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Free Enterprise - Economics

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5 Characteristics - #1
Economic Freedom

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Terms in this set (10)

5 Characteristics - #1
Economic Freedom

Freedom to choose occupation and employer, Businesses can hire the best workers and produce the goods and services that will be most profitable

5 Characteristics - #2
Voluntary Exchange

Buyers and sellers are willingly engaging in the market transaction, both buyer and seller are better off after the transaction than before

5 Characteristics - #3
Private Property

People have the right to control possessions as we wish, as long as it doesn't interfere with the rights of others, gives people the incentive to work, save, and invest

5 Characteristics - #4
Profit Motive

The driving force that encourages people and businesses to improve their material well-being, if things go poorly they lose part or all of the investment, but if things go well they will earn rewards

5 Characteristics - #5
Competition

Capitalism thrives on competition, competition is the struggle that goes on between buyers and sellers to get the best products at the lowest prices

Benefits of the Free Enterprise System

individual freedom of consumers and producers, variety of goods, adapting to change, promoting products, creation of wealth

Role of Entrepreneur

most important part of the economy, they organize land, labor, and capital in order to seek profit, search for products can lead to chain events that improves new products, greater competition, more production, higher quality, and lower prices for consumers

Role of consumer

consumers have power in the economy because they determine which products are likely produced, if consumers like a product it will sell, and the producer will be rewarded for his or her efforts, consumers reject the product, the firm may go out of business, this is known as consumer sovereignty

Role of government

Protector, Provider and consumer, and regulator

Price stability

Stable prices help avoid inflation, stability makes budgeting easier and adds a degree of certainty about the future