Unit 2 – Economic Essentials
Chapter 3 – Our Free Enterprise System
Objectives 3.1
Identify the basic principles of a free enterprise system – freedom of choice, freedom to own property and freedom to compete in the marketplace.
Explain the role competition plays in free enterprise – It forces businesses to produce better-quality goods and services at reasonable prices.
Discuss the importance of profit to free enterprise – It is money earned from conducting business after all cost and expenses have been paid, profit provides the incentive for people to risk their money on business ventures.
Terms 3.1
Free enterprise system – is the freedom of choice, freedom to own property and freedom to compete in the marketplace.
Competition – is the struggle between companies for customers.
Price Competition – focuses on the sale price of a product.
Non-price competition – occur when businesses chose to compete on the basis of factors that are not related to price.
Monopoly – is exclusive control over a product or the means of producing it.
Risk – is the potential for loss or failure.
Profit – is the money earned from conducting business after all costs and expenses have been paid.
Objectives 3.2
4 Roles of government is free enterprise – It provides general services, supports businesses to promote the growth and development of our nation, regulates businesses to ensure fair business practices and safety for consumers and it competes with private businesses on a very small scale.
Explain how supply and demand interact with price – shortages increase price, surpluses decrease price.
Terms 3.2
Licensing Agreement – protects the originator’s name and products.
Demand – refers to consumer willingness and ability to buy products.
Supply – is the amount of goods producers are willing to make and sell.
Equilibrium – exists when amount of product supplied is equal to the amount of product demanded.
Surpluses – occur when supply exceeds demand.
Shortages – occur when demand exceeds supply.