Ch. 3 American Free Enterprise
Econ Unit 1
Vocab Chapter 3
Section 1: Benefits of a Free Enterprise
Essential Question: “What are the benefits of free enterprise?”
Learning Objectives
-Basic principles of U.S. free enterprise system
-Role of consumer in American economy
-Constitutional protections underlying free enterprise
-Why could/will govt. intervene in marketplace
Introduction
What are the benefits of free enterprise?
What is free enterprise?
U.S. considered to be “land of opportunity”
American tradition of Free Enterprise has been key supporter of this
Characteristics
Profit motive: Key incentive; all decisions are made w/ idea of increasing profit
Open opportunity: Anyone can participate in market
Legal Equity (Law): Everyone has same legal rights….now..
Private Property: Own decisions about own property
Freedom to buy/sell: Own decisions about entering agreements, and what/when/how to buy/sell
Role of the consumer
Freedom to make own economic choices
Interest groups
Economic Freedom and Constitution
Free enterprise is written into the constitution
5th Am.: Protects private property from being taken w/out due process
Spells out how govt. can tax people/businesses
Guarantees people/businesses right to make contracts
What are the problem with monopolies?
Why is it important for the government to provide protection for the consumer against monopolies?
The Role of government in the marketplace
Govt. has many roles
why it’s important to protect consumer using india as example
The negative effect of regulation
Major Federal Regulatory Agencies
Identify one agency set up to protect
Public Safety
FDA
FAA
CPSC
Fair competition
FTC
FDIC
Equality
EEOC
Video: PBS Trans Fat Govt Regulation
How do you think the FCC promotes the public interests?
Making sure broadcast communication conforms to standards so consumers can receive signals
Reflective Questions: Possible Test Questions
What is the theory for adam Smith's “Invisible Hand”
Give Adam smith a hand Activity
-Adam Smith was an economist
-Wrote the Wealth of Nations
-Came up with the theory of Laissez-
faire Economics: “To be left alone”
-Invisible hand theory means to have
limited government interference
What makes capitalism work?
6 Key Concepts:
Activity: Create a six fingered hand
-Trace out your hand and include another finger for a total of 6 fingers
-Outside fingers will include the 6 concepts
-Inside the fingers will include a brief definition of the concept using your notes and textbook
-Palm will a bio of Adam Smith using your textbook
Sec 2: Promoting Growth and Stability in the Economy
“How does U.S. Govt. promote growth/Stability?”
Learning objectives
How does the U.S. Govt. encourage growth/stability?
EX: Business Cycle
-WhY IS DONALD TRUMP ATTACKING OREOS?
What do you think?
-happens to our economy when business leave?
-IS IT THE GOVERNMENT JOB TO PREVENT BUSINESSES FROM LEAVING TO OTHER COUNTRIES?
Tracking Business Cycle
¢Govt. often intervenes to influence macroeconomic trends
¢One measurement of well-being is GDP: Gross Domestic Product
¢GDP= Measurement of total goods/services produced in year
�Business Cycle: pattern of expansion followed by contraction
¢Expansion GDP goes up
¢Contraction GDP goes down
Why do govt experts track the business cycle?
�So they can see where country is and make predictions
Promoting Economic strength
¢High Employment
�1. Govt. works to ensure jobs for everyone available
�2. 4-6% unemployment is healthy
¢Economic Growth
�1. To help spur growth, govt. can cut taxes or increase spending
¢Stability and Security
�1.One indicator can be price levels, another is banks/financial institutions
�
2. Government looks to prevent sudden shifts in prices to avoid consumer/producer suffering
�3. Govt. Regulations seek to keep banks/financial inst.’s stable; think bailout!!
¢Economic Citizenship
�1. Voters have a say in promoting economic strength by:
-Voting for public officials
-Voting on referendums
Why Markets exist?
-What is specialization and how does it work
-How does country benefit from trading
Technology and productivity
How does tech improvement help economy?
