers
profit
supply
demand
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The Free Enterprise System
The Free Enterprise
System
What do you know about how the
prices for goods and services are
set?
Do you understand why prices rise
or fall?
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Economic Systems
Economics is the study of how
people produce, distribute, and
use goods and services.
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Economic Systems
Producing means creating good
or services.
Distributing means making goods
and services available to the
people who need them.
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Economic Systems
Using is what people do with
goods and services.
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Economic Systems
An economic system is a
country’s way of making choices
about how to use its resources to
produce and distribute goods and
services.
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The Free Enterprise
System
The economic system of the
United States is known as
capitalism.
Capitalism is also known as a
market economy or free enterprise
system.
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The Free Enterprise
System
Free enterprise means that
individuals or businesses may buy
and sell goods and services and
set prices with little government
control.
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The Free Enterprise
System
The government passes laws to
regulate, or set rules for, some
prices and wages.
Laws passed by the government
protect everyone who buys and
uses goods and services.
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The Free Enterprise System
Other Economic
Systems
In a command economy, the
government makes all of the key
economic decisions.
In a command economy, there is
little economic freedom and little
incentive to increase productivity.
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The Free Enterprise System
Other Economic
Systems
In a socialist economy, there is
private enterprise, but the
government controls key
industries and makes many
economic decisions.
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The Free Enterprise System
How the U.S. Economy
Works
People who buy and use goods
and services are consumers.
Every time consumers make a
purchase, they are “voting” with
their dollars.
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The Free Enterprise System
The Producer’s Goal:
Making a Profit
Producers and consumers have
very different goals.
Producers try to make goods or
provide services that consumers
will buy.
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The Free Enterprise System
The Producer’s Goal:
Making a Profit
All businesses must earn a profit
to keep operating.
A profit is the amount of money
left after the business pays its
expenses.
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Q and A
I don’t want to work for a business
whose main goal is making a profit.
Am I a misfit?
continued
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Q and A
Perhaps a job in a nonprofit
organization would be perfect for you.
Some nonprofit organizations exist to
serve charitable causes.
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Graphic Organizer
The Pattern of the Economy
People
Pay wages
and salaries
from profit
earned
Provide
goods and
services to
consumers
Provide labor
and skills
Spend money
for goods and
services
Business and Industry
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The Free Enterprise System
Factors That Affect
Prices
A consumer’s main goal is to get
the most for his or her money.
Consumers note changes in
prices and compare prices.
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Graphic Organizer
Factors That Cause Prices to Change
Supply and
Demand
Production
Costs
Competition
Supply is the amount
of goods and services
available for sale.
The more it costs to
make a good or provide
a service, the higher its
price.
When producers offer
similar goods or
services for sale, they
are in competition.
Demand is the amount
of goods and services
that consumers want to
buy.
Producers must sell
their goods or services
for more than it costs to
produce them.
When competition is
great, prices are lower.
When there is little
competition, prices are
higher.
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The Free Enterprise System
The Big Picture
The global economy links the
free enterprise system of the
United States to all the other
economic systems of the world.
You already have a role in the
global economy.
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The Free Enterprise System
Try This Activity
Evaluate
International Career
Opportunities
Knowing the similarities and differences
between our economy and the economies
of other countries will help you compare
employment opportunities in our free
enterprise system to those available in the
international job market.
continued
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The Free Enterprise System
Try This Activity
Evaluate
International Career
Opportunities
Create a Venn Diagram Prepare a
Venn diagram comparing and contrasting
the employment opportunities in the U.S.
free enterprise system to those in the
economic system of another country.
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Critical Thinking Review
Critical Thinking
Q Why does the government regulate prices
and wages?
A So that businesses can’t develop
monopolies, charge excessive prices to
consumers, pay less than the minimum
wage, and refuse to pay overtime.
continued
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Critical Thinking Review
Critical Thinking
Q What happens to prices when supply is
greater than demand? When demand is
greater than supply? Explain why this
happens.
continued
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Critical Thinking Review
Critical Thinking
A Prices go down when supply is greater
than demand because producers have an
excess amount of goods or services
available; prices go up when demand is
greater than supply because consumers
want more goods or services than are
available for sale.
continued
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Critical Thinking Review
Critical Thinking
Q Why would workers in a command economy
have less incentive to be productive than
workers in the free enterprise system?
continued
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The Free Enterprise System
Critical Thinking Review
Critical Thinking
A Workers in a command economy always
have a job and get paid regardless of their
productivity. Even if they are more productive,
they will not earn more money nor will they
necessarily be promoted. Workers in the free
enterprise system must be productive to keep
their jobs, earn more money, and advance in
their careers.
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End of Chapter 13
Our Economic System
Lesson 13.1
The Free Enterprise System