AMERICAN FREE
ENTERPRISE
Taught by Professor Coleman
BELLRINGER
Define “land of opportunity”
Provide examples of family or community
members who started up small businesses.
A TRADITION OF FREE ENTERPRISE
Why has America
been such an
economic success?
 Open land
 Natural resources
 Uninterrupted flow of
immigrants
AND?
FREE
ENTERPRISE
The social and political
commitment to giving
people the freedom and
flexibility to try out their
business ideas and
compete in the
marketplace
CONSTITUTIONAL PROTECTION
Property Rights
Taxation
 Can’t be taken from an
 Can only tax in ways
individual except when
there is a public reason
 Government must pay fair
value of property
 Applies to businesses, too
Constitution allows
 Congress can levy taxes
 Direct taxes must be
apportioned according to
population
 Guarantees the right to
make binding contracts
BASIC PRINCIPLES OF FREE ENTERPRISE
 Profit motive: force that
encourages people and
organizations to improve
their natural well-being
 Open opportunity:
everyone can compete in
the market place
 Economic rights: legal
equality, private property,
free contract, voluntary
exchange, and competition
ACTIVITY: BUILDING KEY CONCEPTS
Figure 3.1 Features of American Free Enterprise
Page 52
Choose one of these features and give an example
from your own daily life.
ROLE OF THE CONSUMER
When consumers buy
products, they signal
to producers what to
produce and how
much to make
Also make wishes
known by joining
interest groups
ROLE OF THE GOVERNMENT
Information and Free
Enterprise
Protecting Health,
Safety, and Well-Being
Negative Effects of
Regulation
ACTIVITY: FOR DOTS!!
Applying Economic Concepts, page 55
SECTION ASSESSMENT
Section 1 Assessment, pg. 55
2. Economic Profile: Alice Rivlin, pg.
56
1.
BELLRINGER
Brainstorm a list of tasks performed by librarians
Prepare to compare/contrast this job with the job
of a government economist.
TRACKING BUSINESS CYCLES
Macroeconomics
Microeconomics
 Study of the behavior and
 Study of the economic
decision making of entire
economies
behavior and decision
making of small units
(individuals, families,
households, business)
ACTIVITY: KNOW THE DIFFERENCE!
(COMPARE/CONTRAST)
Macroeconomics
 How the banking system
operates throughout the
U.S.
Microeconomics
 How an individual bank
tries to make a profit by
receiving deposits and
making loans
TRACKING BUSINESS CYCLES
How is economic wellbeing measured?
What’s a BUSINESS
CYCLE?
 Gross Domestic Product
 Period of macroeconomic
(GDP)
 Total value of all final
goods and services
produced in an economy
expansion followed by a
period of contraction, or
decline.
PROMOTING ECONOMIC GROWTH
Employment
Growth
 unemployment rate
 each generation should do
between 4% and 6%
desirable
better
 measured by GDP
PROMOTING ECONOMIC GROWTH
Stability
Economic Citizenship
 Gives consumers,
 Do you expect your
producers, and investors
confidence in the
economy
 Indicator #1: price levels
 Indicator #2: Health of
financial institutions
generation to have a
higher standard of living
than that of past
generations?
 DO YOUR PART! GET AN
UNDERSTANDING OF
MACROECONOMIC
PROCESSES THAT SHAPE
OUR FUTURES!
TECHNOLOGY AND PRODUCTIVITY
Technological Progress
The Government’s Role
 Process used to produce a
 Morrill Acts of 1862 and
good or service
 Improvements allow an
economy to produce
more output form same
or smaller quantity of
inputs, or resources
1890?
 Land-grant schools (MIT,
Texas A&M)?
 NASA?
 U.S. Patents?
ACTIVITY . . . BACK TO BELLRINGER
Compare and contrast the job of
a librarian to the job of a
government economist.
SECTION 2 ASSESSMENT
 Key Terms and Main Ideas, page 60, 1-6
 Skills for Life: Analyzing Primary Sources, page 61, 1-3
BELLRINGER
Recall seeing a young child being asked to share
something with another child. Did the child share
willingly and fairly without the help of the parent?
PROVIDING PUBLIC GOODS
 A shared good or service
for which it would be
inefficient or impractical
(1) to make consumers
pay individually and (2) to
exclude nonpayers
COSTS & BENEFITS . . . FREE-RIDER PROBLEM
 Benefit <cost that each
would pay if provided
privately
 Societal benefits> total
cost (contribution)
 Public goods financed by
public sector
 Private sector would have
little incentive to produce
public goods
 Free riders don’t pay, but
still benefit
MARKET FAILURES
Situation in which
the market does
not distribute
resources efficiently
EXTERNALITIES
 An economic side effect of
a good or service that
generates benefits or
costs to someone other
than the person deciding
how much to produce or
consume.
 Video: Externalities
EXTERNALITIES . . .
Positive Externalities
Negative Externalities
 Benefits too many people
 Generate unintended
(not just those who paid
for it)
 Buying/updating an
eyesore . . .
costs
 Paper mill wastes pollute
river, need to buy watertreatment
ACTIVITY – FOR DOTS!
Key Terms and Main
Ideas, page 66, 1-3
ASSESSMENT
 Decision Making on Page
66 (#6)
 Answer in paragraph form
BELLRINGER
What is your
personal definition of
poverty?
PROVIDING A SAFETY NET
Outline pages 67-70
You have 10 minutes.
VIDEO: U.S. POVERTY
 U.S. POVERTY (TAVIS SMILEY & DR. CORNEL WEST)
 Record 15 salient points from the video
SECTION 4 ASSESSMENT
Key Terms and Main Ideas, pg. 70, 1-4
CHAPTER 3 EXAM
For: Chapter 3 Self-Test
Visit: PHSchool.com
Web Code: mna-1031
Print & Submit