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 Chapter 3: The American Free Enterprise System

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3.1: Free EnterpriseA 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

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 Chapter 3: The American Free Enterprise System

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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

TaxationArticle 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.

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 Chapter 3: The American Free Enterprise System

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Tax rate Single filers Married filingjointly or qualifyingwidow/widower

Married filingseparately

Head ofhousehold

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

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 Chapter 3: The American Free Enterprise System

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Basic Principles of Free EnterpriseProfit 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 marketplaceEconomic 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_trksidZp3984Q2em1560Q2el2649QQitemZ260829570833QQsspagenameZSTRKQ3aMEUSXQ3aIT

Competition – rivalry among sellers to attract customers while lowering costs. Provides consumers with the choice of a larger variety of goods.

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Role of the Consumer – make their desires known through economic dealings with producers (silly bands, vans, i-pods) 

Role of the GovernmentInformation 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…

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 Chapter 3: The American Free Enterprise System

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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

Role

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3.2 Promoting Growth and StabilityTracking 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 StrengthHigh Employment – unemployment rate of 4-6%Growth – higher standard of living for each generationhttp://www.youtube.com/watch?v=YG4TbJT1bLQ&feature=related

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3.2 Promoting Growth and StabilityBusiness Cycle – a period of macroeconomic expansion by a period of contraction

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3.2 Promoting Growth and StabilityTechnology 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

valueTechnology – 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=yTRkdm-hi04&feature=related,

 

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3.2 Promoting Growth and StabilityGovernments 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 yearsCopyright – exclusive rights to publish and

sell creative worksR&D – Research and Development

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3.3: Providing Public GoodsPublic 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.

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3.3: Providing Public GoodsList 3 Public Goods in Glynn County that prove to benefit

society more than it costs. Explain why.

      

Public Good Explain why it benefits society more than it costs society

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3.3: Providing Public GoodsMarket 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.

 

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3.3: Providing Public GoodsExternalities – 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.

 

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3.3: Providing Public GoodsList Two Positive and Two Negative externalities in the community and explain why they are

positive and negative.

 Positive Externality Negative Externality

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3.4 Providing a Safety NetThe 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?

44Milliion2. How much has the poverty level increased in the

past year? 4 million in one year3. How many Americans are without health insurance?

51 million4. 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? $14.5006. According to Melody Hobson , what gives us hope in

our economy? Innovation

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3.4 Providing a Safety Net

Personsin Family

48 ContiguousStates 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, add3,820 4,780 4,390

2011 HHS Poverty Guidelines

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3.4 Providing a Safety Net

Programs in placeTemporary 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.

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3.4 Providing a Safety NetTable 1: Life Expectancy for Social Security

Year Cohort Turned 65

Percentage of Population Surviving from Age 21 to Age 65

Average Remaining Life Expectancy for Those Surviving to Age 65

Male Female Male Female

194019501960197019801990

53.956.260.163.767.872.3

60.665.571.376.980.983.6

12.713.113.213.814.615.3

14.716.217.418.619.119.6

Looking at the tables above, what Economic and Social implications can you foresee?  

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can you foresee? 

Table 2: Americans Age 65 or Older 1880-1990

YearNumber of Americans Age

65 or Older

1880189019001910192019301940195019601970198019902000

1.7 million2.4 million3.0 million3.9 million4.9 million6.7 million9.0 million

12.7 million17.2 million20.9 million26.1 million31.9 million34.9 million

Looking at the tables above, what Economic and Social implications can you foresee?

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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.

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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 poorMedicare – over age of 65 and the disabledMedicaid – 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/