ECONOMICS
FREE ENTERPRISE SYSTEM & SUPPLY AND DEMAND
Review

Three fundamental economic questions?

Market Economy

Command Economy

Mixed Economy
Free Enterprise System
 Free
Enterprise System: “A system that encourages
individuals to start and operate their own businesses
without government involvement”
 Which
Factor of Production is related to this?
Characteristics of Free Enterprise

Freedom of Ownership

Risk

Profit

Competition
Freedom of Ownership

Freedom of Ownership: “Individuals are free to own
personal property”


Can do what you want with property


personal property: car, home, computer
lease, sell or give away
Encourages individuals to own their own businesses
Risk

Risk: “Potential for loss or failure”

What risks do businesses take?



Possibility to be sued
Loss of all personal savings used to start-up the business
Natural disasters
Profit

Profit: “Money earned from conducting business after all
costs and expenses have been paid”
 Profit
is:
motivation for taking risk
 reward for taking risk
 reward for meeting customer wants and needs
 used to pay owners, stockholders

 Profit
is driving force of free enterprise!
Competition

Competition: “The struggle between companies for
customers”

Competition:




essential part of free enterprise
forces businesses to produce better quality products
keeps prices “in-check”
results in wider selection of products and services
Types of Competition

Price Competition: “focuses on the sale price of a
product”


Assumption behind this: “if all else is equal, the customer will
buy the product with the lowest cost” … WHAT DO YOU
THINK?
Non-Price Competition: “focuses on factors that are
NOT related to price”

Assumption behind this: “if all else is equal, the customer will
buy the product with better quality & closer sales location” …
WHAT DO YOU THINK?
Monopoly

Monopoly: “no competition and one company controls
the entire market”
Review

Free Enterprise System




Freedom of Ownership
Risk
Profit
Competition

Price Competition
Non-Price Competition

Monopoly

VOCAB TERM
1. Economy
DEFINITION
PHOTO
the organized way a nation
provides for the needs and
wants of its people
You will draw a photo of
something that helps you
remember this term – keep it
simple!
The 3 ?s
12. Free enterprise
system
13. Freedom of
ownership
14. Risk
15. Profit
11.
16. Competition
17. Price competition
18. Non-price
competition
19. Monopoly