Free Enterprise Capitalism

Free Enterprise

What is an economy?

• A place (market) where consumers (people that buy stuff…like you) are able to get together with people that sell stuff and exchange goods and services

Characteristics of a Market Economy

1. Right to choose jobs and professions

2. Own Private Property

3. Limited gov’t in economy

4. Competition between businesses

drives the economy

5. Freedom to buy what we want.

Four Factors of Production

• Land: land and everything that comes from it; raw materials, natural resources

• Labor: people that work• Capital: All resources used to produce a

product like tools, machinery, factories, violins, ballet shoes, paint brushes and costumes.

• Entrepreneurship: a person or co. combines use of land, labor, and capital to come up with products. “The Idea Person”

Four main Economic Questions1. What to produce? This is determined by available

resources, what people want to buy and by the available technology.

2. How much to produce it? This is influenced by the available technology and natural resources.

3. How to produce it? Depending on the type of economic system, this is determined by the government, the marketplace, or by tradition

4. Who gets the goods? Determines who receives the goods and services and how much they receive.

• GDP: Gross Domestic Income: Everything PRODUCED in a country in a giving year.

• Per capita Income: GDP divided by the number of people in a country (Per Capita=per person)

Set by tradition

and Custom

Set by tradition

and Custom

Set by tradition

and Custom

LowLowLow

Low

High

Determined By the Ruler or Government

Determined By the Ruler or Government

Determined By the Ruler or Government

Low to medium

Average to HighAverage to High

High

Low

Determined By Interaction of Producers and Consumers

Producers decide What to Produce; Less Efficient Producers go out of Business

Consumers Purchase what they want and can afford to Pay for

High

High

High

Low

High

MarketX