�Allows economy to operate more efficiently
*Helps increase productivity
*Light bulb made longer workdays
*Assembly line: mass production
Govt.s promote innovation/invention to maintain a technological advantage by:
�Funding raising universities for research
�Est. own research institutions: NASA
�Grant patents/copyrights, incentives to innovation
EX: Govt funding is CA Proposition 71 Stem Cell Research
American Work ethic
Growth cannot occur without individual effort
Section 3
Public Goods
“Why does a society provide public goods?”
Objectives
�-Examples of Public Goods
�-Understand market failures
�-How govt.s allocate resources to manage externalities
Why does a society provide public goods?
B/C it would be inefficient/impractical for a free market to provide them
Public goods
Shared good/service that would be inefficient/impractical to make consumers pay for or to exclude those who can’t
�Signs, lights, conditions, etc.
�Police, firefighters, etc.
public goods: Cost and benefits
What 2 Criteria must be present for a public good?
Public
Verse
Private
Public Goods: cost/benefits
Govt. pays for public goods through…….
�Taxes
Financial burden become much less than if private funded
Bill Gates $$$
public goods: Free rider problem
¢“Free Riders”
�People not willing to pay for certain good/service but would benefit from its offering as public good
¢Government stops providing public good
�Instead relying on “donations/contributions
¢Some people would “refuse” to pay and many services would be eliminated
Examples: National Roads, Trash Cleaners, U.S. Mail Delivery, Fireman, Police...
Don’t be this guy
Externalities: Economic side effects
Positive Externalities
Ex: How many people would be able to afford building a road if it was up to a free market to create public goods?
Negative Externalities
Government Goals
Understanding externalities helps us see the roles that govt. plays in U.S. economy
�Takes action to create positive externalities: Improving education
�Takes actions to limit negative externalities: Pollution, health issues.
Many economists feel the private sector produces more positive externalities than the govt.
�“With less” regulation companies wouldn’t eat as much money in costs meeting them, but would also be encouraged to find their own methods of better meeting broad requirements.
Econ Pop: House of Cards
-What impact do you have on public officials?
-Whats the true intention of Public offical and what do they do with the taxpayers money?
Section 4: Providing a safety net for the poor
¢“How does Government help the poor?”
Objectives
Intro: How The Gov’t helps the poor
¢How does the government help the poor?
�To help the poor govt. programs take money from some people and redistribute it to others
Program examples:
Poverty problem
Problem
�Free markets create uneven wealth distribution
�Poverty “threshold” is set based on the cost of goods a family NEEDS to buy
Government's Role
�Provides a safety net to groups through federal, state, and local govt. programs
Young, old, sick, poor, disabled
�Welfare Program
Collects funds from taxpayers to redistribute money to needy
Began during……?
�Great Depression
Welfare Reform
Critics of welfare
Also gave states more freedom to experiment w/anti-poverty programs
redistribution programs
Cash Transfer Programs
�(TANF) Temporary Assistance for Needy Families
�Social Security- Collects money from current workers and redistributes to retired/disabled people
�
Unemployment Insurance- Provides $$ to workers who lost jobs; need to proof making effort to work
�Workers compensation- Provides state funds to workers injured on the job
In Kind benefits
Govt. provides poor people w/ benefits
�Food stamps
�Subsidized housing
�Legal aid
Medical and educational benefits
Govt. provides health care to…..
�Elderly (Medicare)
�Disabled/poor (Medicaid)
�Uninsured children (SCHIP)
Govt. funds educational programs from pre-school to college
�Cheaper State colleges, reduced lunch, free-preschool
-What is something new you learned?
-What is the issue in this video clip?
-What does this say about the American Dream?
-Bias: video does not mention if the poor can move out of their economic standing with new job or pay raise...
LAst Week John Oliver
-What does Wealth Gap mean?
-Does social class related with wealth inequality (class warfare)?
-How does income inequality affect growth?
-Today issue with discrimination against poorer class…