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Chapter 2: Economic Systems and Decision Making Economic and Social Goals
Economic Freedom
In the United States, people place a high value on the freedom to make their own economic decisions Economic freedom, in addition to political freedom, is an essential staple of American society

Economic Efficiency
Economic decision making must be efficient so that benefits gained are greater than costs incurred

Economic Equity
Americans have a strong sense of fairness, which is evident through laws governing American business

Economic security
Congress set up Social Security, which is a federal program of disability and retirement benefits that covers most working people

Full Employment
People want their economic system o provide as many jobs as possible

Price Stability
If inflation, which is a rise in the general level of prices, occurs, workers need more money to pay for food, clothing, and shelter People on a fixed income, which is an income that does not increase, get hurt by inflation the most- hence the need for price stability

Economic Growth
Growth is needed that people can have more goods and services in the future

Future Goals?

Chen 2 As our society evolves, it is possible that new goals different from the seven goals are added.

Trade-Offs Among Goals

People sometimes have different ideas about how to reach a goal, and sometimes the goals themselves conflict. For the most part, people and business are usually able to resolve conflicts from goals The United States economy is flexible enough to allow choices, accommodate compromises, and still satisfy the majority of Americans most of the time

Section Three- Capitalism and Free Enterprise

Capitalism, a system in which private citizens own the factors of production, and free enterprise describe the United States economy

Characteristics of a Free Enterprise Economy

Economic Freedom
Economic freedom is a characteristic of capitalism often taken for granted With economic freedom, people can choose to have their own business or to work for someone else

Voluntary Exchange
Voluntary Exchange is the act of buyers and sellers freely and willingly engaging in market transactions If consumers spend money on a product, they must believe that the item being purchased is of greater value to them than the money they gave up With voluntary exchange, sellers also have many opportunities to sell their products

Private Property

Chen 3 Private property is the concept that people have the right and privilege to control their possessions as they wish Private property gives people an incentive to get ahead; people know that if they succeed, they will be able to keep any rewards they earn

Profit Motive
Profit is the extent to which persons or organizations are better off at the end of a period than they were at the beginning The profit motive, which is the driving force that encourages people and organizations to improve their material well-being, is responsible for the growth of a free enterprise system Entrepreneurs want to be their own boss and are willing to risk everything to make their dreams come true

Role of the Consumer

Consumer sovereignty describes the role of the consumer as sovereign, or ruler, of the market Consumers ultimately have a say in what is and what is not produced when they express their wants in the form of purchases in the marketplace

The Role of the Government

Protector
The government protects property rights, enforces contracts, and tries to make sure everyone follows fair rules to ensure an efficient and fair economy

Provider and Consumer

All levels of government provide goods and services for citizens, and consumes factors of production just like any other form of business

Regulator
Government preserves competition in the marketplace and oversees interstate commerce.

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Promoter of National Goals

The United State has a mixed economy (or a modified private enterprise economy), which is an economy where people carry on their economic affairs freely but are subject to subject to a degree of government intervention and regulation