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Warm Up #9

Define these terms from

Chap. 3:A.Market FailureB.Public Goods

C.ExternalityD.Negative ExternalityE.Positive Externality

F.SubsidyG.Transfer Payment

H.Public Transfer Payment

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SSEF5 a The students will describe the roles of government in a market economy.a. You will be able to explain why government provides public goods and

services, redistributes income, protects property rights, and resolve market failures.

Determine and define vocabulary. Identify key terms within the standard. Define each term.

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The American Free Enterprise Systemand the Role of the Government

SSEF5The students will describe the roles of government in a market economy.

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What is a Free Enterprise System?

EXAMPLE: United States• Business people free to start business, choose how to

use resources• Managers and workers choose where to exchange labor

for pay• Consumers choose which goods and services to buy• Zalia Cosmetics—2001 startup aimed at underserved

Latina market• Government protects or encourages competition,

enforces contracts

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What happens when businesses (firms) do not provide goods or services that the American

people want?

The Federal, State or Local Governments provide those services.

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1. Provide Public Goods and Services KEY CONCEPTS

• Public sector—branches of government that make production decisions

• Market failure—outsiders benefit from or pay for marketplace interaction

• Public goods—products provided by the government, but consumed by the public

• Public goods are funded with taxes

Government and Free Enterprise

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2. Redistributes Income

KEY CONCEPTS

• Safety Net–Government programs designed to protect

people from economic hardships (old/sick)• Public transfer payments (combats the issue of

poverty)–Is a payment in which the government

transfers income from taxpayers to recipients who do not provide anything in return.

–See figure 3.8, P. 89

Government and Free Enterprise

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3. Protects Property Rights KEY CONCEPTS

• The rights of individuals and groups to own businesses and resources.

Government and Free Enterprise

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4. Resolve Market Failures KEY CONCEPTS

• Market failure—outsiders benefit from or pay for marketplace interaction

• Public goods—products provided by government, consumed by public

• Public goods funded with taxes

Government and Free Enterprise

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Managing Externalities

KEY CONCEPTS

• Market failure occurs when economic transactions cause externalities

• Externality—side effect on someone other than producer or buyer– negative externality—people uninvolved in

the transaction pay costs– positive externality benefits people

uninvolved in transaction

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Think Pair ShareWhat are some more examples of market failures?

Industrial Pollution

Second Hand Smoke

Dam

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Show What You Know!

EOCT QuestionWhich of the following is Free Enterprise MOST connected with?ExpensesConsumersProducersConsumer sovereignty

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Show What You Know!

EOCT QuestionPublic goods are funded bycharitable donations collected by the governmentprofits made by private businessesprofits made by public companiestaxes collected by the government

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Show What You Know!

EOCT QuestionA person who chooses not to pay for a good or service but benefits from it when it is provided is called a(n)free consumerfree riderinvestment risksubsidy risk

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Show What You Know!

EOCT QuestionGovernment programs that protect people from economic hardship are called afree riderpositive externalitysafety netpublic subsidy

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Show What You Know!

EOCT QuestionA positive externality occurs when people who are not part of a marketplace interactionare not affected by itmake no profit from itbenefit from itpay all of the costs of it

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Closure Activity #7

Paying for Pollution

Do page 87 Analyze Graphs 1 & 2

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The End.

Any Questions?Any Questions?Any Questions?Any Questions?Any Questions?Any Questions?

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Definitions and Test Tomorrow.

Free RiderPublic SectorRedistribute IncomeTaxesConsumer sovereigntyProfitFree contractSafety netMarket failureProfit motive

CapitalismPublic GoodsExternalityNegative ExternalityPositive ExternalitySubsidyTransfer PaymentStandard of livingSpecializationPublic Goods