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 muchVoluntary 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 moneyProfit – extent to which

persons or organizations are better off than they were before a transaction

The Role of the Entrepreneur

Manage land, labor, and capitalMany 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 produceConsumer sovereignty

Wants change as they are exposed to more products

The Role of Government

4 Roles 1. Protector

– Laws protect consumers– Prohibits abusing freedoms

2. Provider and Consumer– Provide goods and services

3. Regulator– Preserves competition

Promoter of National Goals– US operates under a modified private enterprise economy

people are economically free, but government intervenes and regulates