Chapter 17
Sec 3
Capitalism
 Capitalism- An economic
system in which private
citizens own and use the
factors of production in order
to seek a profit .
 Free Enterprise- Another term
to describe the American
economy. Competition is
allowed to flourish with a
minimum of government
interference
- (Characteristic)- nation’s
economy ability to grow and
accumulate, or collect wealth
6 Features of Free Enterprise --US
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Markets
Economic Freedom
Private Property
Competition
Profit Motive
Voluntary Exchanges
What makes Capitalism Work
 Markets- Markets connect
different sectors of the
economy
- Consumer Sovereignty- Used
to describe the consumer as the
“king,” or ruler, of the market,
the one who determines what
product to produce.
 Economic Freedom- Freedom to
make our own economic
decision.
- choose the type of occupation
- choose the products we want
- produce the products we want
- consequences of our choices
What makes Capitalism
Work continued
 Private Property Rights- The
right we have the freedom to
own and use, or dispose of
our own property as we
choose.
- Incentive to work, save and
invest.
 Competition- The struggle
between buyers and sellers
to get the best products at
the lowest price.
- cost of production is low
and quality is high
- rewards efficient producers
What makes Capitalism
Work continued
The Profit Motive Profit – The amount of money
left over after all the costs of
production have been paid.
 Profit Motive- The driving
force that encourages
individuals and organization to
improve their material wellbeing.
- Responsible for the growth of
a free enterprise system.
 Voluntary Exchange- The act of
buyers and sellers freely
engaging in market
transactions.
History of Capitalism
 In 1776 Adam Smith, a Scottish
philosopher and economist
provide a philosophy for the
capitalist system in his book The
Wealth of Nations.
-individuals would work for their
own self interest.
- They would be guided by an
“invisible hand” to use
resources efficiently.
 Laissez-faire Economics- a
French term, means “to let
alone”
- Gov’t should not interfere in
the market place. (competition)
Capitalism
6 Features of Free Enterprise --US
•
•
•
•
•
•
Markets
Economic Freedom
Private Property
Competition
Profit Motive
Voluntary Exchanges