ECON ch.3

In our mixed free-enterprise economy, the government

helps oversee production, protects consumer and business rights, and acts as consumer

Businesses have most of the same rights as ______________________. They can sue and be sued, they can enter into __________________, and they can own __________________. However, corporations cannot ______________ like you can.

individuals; contracts; property; vote

economic goals evolve over time as

new issues and concerns arise (for example, climate change). Resolving these issues could mean changing or adjusting our economic goals.

list of goals

1. Economic Freedom 2. Economic Efficiency 3. Economic Equity 4. Economic Security 5. Full Employment 6. Price Stability 7. Economic Growth.

The ____________ economy allows individuals to purchase what they want, work where they want, and change jobs when they want. Businesses can make whatever products they wish and sell them at any price. Buyers and sellers can exchange money for products as they wish, but no one is forced to buy or sell. People and corporations own property and can buy it, sell it, use it to borrow money, or to make a profit. People have the right to make a profit.

American

Explain how the entrepreneur, consumer, and government interact in our economy.

Answer should include: The entrepreneur establishes businesses but is held accountable to government regulations and consumer demand. The consumer is responsible for determining the products in the marketplace by her purchase decisions. The government must provide services the public sector cannot, as well as establish legal protections for consumers and regulations for businesses.

Why is the customer always right?

Because the consumer's purchasing power determines the success or failure of a product or even a business.

Why do all levels of government consume so much?

Because the tasks of protecting, providing, and regulating are expensive, and require resources and labor to accomplish.

Why is government regulation important?

Consumers don't always know when they are at risk from business practices.

Explain how consumer sovereignty helps drive progress.

Consumers, who always want the benefits of the latest innovations, guide businesses to produce better goods and services by purchasing certain products.

Why do entrepreneurs try to start businesses or develop new products? Are they more likely to succeed or fail?

Entrepreneurs start businesses and develop products because they seek profits; most entrepreneurs are likely to fail.

The most recent example of uneven economic growth in the United States was the __________________ __________________, which lasted 18 months between 2007 and 2009. During this period, the nation's GDP shrank about _________ and ________ percent.

Great Recession; 4.5; 5

____________ can own property and use the property as they wish to make a profit and build wealth. They can buy and sell any products they wish.

Individuals

How does the government act as protector of the economy?

It makes laws protecting individual freedoms, ensuring things like product safety, and property rights.

__________________ __________________ drives producers to improve their __________________ well-being. Because of this, the lure of __________________ guarantees a constant supply of goods and services from all kinds of producers.

Profit motive; material; profit

What services do state and local governments provide?

Roads, education, welfare, parks, libraries, sanitation, and transportation

To protect against adverse economic events, the government set up a retirement and disability benefits program called ____________________ ____________________, as well as a health insurance program called ________________________.

Social Security; Medicare

(?) was established in 1972 to protect consumers from poor manufacturing processes and to make sure that products met quality and safety standards.

The Consumer Product Safety Commission

Disadvantages

a gap between the rich and poor, and a tendency for suppliers to combine, thereby reducing competition

Inflation is

a rise in prices and particularly affects those on a fixed income

Our attempts to _______________________ compromises in our goals have altered, or ____________________, our economic system.

accommodate; modified

Entrepreneurs create new

businesses that provide new jobs; they often develop innovative products and services that may spread through the economy and open up opportunities for even more new businesses.

Economic freedom is the ability of businesses and consumers to make their own _______________________.

choices

Entrepreneurs are vital to the success of a

free enterprise economy because they start businesses

In the __________________-side of the market, suppliers tend to __________________ with other suppliers to avoid _________________________ or to become more efficient. This means that participant on the __________________-side of the market have fewer suppliers to choose from.

supply; combine; competition; demand

Though government involvement means

the United States economy is not a purely capitalistic one, the public demands the benefits that government involvement provides

Because in market economies production is based on people's __________________, not just their needs, there is a wide __________________ of options available for many kinds of goods and services.

wants; variety

Economists think of __________________ as the accumulation products that are _________________, scarce, have utility, and are _________________ from one person to another.

wealth; tangible; transferable

The individual economic freedom in free enterprise can also mean

widespread income gaps as not everyone is guaranteed economic success.

Describe the characteristics of our economic system? Of the benefits and disadvantages of our free- enterprise capitalism, which do you think are stronger? Why?

A capitalistic free enterprise system has five important characteristics: economic freedom, voluntary exchange, private property rights, the profit motive, and competition. Economic freedom means that you have the freedom to choose your career, your employer, and where you work. Voluntary exchange means that buyers and sellers freely and willingly engage in market transactions, and they do so because they believe that they will benefit from the exchange. Private property rights allow people to own and control their possessions. Private property gives people the incentive to work, save, and invest as they wish. People are free to risk their property as they wish, and profit motive will encourage people to innovate and leads to economic growth. The struggle among sellers to attract buyers, or competition, helps to ensure that unpopular products will no longer be made; producers will always be working to bring newer, better, and less expensive products to the market. This ensures that scarce resources will be used as efficiently as possible.

