Free Enterprise Capitalism

Economic Freedom

  • Being able to buy or produce the things you want.  You have the right to choose your occupation, employer, and job location.  Businesses can then determine what, how, and for whom to produce on their own with little to no government interference.

This picture shows where some of the major European Countries compare to us as far as being economically free.  Along with where the United States is ranked.

With economic freedom, you can choose your occupation.  You can work on a farm...

... or you can work in a factory.

Also with economic freedom, you can spend your money however you choose to.  You can save it in a bank...

Or you can choose to spend it on a house, car, or anything you'd like.

This video relates Economic Freedom to the Quality of Life.  The more economically free a country is, the better quality of life the people have in it.

Voluntary Exchange

  • The act of consumers and producers freely and willingly participating in market transactions.  These transactions benefit both the consumer and the producer, or else it wouldn't occur due to the fact that this is a voluntary exchange.

This is an example of a market where sellers and buyers engage in voluntary exchange.  The sellers sell what they wish to the buyers who are spending their money as they like.

This would also be an example of a market.  Any sort of store is a market.  Buyers are free to come in and look and then purchase what they would like.

The buyers gets to determine what to spend their money on, thus making it a voluntary exchange.

A place with numerous stores, that sell numerous types of items, such as the mall would be considered a very large market where several voluntary exchanges take place.  With several stores being in one place, you can just make one stop and get everything you need.  Malls have clothing stores and electronic stores and even food.

This video helps explain a role the government could have on a free market system that isn't completely free.

Private Property Rights

  • People may own and control their possessions as they wish.  Private property gives people the incentive to work, save, and invest.  When people are able to do what they want with their property, they are not afraid to accumulate, improve, use, or lend it.

You have the right to decorate your property how you'd like such as the inside of your house or your yard.  You also have the right to own the property you choose and as much of it as you want, such as the number of cars or the size of house or yard that you have.

Profit Motive

  • Encouragement to people and organizations that helps improve their material well being.  It is largely responsible for the growth of a free enterprise system.  Profit if the extent to which persons and organizations are better off finically at the end of a specific period than they were at the beginning.

The first picture shows that profit is an increase in money.  Then the second is showing that while you try and make a profit, there are always risks and those risks can lead to losses.  The third picture shows that you have to balance out your budget and try to keep your cost at the same level as your profit.  The fourth picture shows that in order to increase your profits, you either increase your revenue or decrease your cost.  And the fifth one shows that as the costs go down to make a product, the profit can go up just as the price went down.

Competition

  • Capitalism thrives on competition.  Competition is the struggle among sellers to attract consumers.  This is possible because individuals have the right to produce the products they think will be the most profitable.  Free enterprise capitalism allows this competition to flourish and it benefits the producers and the consumers.

These pictures all represent how sellers compete for attention from the consumers.  It's a race and struggle to get the buyers attention.  Then once you've got their attention you have to look more appealing than the competitors, such as the name or price.  They're always comparing themselves to their competitors and trying to stay not only one step ahead of them, but several steps to allow for a "buffer zone."  They want to keep their competitors far behind them.

Government Involvement

The Government

  • Protector: The U.S. Government putts laws in place to keep the economy safe.  It helps prevent false advertising, unsafe drugs and foods, environmental hazards, and unsafe automobiles.  It also protects individual freedoms such as discrimination against age, gender, or race.
  • Provider: The national government provides a system of defense and justice.  It also provides subsidies to parts of the economy.  It also funds the state and local governments for things such as road construction, education, welfare, parks, libraries, sanitation, and bus services.
  • Regulator: It oversees communications, interstate commerce, and industries such as banking and nuclear power.  It preserves competition in the market place.  State governments can help regulate insurance rates, while local governments can regulate economic activities such as building and zoning permits.
  • The government can also be seen as a consumer.  It uses up scarce resources, just like any other business, to fulfill it's job as protector, provider, and regulator.
  • The Government's main job is to increase the quality of life.

This video gives a short preview of how the government helps us out and gives examples of what it does.

Comment Stream