Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
American Free Enterprise Chapter 3 Section 1- Advantages of Free Enterprise System U.S. is a capitalist economic system This is all based on private ownership of the four factors of production Consumers are free to choose what they buy, producers are free to make what they like, and make as much profit as possible. How Free Enterprise Works Free Enterprise is just another name for capitalism You are free to start a business that provides usefulness to consumers Business is free to use scarce resources as they please Managers and workers operate these businesses in exchange for pay Consumers decide what they want to buy They look for goods and services to fulfill wants for the best possible value Limits of Free Enterprise Gov’t only limits free enterprise in small ways ex. Can’t take advantage of consumers with unsafe products Some emerging nations using free enterprise set more limits Ex. Make companies offer the same benefits Five Freedoms of Free Enterprise 1. Right to Private Property- ability to own your own land, thoughts, and material items. 2. Open Opportunity- Anyone can take part in the market by free choice. Ex. No one can tell you that you can’t open a deli. This creates a wide range of goods and services to choose from. Forces all business to be productive and efficient. 3. Legal Equality- Everyone in the economy is protected by same economic rights under law. Everyone has the right to succeed or fail. 4. Free Contract- People choose which agreements to enter into in the market place ex. Buying a house and agreeing to pay a mortgage 5. Profit Motiveforce that encourages people to improve their wealth through economic activity Ex. You decide to open a Sheetz on Route 30 to become wealthier Competition in Free Enterprise Drives prices down to offset people true ambitions to make as much money as they can It creates reasonable prices for the consumer, but still leads to profit Ex. Gas Station Wars Section 2- How Does Free Enterprise Allocate Resources? Consumers are looking to get the best value of a good or service for their buck Producers as looking to make as much profit as possible Profit- Money left over after paying for production costs Revenue-Bills=Profit Revenue- Money made from selling a good or service By trying to earn profit producers help to allocate resources Allocate- to set aside or locate scarce resources We allocate our money or set it aside to fulfill wants that we feel are most important. Gas, Bills, Food Ex. Seeking Profit Convenience Stores They charge a reasonable yet higher price on their products By convenience store A making profit, it will motivate Timmy to open his own store People allocate resources to places they know they will make money Resources are now being allocated (set aside) for convenience stores instead of another area This creates competition and variety in the economy Consumers Also Allocate Resources When you buy a product you are choosing it over another This helps to influence what producers will make and provide Ex. Popularity of Energy Drinks Ten years ago they were not in demand Now even the largest soft drink companies are making them due to popularity Coke and Pepsi allocated their resources and put more money into making energy drinks. Questions What other trends have taken place in society where a new product causes companies to reallocate their resources into a new product? How does a free enterprise system keep their from being to many conveniences stores in a market? Role of Gov’t In Our Economy Our Gov’t plays a limited role in regulating our economy We call this modified free enterprise Refer to Circular Flow Model of Gov’t Interaction in economy Federal, State, and Local Gov’t takes tax dollars from individuals, businesses, and provides services ex. Military, Social Security, Prints Money, Maintains Roads Product and Factor Markets provide resources for gov’t to use to operate Ex. Gov’t workers, computers, land Federal gov’t employs less workers, but spends way more $ to operate Section 3- Gov’t and Free Enterprise Economic Decisions are made by buyers and sellers, this is called the free enterprise sector of the economy Public and Free Enterprise Sector Public Sector- delivery and services by and for the gov’t ex. Military, Social Security Free Enterprise Sectormakes a good or a service if all costs and benefits go to the buyer and seller ex. Ford Motor Co. All of the goods and services provided by the gov’t in public sector are funded by taxes Ex. Street lighting system These public goods can’t be taken away even though you don’t pay directly for them. Example You do not pay a usage fee for street lights every time they come on. Yet, everyone is able to benefit from them. Your tax dollars pay for the lights Public Sector Example Military Everyone benefits from protection Your protection does not take away from others protection Taxes They are used to ensure that one person does not pay for military services or other public goods. They are used to make sure all people contribute towards public goods in some way It would be impossible to charge individually for all of these public services Gov’t collects taxes to prevent free riders from taking advantage of public goods and services without paying Ex. Fireworks Display, It would be impossible to charge everyone who could see them to pay for them. So city takes the money out of tax dollars Public and Private Sectors Share Responsibilities Private Sector- Businesses looking to make profit ex. Pat’s Market Public Sector- gov’t goods and services Ex. Paying a toll on the turnpike Highway is built with some federal and state money The rest of the highway we pay for in tolls Most infrastructure, mass transit, highways, water and sewer, is funded by both the private sector- citizens and the public sector- gov’t Managing Externalities Externality- side effect that affects someone other than buyer or seller Negative Externalityimposes costs on people who were not involved Examples of negative externalities If you play loud music at night your neighbor may not be able to sleep. If you produce chemicals and cause pollution as a side effect, then local fishermen will not be able to catch fish. This loss of income will be the negative externality. If you drive a car, it creates air pollution and contributes to congestion. These are both external costs imposed on other people who live in the city. If you build a new road, the external cost is the loss of a beautiful landscape which people can no longer enjoy. Social cost With a negative externality the Social Cost > Private Cost Positive Externality This creates benefits for people who were not involved with economic activity Gov’t works to increase these positive externalities Examples of Positive Externality When you consume education you get a private benefit. But there are also benefits to the rest of society. E.g you are able to educate other people and therefore they benefit as a result of your education. A farmer who grows apple trees provides a benefit to a beekeeper. The beekeeper gets a good source of nectar to help make more honey. If you walk to work, it will reduce congestion and pollution, benefiting everyone else in the city. Social Benefit With positive externalities the benefit to society is greater than your personal benefit. Therefore with a positive externality the Social Benefit > Private Benefit Remember Social Benefit = private benefit + external benefit. Gov’t Subsidies Gov’t provides money to help cover the cost of an economic activity that may help lots of people. Ex. Gov’t provides subsidies to open a free health clinic. It would benefit a whole community What would be another example of a community benefit through subsidy money? Public Transfer Payments Gov’t also helps the sick, elderly, and poor in tough times Gov’t provides safety net programs to protect people from economic hardship Ex. Welfare, Social Security, Grants Poverty in America The most recent government statistics on poverty collected show that in 2014, 46.7 million people (15 percent) were in poverty, including 15.5 million (21 percent) children under the age of 18. 48.1 million Americans lived in food-insecure households, including more than 15 million children. According to the Feeding America Hunger in America 2014 study, Based on annual income, 72 percent of all Feeding America client households live at or below 100 percent of the federal poverty line. The median annual household income of Feeding America clients is $9,175. More than half of client households (54 percent) report at least one employed person at some point in the past year Some families are poor for along time, but most move in and out of poverty over the years Transfer Payments Gov’t works to create jobs and helps through transfer payments- Transfer of income from one person or group to another even though the payer receives nothing in return Private and Public Transfer Payments Private Transfer Payments- this could be help from a family, friend, or charity Public Transfer Payment- comes from the gov’t using tax dollars that you don’t have to pay back. Ex. Welfare, Social Security, Unemployment