Untitled Flashcards Set

Free enterprise: an economic system in which privately owned businesses have
the freedom to operate for a profit with limited government intervention.
• Voluntary exchange: economic action done or brought about by free choice.
• Private property rights: fundamental feature of capitalism, which allows
individuals to own and control their possessions as they wish; includes both
tangible and intangible property.
• Profit: extent to which persons or organizations are better off at the end of a
period than they were at the beginning; usually measured in dollars.
• Profit motive: driving force that encourages people and organizations to improve
their material well-being; characteristic of capitalism and free enterprise.
• Competition: the struggle among sellers to attract consumers.

• Biofuels: fuel made from wood, peat, municipal solid waste, straw, corn, tires,
landfill gases, fish oils, and other waste.
• Great Recession: severe economic downturn that lasts from late 2007 through
mid-2009.
Academic Vocabulary:
• Incentive: something that motivates
Guiding Questions: How does the American economy incorporate the main
characteristics of a free enterprise economy?
Main Ideas
Characteristics of Free Enterprise Capitalism
• A free enterprise economy has both capitalism and free markets.
• Characteristics of a capitalistic free enterprise economy include economic
freedom, voluntary exchange, private property rights, the profit motive, and
competition.
• Economic freedom allows you to choose your occupation, employer, and job
location.
• Capitalism allows voluntary exchange between buyers and sellers.
• Private property rights allow people to own and control possessions, which
gives them the incentive to work, save, and invest.
• The profit motive is largely responsible for the growth of a free enterprise
system.
• Competition benefits both consumers and the economy.
Benefits of Free Enterprise Capitalism
• Individual freedom is closely related to economic freedom.
• Market economies produce a huge variety of goods.
• Market economies adjust daily, mainly through the ever-changing prices of goods
and services.
• Intense competition in a free market capitalist economy promotes economic
progress in the form of a continuing supply of newer and better products.
• When more and better products are produced in a free market capitalistic
system, wealth is created.
Disadvantages of Free Enterprise Capitalism

• Periods of uneven economic growth are one of the disadvantages of free
enterprise capitalism.
• In free enterprise capitalism, the gaps between rich and poor citizens seem to
increase.
• In free enterprise economies, suppliers tend to combine to avoid competition,
which results in fewer participants on the supply side of the market.
• Businesses such as corporations have most of the same rights as individuals, but
they also have many responsibilities as a result of government-imposed
regulations.