1 / 0

The Free Enterprise System

The Free Enterprise System. Chapter 3. Capitalism. Basic Principles Free enterprise system- encourages individuals to start and operate their own businesses without government involvement. Today, government does intervene on a limited basis. Basic Principles. Freedom of ownership:

craig
Download Presentation

The Free Enterprise System

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. The Free Enterprise System

    Chapter 3
  2. Capitalism Basic Principles Free enterprise system- encourages individuals to start and operate their own businesses without government involvement. Today, government does intervene on a limited basis.
  3. Basic Principles Freedom of ownership: Individuals are free to own personal property such as: Cars, computers, and homes. You can do with your property as you will as long as it is legal. Intellectual property rights fall under this.
  4. Example) You come up with a product or idea so in order to protect it, you have to apply for a patent. Anyone that would want to use your idea or product, would have to pay you through a licensing agreement. Professional athletes use licensing agreements to protect their names and images. Companies have to pay tem in order to use their name and image.
  5. Competition Competition- The struggle between companies for customers. Essential part of free enterprise system It forces business to produce better quality goods and services at a reasonable price. Competition is comprised of two things: Price and nonprice competition
  6. Price Competition Price Competition- Focuses on the sale price of a product. The assumption is that, all other things being equal, consumers will by the products that are the lowest price. Examples) Ross and TL Maxx
  7. Nonprice Competition Nonprice Competition- Business choose to compete on the basis of factors that are not related to price. Factors are: Quality of the product Service and financing Business location Reputation Nordstrom is an example.
  8. Monopolies Monopoly – Exclusive control over a product or the means of producing it. Not permitted in the free enterprise system because it does not allow for competition. Case) Microsoft was declared a monopoly by a federal judge. So, though not permitted, the US government has allowed a few to exist. UTILITY COMPANIES AT&T WAS UNTIL 1982.
  9. Risk Risk- The potential for loss or failure in relation to the potential for improved earnings. Potential for earnings increases, so does risk. 1 out of 3 businesses fail a year.
  10. Profit Profit- The money earned from conduction business after all costs and expenses have been paid. Profit for businesses is about 1-5% while the rest goes to cost, expenses and taxes.
  11. Economics Cost of Unprofitable Firms Effects: People get laid off Lose money Government loses money in taxes from the business Rise in unemployment Everyone loses
  12. Economic Benefits of Successful Firms Success: Hire more people Employees paid more Higher morale Investors make money Government makes money on taxation Money goes back into the economy
More Related