3.1: Free Enterprise
A Tradition of Free Enterprise
Over 18 million unincorporated businesses in America.
America, “the land of opportunity,” a place where anyone
from any background could achieve success through hard
work
Why has America been so successful?
Open land, natural resources and uninterrupted flow of
immigrants.
Free Enterprise – social and political commitment to giving
people the freedom and flexibility to try out their business
ideas and compete in the marketplace.
Pursuit of Happyness : http://www.youtube.com/watch?v=_xcZTtlGweQ
SSEF3b, 4a, 5a, 6a,b,c
Constitutional Protections:
The Bill of Rights – guarantees certain individual freedoms. I.E.: freedom
of speech, religion
Property Rights – protected under the 5th amendment; no person shall be
deprived of life, liberty, or property without due process of law; nor shall
private property be taken for public use without just compensation
Taxation
Article I – gives Congress the power to levy taxes, Sections 2 and 9 taxes
apportioned according to population so that everyone will pay the same
amount.
Sixteenth Amendment (1913) – gave Congress the right to set taxes based
on Income
Article I, Section 10 – individuals or business cannot use political process
to get excused from their contracts, no law can be passed that would
change the terms of someone’s business agreement.
SSEF3b, 4a, 5a, 6a,b,c
Tax rate
Single filers
Married filing
jointly or qualifying
widow/widower
Married filing
separately
Head of
household
10%
Up to $8,500
Up to $17,000
Up to $8,500
Up to $12,150
15%
$8,501 $34,500
$17,001 $69,000
$8,501$34,500
$12,151 $46,250
25%
$34,501 $83,600
$69,001 $139,350
$34,501 $69,675
$46,251 $119,400
28%
$83,601 $174,400
$139,351 $212,300
$69,676 $106,150
$119,401 $193,350
33%
$174,401 $379,150
$212,301 $379,150
$106,151 $189,575
$193,351 $379,150
35%
$379,151 or
more
$379,151 or
more
$189,576 or
more
$379,151 or
more
Income Tax Rates:
http://www.bankrate.com/finance/taxes/2011-tax-bracket-rates.aspx
SSEF3b, 4a, 5a, 6a,b,c
Basic Principles of Free Enterprise
Profit Motive – the force that encourages people and organizations to improve their
material well-being.
It rewards innovation, and improves productivity
Open Opportunity – the concept that everyone can compete in the marketplace
Economic Rights –
Legal equality – everyone has the same legal rights, it allows everyone to compete in the
economic marketplace
Private Property Rights – people have the right and privilege to control their possessions as
they wish.
Free contract – allows people to decide what agreements they want to enter into.
Voluntary Exchange – allows people to decide what and when they want to buy and sell.
(1972 Pontiac)
http://cgi.ebay.com/ebaymotors/_W0QQcmdZViewItemQQ_trksidZp3984Q2em1560Q2el2649QQitemZ260829570833QQsspagenameZSTRKQ3aME
USXQ3aIT
Competition – rivalry among sellers to attract customers while lowering costs. Provides
consumers with the choice of a larger variety of goods.
SSEF3b, 4a, 5a, 6a,b,c
Role of the Consumer
– make their desires known through economic dealings
with producers (silly bands, vans, i-pods)
Role of the Government
Information and Free Enterprise
Public Disclosure Laws- require companies to give
consumers important information about their products
•Credit card disclosure laws http://www.youtube.com/watch?v=YG4TbJT1bLQ&feature=related
Protecting Health, Safety and Well Being – zoning laws,
environmental protection, food, ,medicine…
SSEF3b, 4a, 5a, 6a,b,c
On page 55 list the Major Federal Regulatory Agencies and
their role in the American Free Enterprise System
Major Federal Regulatory Agencies:
Agency and Date Created
SSEF3b, 4a, 5a, 6a,b,c
Role
3.2 Promoting Growth and Stability
Tracking Business Cycles
Microeconomics – the study of the economic behavior
and decision making of small units, such as individuals,
families and businesses (individuals)
Macroeconomics – the study of the behavior and the
decision making of entire economies. (The nation)
American Free Enterprise – Government plays a role in
attempting to prevent wild swings in economic
behavior.
Promoting Economic Strength
High Employment – unemployment rate of 4-6%
Growth – higher standard of living for each generation
http://www.youtube.com/watch?v=YG4TbJT1bLQ&feature
=related
SSEF3b, 4a, 5a, 6a,b,c
3.2 Promoting Growth and Stability
Business Cycle – a period of macroeconomic
expansion by a period of contraction
SSEF3b, 4a, 5a, 6a,b,c
3.2 Promoting Growth and Stability
Technology and Productivity (p.59)
America has a high standard of living in comparison to the
majority of the rest of the world
 GDP/capita statistics:
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(
PPP)_per_capita
Work ethic – purposeful activity and commitment to value
Technology – process used to produce a good or service
- Innovations help us create more for less.
 Time Magazine 2010 Inventions:
http://www.youtube.com/watch?v=yTRkdmhi04&feature=related,
SSEF3b, 4a, 5a, 6a,b,c
3.2 Promoting Growth and Stability
Governments Role
Provides Incentive for innovation
Morrill Acts of 1862 and 1890 – land-grant money to
pursue the study of agriculture. I.E. MIT and
Texas A&M University
NASA –
US Patents – gives the inventor the exclusive right to
produce and sell for 20 years
Copyright – exclusive rights to publish and sell
creative works
R&D – Research and Development
SSEF3b, 4a, 5a, 6a,b,c
3.3: Providing Public Goods
Public Goods – a shared good or service for which it would be
inefficient or impractical to make consumers pay
individually and to exclude non-payers.