In what ways might our economic goals conflict? Are economic goals constant, or do they change over time? How are conflicts among goals resolved?

The goal of economic freedom can clash with economic equity, because laws have to be passed, like the minimum wage, to ensure economic equity, but at the same time these laws interfere with the freedom of a business to make its own decisions. Economic goals shift as our society evolves and our priorities shift. Conflicts among goals are often resolved through politics.

The government maintains the

infrastructure that businesses need to create and transport goods; it defends the nation, and thus businesses, against foreign aggression; it subsidizes vital goods, such as agricultural products; it writes and enforces some regulations on businesses to protect consumers against unfair practices or unsafe products.

Because citizens have the opportunity to amass their own private wealth, they can then use that wealth to take advantage of

investment opportunities not available to people in other nations that do not offer private property benefits.

Why is a mixed (or modified) free enterprise economy necessary? Why not do away with government regulation?

The private sector cannot provide certain services, such as defense, on its own.

(?) decide if government is needed to subsidize vital products, to ensure the safety of products or fairness in business practices (regulation), and to provide the infrastructure in which businesses can operate.

The public and legislators

Price can drive __________________ in market economies, where consumers' demands lead to producers' innovations that make the most of scarce or expensive __________________.

change; resources

Consumers tell businesses WHAT to produce in our

economy

Because resources are scarce, we need to have economic ______________________.

efficiency

Without jobs, people cannot support themselves or their families; because of this, the goal of full _________________________ is important to many people.

employment

The widening gap between __________________ and __________________ may require government interventions some criticize as too _______________________ in nature.

rich; poor; socialist

Capitalism helps ensure __________________ resources are used efficiently by promoting __________________ among producers.

scarce; competition

Price _____________________ helps protect against a rise in the general level of prices, called __________________. This rise in prices can hurt people on a fixed _____________________ and businesses that suffer when __________________ rates rise.

stability; inflation; income; interest

In the United States, many conflicting economic goals are worked out politically, and people ______________ for candidates who support their goals.

vote

Conflicts over economic issues are often resolved by

voters voting for the candidate who shares their views. Also, the U.S. economic system is flexible, and it accommodates compromises that satisfy the majority of Americans.

What services and goods does the U.S. government supply its citizens?

It supplies defense and justice, subsidizes agriculture, and funds state and local governments.

Who benefits from the activities of entrepreneurs, and how?

When entrepreneurs are successful, everyone benefits. Entrepreneurs gain profits and a growing business, workers gain more and better paying jobs, consumers benefit from new and better products, and the government benefits from the increased economic activity that leads to larger tax receipts.

Economic freedom grants the ability to __________________ the things you want and __________________ where and for whom you want. Businesses can __________________ the workers they want and are free to __________________ success or failure.

buy; work; hire; risk

Individual freedom exists economically and politically in places where __________________ and __________________ allow people to choose their government as well as their purchases.

capitalism; democracy

Because we value economic equity, it is illegal to __________________ in employment, there is a __________________ wage, and there are __________________ that protect consumers from false advertising and defective products.

discriminate; minimum; laws

Government intervention is needed to

ensure fair competition and to protect the public safety; for example, in the purity of pharmaceuticals and vehicle safety.

An __________ will be successful in his or her new business if the business provides a good or service that is new and wanted by consumers or if the good or service is of better quality at a better price than that of competitors.

entrepreneur

Consumers play the crucial role of "judge" in a

free enterprise system because they determine which products and services they want by purchasing the products and services that best meet their needs. In this way, consumers determine which products are sold and which businesses succeed.

An economy based on free enterprise has both ______________ ______________________ and _________________________.

free markets; capitalism

Economic __________________ is essential to meet people's __________________ as the population _______________________.

growth; needs; rises (increases, expands)

Benefits

individual freedom; variety of goods and services; an economy adaptive to change, promotes progress, and creates wealth

The Great Recession demonstrated the

large swings in growth and contraction that characterize a free market economy.

In a capitalistic system, people can do whatever they choose to their property due to __________________ __________________ __________________. Additionally, they have the opportunity to __________________ and __________________ based on the value of their property.

private property rights; borrow; invest

Companies competing for business produce better __________________, usually for __________________ money. This promotes economic __________________.

products; less; progress

Conflicting goals involve considering _____________-________ and _________________ costs.

trade-off; opportunity

In __________________ __________________, __________________ acquire items they believe are worth __________________ than the money charged, while __________________ believe the item sold is worth __________________ than the cash paid. Both parties believe they __________________ from the transaction.

voluntary exchange; buyers; more; sellers; less; benefit