Thursday, January 24th
OBJECTIVE

You will be able to
explain the key
principles of the free
enterprise (capitalist)
economic system.
DO-FIRST



Every nation’s economy is
made up of producers
and consumers. Producers
MAKE the goods.
Consumer BUY the goods.
Give one example of a
producer. Give one
example of a consumer.
Are you a producer or a
consumer? Explain in 2
sentences.
M&M Simulation!



Imagine my classroom is the
American economy.
I am the producer and you
are the consumers!
Enjoy your consumer goods!
Ms. Mathai’s M&M Shortage…


Why isn’t there an
unlimited supply?
What happens when there
aren’t enough resources for
everyone in an economy?
SCARCITY!


No one has access to unlimited resources—our economic
system must figure out how to best use our scarce
amount of resources.
DEFINITION: write this term below your objective for
today—
Scarcity: a limited supply or
amount of a resource.
CAPITALISM
A.K.A. the free enterprise system
Three Basic Questions

1.
2.
3.

Every economic system must answer three basic
questions:
What goods should be produced?
How should those goods be produced?
Who gets the goods that are produced?
How does our American society answer this
question? The Free Enterprise System (Capitalism)
Economic Systems – 4 Types
Socialist - Syria
Communist – China
Free Enterprise – United States
Traditional – Java, Indonesia
The Free Enterprise Economy

In a free enterprise (capitalist)
economy, individual producers
get to decide WHAT to make
and HOW to make it.
The Free Enterprise Economy


In a free enterprise (capitalist)
economy, individual producers
get to decide WHAT to make
and HOW to make it.
Consumers who have the money
and resources are the ones who
get to buy the goods that are
produced.
The Free Enterprise Economy



In a free enterprise (capitalist)
economy, individual producers
get to decide WHAT to make
and HOW to make it.
Consumers who have the money
and resources are the ones who
get to buy the goods that are
produced.
In a free enterprise economy,
we all compete against each
other to make more money and
have more resources.
STOP and THINK


In a free enterprise or capitalist economy, what are
the ADVANTAGES?
What are the DISADVANTAGES?
What did this look like in history?

In America, the Industrial Revolution
led to the start of the free
enterprise (capitalist) economic
system.
What did this look like in history?


In America, the Industrial Revolution
led to the start of the free
enterprise (capitalist) economic
system.
Wealthy Americans who had the
money and land (the capital) to
build a factory became the
business owners.
What did this look like in history?



In America, the Industrial Revolution
led to the start of the free
enterprise (capitalist) economic
system.
Wealthy Americans who had the
money and land (the capital) to
build a factory became the
business owners.
Americans who wanted to move to
the cities and find work would take
a job in these factories.
The Profit Motive

In a free enterprise
(capitalist) system, all
of us are competing
against each other to
make more money and
have more resources.
This is called the “profit
motive”—we are
motivated by the idea
of making money!
Disadvantages of Capitalism

During the Industrial Revolution, this
led to some disadvantages:
 Factory
owners would pay their
workers the lowest wage possible, use
child labor, and abuse their workers.
The more products the workers made,
the more money the factory owner
would make.
Disadvantages of Capitalism

During the Industrial Revolution, this
led to some disadvantages:
 Factory
owners would pay their
workers the lowest wage possible, use
child labor, and abuse their workers.
The more products the workers made,
the more money the factory owner
would make.
 Factory owners would not spend
money on keeping their factories safe
for their workers.
Disadvantages of Capitalism

During the Industrial Revolution, this
led to some disadvantages:
 Factory
owners would pay their
workers the lowest wage possible, use
child labor, and abuse their workers.
The more products the workers made,
the more money the factory owner
would make.
 Factory owners would not spend
money on keeping their factories safe
for their workers.
 Factory owners did not care that their
factories polluted the environment.
Disadvantages of
Capitalism

The Free Enterprise system also
has social inequality.
Disadvantages of
Capitalism


The Free Enterprise system also
has social inequality.
Factory owners became
wealthier while many of their
workers remained in poverty.
Disadvantages of
Capitalism



The Free Enterprise system also
has social inequality.
Factory owners became
wealthier while many of their
workers remained in poverty.
American society became
divided into upper class (the
wealthy) and lower class (the
poor)
Advantages of Capitalism:
Economic BOOM!

With the free enterprise system, America created the largest,
wealthiest, and most innovative economy of all time!
Advantages of Capitalism:
Economic BOOM!

With the free enterprise system, America created the largest,
wealthiest, and most innovative economy of all time!

Producers used the resources they had to create as many goods as
possible. They decided what to make, how to make it, and at what
price to sell it.
Advantages of Capitalism:
Economic BOOM!

With the free enterprise system, America created the largest,
wealthiest, and most innovative economy of all time!
Producers used the resources they had to create as many goods as
possible. They decided what to make, how to make it, and at what
price to sell it.
 Consumers were able to buy many new innovations that made their
lives better and easier.

Advantages of Capitalism:
INCENTIVES!

In a free enterprise
system, people respond
to the incentives
(rewards) to make
money! The harder you
work, the more money
you make. The less you
work, the less money
you make.
Connect it to your life!

How is the “free enterprise” system similar to our
paycheck system where you earn gold, silver, or
bronze each week?
Advantages of Capitalism:
COMPETITION!


In a free enterprise (capitalist) system, producers
compete with each other to make the best product.
When producers compete with each other, the
consumers get the best possible products to choose
from!
VS.
Go back to your t-chart!

Add 2 more advantages and disadvantages to the
t-chart on the front of your notes page!
So who came up with the idea of the
free enterprise system?


Adam Smith!
He published a
book called the
Wealth of
Nations which
stated that the
best economic
system is a
capitalist or
free enterprise
system.
Adam Smith’s Ideas

He argued that when people are
able to compete and work in their
own self-interest, they help the
economy grow. Producers can make
what they want, consumers can buy
what they want, and scarce resources
are distributed in the most efficient
way.
Adam Smith’s Ideas


He argued that when people are
able to compete and work in their
own self-interest, they help the
economy grow. Producers can make
what they want, consumers can buy
what they want, and scarce resources
are distributed in the most efficient
way.
He also argued that a nation’s
government should NOT limit or
interfere with businesses—this is
where the term “Free Market” or
“Free Enterprise” comes from.
Look back at the disadvantages of
the free enterprise system…





How could you fix these problems?
Who could protect workers who were being
abused?
Who could prevent the use of child labor?
Who could help make sure factory working
conditions were safe?
Who could help protect the environment?
THE GOVERNMENT!

Tomorrow, we will
begin looking at the
“era of reform”– at
time when Americans
started to demand
that the government
help protect the rights
of the workers, the
poor, the sick, and the
environment!
ACTIVITY: Table Posters!



Take your posters that are divided into 2 sections.
In the TOP section, work to create a word web for the
term “free enterprise.” Your word web should contain
10 words that you associate with “free enterprise.”
In the BOTTOM section of your poster, create a t-chart
of the advantages and disadvantages of free
enterprise. Collaborate with your group to come up with
at least FOUR advantages and FOUR disadvantages.
Week 3 Exit Ticket and HW

Complete the exit ticket, then assign yourself
silently!
Download

The Free Enterprise System