Download Ch 3:1,3:2 PP Notes

Chapter 3
Benefits of a Free
Enterprise
Section 1 and 2
FIVE Basic Principles of Free Enterprise
 Profit
Motive
 Open Opportunity
 Legal Equality
 Private Property
 Freedom to Buy and Sell
1. Profit Motive
► Profit
motive is the incentive that drives
individuals and business owners to improve
their material well-being
 In a free enterprise system, business owners and
managers make the choices themselves based on
what will increase their profits
 It forces the ‘boss’ to exercise financial discipline
because they are ultimately responsible for the
business in succeeding or not
►Example:
Moving a MLB team
1. Profit Motive
► MLB
team Montreal Expos existed from
1969 to 2004. They were losing money and
fans.
► They moved their club to Washington D.C.
and became the Washington Nationals in
2005
2. Open Opportunity
►Open
opportunity is the principle
that everyone can compete in the
marketplace
 In other words, anyone who wants to
start a business whether they are
wealthy or not have the same chance
►Example:
Opening 2 different fast food
places in the same town
2. Open Opportunity
► In
Mankato, Burger King and McDonalds
compete right by each other in Mankato on
Madison Ave
3. Legal Equality
►Legal
equality is the principle that
everyone has the same legal rights
 This in returns benefits the economy by
maximizing a countries use of its human
resources
 When a society doesn’t allow equal access
to women and minorities, it loses
productive potential for a business
3. Legal Equality
Example: NCAA not allowing equal
opportunity before Title IX in 1972.
 The benefit of women in academics (math
and science) and sports helped America in its
potential in granting equal opportunity for
women
 As a result, more women are in school (more
than men now) and women now have
professional leagues including softball,
basketball and soccer

EXAMPLES of Women’s
Opportunities w/ Legal Equality
4. Private Property

Private property is the principle that
people have the right to control their
possessions and use them as they wish

The free enterprise system allows people to
make their own decisions about their own
property.
 Example:
Making your house pretty or not
allowing people on your land
4. Private Property
5. Freedom to Buy and Sell
► Free
contract is the principle that people may
decide what agreements they want to enter
into
 Example: Miley Cyrus decides to do her
television show or Jackie Robinson signing to
play with the Dodgers in 1947
5. Freedom to Buy and Sell
► Voluntary
exchange is the principle that people
may decide what, when, and how they want to
buy and sell
 In a free enterprise system, this encourages
competition.
►Example:
Selling your car or a garage sale
The Role of the Consumer
► The
great thing about being an American
consumer is you have the rights and
freedoms to make your own economic
choices.
► It’s the consumer who tells the producers
if they like their product and are willing to
spend their money on it.
► Interest
groups—
a private
organization which
tries to persuade
public officials to
act in certain ways
that benefit its
members
 A very powerful
interest group in
America today is
the National Rifle
association
 Eminent
Domain is the
right of the
government to take
your private property
for public use
The Role of the Government

The most important thing in the U.S.A. is its
role is to protect the Constitution

Now within our economy, the governments
responsibilities is to protect our:



Private Property
Contracts
Other business activities
With the Government’s Role we
have……….
With the Government’s Role we
have……….
► Public
Interest
which is the concerns
of society as a whole
► Public Disclosure
Laws which are laws
requiring companies
to provide information
about their products
or services
Chapter 3
Promoting Growth and Stability
Section 2
GDP and Business Cycle


Gross Domestic Product is the total value of all
final goods and services produced in a country in
a given year
Business Cycle is a period of macroeconomic
expansion, or growth, followed by one of
contraction, or decline
Promoting Economic Strength
► Because
a market is vulnerable to the
business cycle, our government tries to
create public policies that promotes
economic strength.
 The government focuses on three areas:
►Employment
►Economic
Growth
►Economic Stability and Security
Employment


Our government’s economic policy is to
ensure jobs are there for everyone who is
able to work
Unemployment between 4-6 percent is
healthy. If its higher, the government may get
involve by creating jobs or giving businesses
incentives to hire
Economic Growth



The government may help economic growth in
an economy by cutting taxes or increase
spending.
Its important for a society to keep its economy
growing because as the population increases,
demand will be there for a society.
Tax cuts and spending helps out economic
growth.
Stability and Security


Consumers, producers, and investors need to
feel confident that an economy will be strong
and not jump up and down (fluctuate in
unpredictable terms).
Why?? If there is no confidence in the
economy, the stock market suffers and people
will not invest. If no investing goes on, future
jobs and growth in business suffers and
ultimately, jobs may be cut or reduced.
Technology and Productivity
Obsolescence
is a situation in
which older
products and
processes
become out-ofdate
Patent

Patents are a government license that gives
the inventor of a new product the exclusive
right to produce and sell it

Patents run for 20 years in the U.S.A.

Examples: New drugs for medicine on the market
Copyright

Copyright is a government license that
grants an author exclusive rights to publish
and sell creative works

Its an incentive for innovation because it protects
people’s right to profit from their creative ideas in
a free market.
Work Ethic

Work Ethic is a
commitment to the
value of work

We all show it in
our quality of work
in the time and
energy we put into
a job
The End