 I.E. Cleaning Mt. Rushmore, launching a space shuttle,
Interstate highway, Parks
Why would each of the above be considered a public good?
Cost and Benefits – the benefit must outweigh the cost when
deciding to move forward with a public good
1. The benefit to each individual is less than the cost that each
would have to pay if it were provided privately.
2. The total benefits to society are greater than the total cost.
SSEF3b, 4a, 5a, 6a,b,c
3.3: Providing Public Goods
List 3 Public Goods in Glynn County that prove to benefit society more
than it costs. Explain why.
Public Good
SSEF3b, 4a, 5a, 6a,b,c
Explain why it benefits society more
than it costs society
3.3: Providing Public Goods
Market Failure – a situation in which the market does not distribute
resources efficiently.
I.E.: Roads – if a company built it they would have to charge a fee for
its use in order to make a profit. In addition, if the population
was sparse, then the company would have no incentive to
produce it due to lack of profit.
Free Rider – someone who would not choose to pay for a certain
good or service, but would get the benefits of it anyway if it were
provided as a public good. I.E. Fire Protection, Army helmets,
Roads.
We are all free riders. If you use a road that is out of state, then you
become a free-rider. You paid nothing towards the road, but still
use it.
SSEF3b, 4a, 5a, 6a,b,c
3.3: Providing Public Goods
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
Positive Externality – an old house is purchased and fixed up
– the neighborhood property value increases due to this. The
neighbors benefit without extending any energy towards the
improvement of the old house.
Negative Externality – chemical waste is dumped in the river by
a local pulp mill
– the community is in harms way of toxic waste. The community
did not ask for the pollution, but is on the negative receiving
end of the pulp mill.
SSEF3b, 4a, 5a, 6a,b,c
3.3: Providing Public Goods
List Two Positive and Two Negative externalities in the community and explain why they are positive and negative.
Positive Externality
SSEF3b, 4a, 5a, 6a,b,c
Negative Externality
3.4 Providing a Safety Net
The Poverty Problem:
Poverty in America video: http://www.viddler.com/explore/lbanda/videos/71/
Answer the following questions about the video:
1. How many people live in poverty in America? 44Milliion
2. How much has the poverty level increased in the past
year? 4 million in one year
3. How many Americans are without health insurance? 51
million
4. What percentage of children are poor in America? 35%
5. How much will a 40 hour work week at Minimum wage
earn in a year? $14.500
6. According to Melody Hobson , what gives us hope in our
economy? Innovation
SSEF3b, 4a, 5a, 6a,b,c
3.4 Providing a Safety Net
2011 HHS Poverty Guidelines
Persons
in Family
48 Contiguous
States and D.C.
Alaska
Hawaii
1
$10,890
$13,600
$12,540
2
14,710
18,380
16,930
3
18,530
23,160
21,320
4
22,350
27,940
25,710
5
26,170
32,720
30,100
6
29,990
37,500
34,490
7
33,810
42,280
38,880
8
37,630
47,060
43,270
For each additional
person, add
3,820
4,780
4,390
SSEF3b, 4a, 5a, 6a,b,c
3.4 Providing a Safety Net
Programs in place
Temporary Assistance for Needy Families (TANF) –
program aims to move people from welfare
dependence to the work force. Federal money
issued to the state and the state runs their own
welfare program.
Social Security – created in 1935 during the Great
Depression. Provides cash transfers of retirement
income.
SSEF3b, 4a, 5a, 6a,b,c
3.4 Providing a Safety Net
Table 1: Life Expectancy for Social Security
Percentage of Population
Average Remaining Life
Year Cohort
Surviving from Age 21 to Age Expectancy for Those
Turned 65
65
Surviving to Age 65
1940
1950
1960
1970
1980
1990
Male
Female
Male
Female
53.9
56.2
60.1
63.7
67.8
72.3
60.6
65.5
71.3
76.9
80.9
83.6
12.7
13.1
13.2
13.8
14.6
15.3
14.7
16.2
17.4
18.6
19.1
19.6
Looking at the tables above, what Economic and Social implications
can you foresee?
SSEF3b, 4a, 5a, 6a,b,c
Table 2: Americans Age 65 or Older 1880-1990
Year
1880
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
Number of Americans Age
65 or Older
1.7 million
2.4 million
3.0 million
3.9 million
4.9 million
6.7 million
9.0 million
12.7 million
17.2 million
20.9 million
26.1 million
can you foresee?
31.9 million
34.9 million
Looking at the tables above, what Economic and Social implications can you
SSEF3b, 4a, 5a, 6a,b,c
foresee?
3.4 Providing a Safety Net
Unemployment Insurance – cash transfer funded
jointly by federal and state governments. Checks
provide money to eligible workers who have lost
their jobs. http://www.bls.gov/lau/tables.htm
Worker’s Compensation – provides cash transfer of
state funds to workers injured on the job. Most
employers must pay workers’ compensation
insurance to cover any future claims their
employees might make.
I.E. Mr. Martin’s torn ACL at open gym while
working at EMHS.
SSEF3b, 4a, 5a, 6a,b,c
3.4 Providing a Safety Net
In-Kind Benefits – goods and services provided for free or at
greatly reduced prices. I.E. food stamps, subsidized
housing, legal aid
Medical Benefits – United States government provides health
insurance for the elderly, the disabled and the poor
Medicare – over age of 65 and the disabled
Medicaid – covers some poor people who are unemployed
or not covered by their employers insurance.
Education – Federal, state and local governments provide
educational opportunities to the poor.
Faith Based Initiatives – religious organizations, US Dept of
Health and Human Services -http://www.hhs.gov/partnerships/
SSEF3b, 4a, 5a, 6a,b,c