Features of the US Economy

Do Now:

Since the Cuban government began allowing people to open businesses in late 2010, nearly a quarter of a million of them opted to work for themselves, opening shops, selling goods, driving taxis and fixing cellphones. Cubans also began buying and selling homes and cars among themselves for the first time in 50 years. What aspects of these changes do you think are good for the Cuban people? Why? Are there any possible negative outcomes to these free-market changes? Explain.

Unlimited Needs and Wants

Limited Resources

Scarcity

Choices

WHAT to

produce

HOWto

produce

FOR WHOMto

produce

WHAT

toproduce

HOWto

produce

FOR WHOMto

produce

Choices

• United States: the 3 economic decisions are determined by individuals (…for the most part)

Free Enterprise

System in which business can be conducted freely with little government intervention

In the US, we have the right to…

1. own private property and enter into contracts

2. make individual choices

3. engage in economic competition

4. make decisions based on self-interest

5. participate in the economy with limited government involvement and regulation

Freedom to own private property and enter into contracts

Private property: Goods owned by

individuals and businesses, NOT the government

You can use it as you wishYou can buy as much as you can afford

Freedom to own private property and enter into contracts

Contracts: Agreements people

make with one another to buy and sell goods and services

*Legally binding even if not written!

Freedom of choice

Free to do what you want with what you own

Producers have freedom to produce what they want for who they want

Consumers have freedom to purchase what they want from who they want

Freedom to engage in competition

Competition Economic rivalry between businesses selling the

same or similar product

*keeps prices “fair” and encourages producers to improve on products

Freedom to make decisions based on self-interest

Producers and consumers make choices for their own benefit

Voluntary exchange: both parties benefit from an exchange

Freedom to participate in the economy with limited government involvement

Individuals and businesses make most of the decisions, NOT the government

Government: regulator Laws to protect workers,

consumers, and businesses Government also provides

public services (taxes) Redistributes wealth (Ex:

welfare) Ultimate goal: economic growth

Economic actors in a free enterprise?

1. Producers2. Consumers3. Government

Both products and resources are being exchanged

This free exchange of goods and services is called….

The MARKET

2 Kinds of Markets…

1. Product market• All the exchanges of products (goods

and services)2. Resource market • All the exchanges of resources