2.5 Benefits of Free Enterprise

Characteristics of Free Enterprise System: Competition

-businesses compete with one another for consumer's money -prevents prices from raising too high and demonstrates the interaction that takes place between producers and consumers -open opportunity: anyone can compete in the marketplace

Economic freedom and the constitution

-economic freedoms that americans enjoy provides a source of patriotism PROPERTY RIGHTS -no person shall be deprived of life, liberty or property without due process of law , nor shall private property be taken for public use without just compensation -eminent domain: the right of the government to take private property for public use. Even then, they must pay the person the fair value of the property that has been taken TAXATION: both individuals and corporations must pay federal income tax CONTRACTS: People and businesses have the right to make contracts -no legislature can pass a law changing the terms of someone's business agreement

Characteristics of Free Enterprise System: Economic Freedom

-free contract: allows people to decide what agreements they want to enter into -voluntary exchange: allows consumers and producers to decide what, when , and how they buy and cell which encourages competition which benefits consumers by producing a larger variety of goods and responsive prices

The Limited Role of the Government in the Marketplace

-gov should take actions to promote the public interest: the concerns of society as a whole INFORMATION AND FREE ENTERPRISE: -public disclosure laws: require companies to give consumes important information about the product or services they offer -make information honest and clear PROTECTING PUBLIC HEALTH, SAFETY, AND WELL-BEING -manufacturing standards, drugs must be safe and effective, conditions in which food is produced must be sanitary, labels must include expiration dates and safe operation of equipment -EPA sets rules to protect the environment -zoning laws: certain areas can be used for residential or business purposes only NEGATIVE EFFECTS OF REGULATION -rules can be costly to implement which can cut into profits and slow growth -stifle competition and create high prices increase gov spending because gov has to hire workers to do the tasks involves in carrying out the new rules

Characteristics of Free Enterprise System: Opportunity

-open land, large reserves of natural resources, talented labor supply -free enterprise: social and political commitment to giving people the freedom and flexibility to try out their business ideas and compete in the marketplace

Characteristics of Free Enterprise System: Private Property Rights

-private property rights: give people the right to control their possessions and use them as they wish -they can make their own decisions about property they have purchased, so they want to use it wisely and conserve it

Characteristics of Free Enterprise System: Profit Motive

-profit motive: drives individuals and businesses to make decisions and improve their material well-being -business owners and managers make decisions based on what will increase their profit. This means more efficient companies will make money

Characteristics of Free Enterprise System: Incentives

A reward or cost resulting from a certain behavior that act as motivations for consumers and producers

Milton Friedman quote

Economic freedom plays a dual role in the promotion of a free society. On the one hand, freedom in economic arrangements is... an end in itself. In the second place, economic freedom is also an indispensable means toward the achievement of political freedom

What is the role of the consumer? What is the role of the entrepreneur?

To decide which products get produced. -they can make their interests known by joining an interest group: a private organization that tries to persuade public officials to act in ways that benefit its members They decide how to combine goods to create new goods and services -by starting new businesses they fuel economic growth -driven by the profit motive

Characteristics of Free Enterprise System: Legal Equality

legal equality: everyone has the same legal rights maximizes the country's use of human capital