Characteristics of Free Enterprise How does Free Enterprise answer the 3 Economic Questions? 1. What goods will be produced? sellers decide: what are consumers willing and able to purchase? 1. How will these goods be produced? producers decide 1. For whom will the goods be produced? for those willing and able to buy 5 Characteristics of Free Enterprise Systems вЂў private property вЂ“ any good that is owned by an individual or a business вЂў public property-owned by the government 5 Characteristics of Free Enterprise Systems вЂў Choice вЂў buyers вЂў sellers вЂў workers вЂў investors ??? 5 Characteristics of Free Enterprise Systems вЂў Voluntary exchange вЂ“ people can exchange what they value less for what they value more вЂ“ people are free to contract and negotiate 5 Characteristics of Free Enterprise Systems вЂў Competition вЂ“ producers compete for consumers by making better products and/or reducing price. вЂ“ businesses compete for better workers with higher wages вЂ“ workers compete for jobs by accepting lower wages or by offering better skills 5 Characteristics of Free Enterprise Systems вЂў economic incentive вЂ“ money acts as an incentive В» people are inspired to work and create businesses in the hopes of making money. вЂў вЂњIt is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard for their own self-interestвЂќ В» Adam Smith вЂњthe invisible handвЂќ- free market An Inquiry into the Nature and Causes of the Wealth of Nations - 1776 вЂў Free markets will guide the most efficient and just distribution of goods and services, providing the most benefit to the most people. вЂњthe invisible handвЂќ influences the U.S. founders Adam Smith So farвЂ¦. вЂў 5 characteristics of Free Enterprise вЂ“ Private property вЂ“ Choice вЂ“ Voluntary Exchange вЂ“ Competition вЂ“ Economic Incentive вЂў Adam Smith вЂњFather of Modern EconomicsвЂќ вЂ“ Wealth of Nations вЂ“ вЂњthe invisible handвЂќ of the free market Ethics and Free-enterprise вЂў 1.Allows for individuals to choose their own occupations. вЂў 2.Produces goods/services preferred by both the majority and the minority. вЂў 3.Rewards or punishes producers based on how well or poorly they respond to the buying public. вЂў 4.Supports the right of the individual to be free. вЂў 5.Provides an opportunity for individuals to strengthen and develop their abilities. Rights Imply Responsibilities in a FreeEnterprise System вЂў The right to voluntary exchange implies the responsibility to provide honest information. вЂў The right to private property implies the responsibility to use it in a legal manner. вЂў The right to compete implies the responsibility of sportsmanship.