Capitalism & Economic Freedom


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Capitalism & Economic Freedom

  1. 1. Capitalism & Economic Freedom <ul><li>Under capitalism, the basic economic decisions are made through the free interaction of individuals looking out for their own best interests </li></ul>
  2. 2. 5 Characteristics of a free enterprise economy
  3. 3. 1) Economic Freedom <ul><li>Choice of where to work and for whom to work </li></ul><ul><li>Choice of starting a business or quitting a job </li></ul><ul><li>Choice to buy, sell, make whatever you want (within the limits of the law) </li></ul>
  4. 4. 2) Voluntary Exchange <ul><li>Buyers and sellers freely and willingly engage in market transactions </li></ul><ul><li>Transactions are made in such a way that both buyer and seller are (ideally) better off after the exchange (both the buyer and the seller profit from the exchange… the seller wants to sell their good/service, the buyer wants to buy the good/service) </li></ul>
  5. 5. 3) Private Property Rights <ul><li>People can own and control their possessions as they wish (within the law) </li></ul><ul><li>This applies to tangible items (cars & houses) as well as intangibles (skills & talents) </li></ul><ul><li>Private property (and the possibility of getting more) gives people the incentive to work, save, and invest. </li></ul><ul><li>They know that if they succeed, they will be able to keep any rewards they earn </li></ul>
  6. 6. 4) Profit Motive <ul><li>The possibility of financial gain </li></ul><ul><li>The driving force that encourages people and organizations to improve their material well-being </li></ul><ul><li>This force is responsible for the growth of the capitalist free enterprise system. </li></ul>
  7. 7. 5) Competition <ul><li>Capitalism thrives on competition </li></ul><ul><li>Competition is the force that drives producers to offer better quality goods/services at lower prices </li></ul>
  8. 8. The Role of the Entrepreneur <ul><li>Entrepreneur organizes and manages land, labor, and capital in order to seek profit </li></ul><ul><li>When an entrepreneur succeeds, everybody wins: entrepreneurs get profits, workers get better paying jobs, consumers get better products, the government gets high levels of economic activity and tax revenues. </li></ul><ul><li>Successful businesses also spark other business to form and compete, thus driving the entire economy </li></ul>
  9. 9. Role of the Consumer <ul><li>Consumer dollars = “votes” for a good/service </li></ul><ul><li>Consumers have the final say as to what is or isn’t produced </li></ul><ul><li>Consumer sovereignty : means the consumer is the one in control of the economy “The customer is always right” </li></ul>
  10. 10. The Role of Government <ul><li>1) To protect the consumer from dangerous products and unscrupulous businesspeople (USDA, FDA, OSHA, etc.) </li></ul><ul><li>2) To provide the consumer with goods and services and to consume goods and services from producers. </li></ul><ul><li>Provider: streets, parks, education, buses, garbage pickup, etc. </li></ul><ul><li>Consumer: the government is now the second largest consuming sector of society, second only to the actual consumer sector </li></ul>
  11. 11. Promoter of National Goals <ul><li>The government modifies the economic systems to promote its goals. Social security, child labor laws, minimum wage laws, etc. </li></ul>
  12. 12. We live in a modified economic system <ul><li>People carry on their economic activity freely, but are subject to some government intervention and regulation </li></ul><ul><li>This is not a laissez-faire economy </li></ul>
  13. 13. Exit Questions <ul><li>1) In your own words, explain what “Voluntary Exchange” means </li></ul><ul><li>2) What is the role of the entrepreneur in a free market society? </li></ul><ul><li>3) Give 3 examples of goods or services provided to the public by the government. </li></ul>