JA EconomicsChapter 2

Free Enterprise Free to make choices

Make the choice they believe offer them the most benefits

Gets it’s strength and support from 6 pillars

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Private Property Resource/product owned by individuals

or businesses

Protected by the U.S. constitution

Businesses have an incentive to maintain their property

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Specialization Businesses and people

One product or a few parts of one product

Contributes to higher wages and profits

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Voluntary Exchange Because of specialization

No one person or business makes one entire product

Everyone is dependent on other people

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The Price System Buyers and sellers look towards the

price to send them a message

Provides incentives

Businesses have a desire to make a profit

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The Price System Price doesn’t determine all economic

behavior

Values Charity Opportunity Convenience, service, loyalty, quality etc

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Market Competition Define Market

Resources

Products

Scarcity

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FREE ENTERPRISE

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Entrepreneurship Helps the economy grow and change

Three characteristics of an entrepreneur Innovative thinking Management skills Risk taker

Page 15 in the study guide

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Economic Systems Market system (free enterprise)

Command system

Traditional system

Mixed – no pure form

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Economic Models Represent the real world

Descriptive, predictive and ideal

Want-satisfaction chain in chapter 1

The circular flow of money, resources and products.

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Goods and S

ervice

s Goods and Services

Resources Reso

urce

s

households

MarketG & S

Market

Resources

Production

Circular flow of money How it grows

How it shrinks

Adam Smith Born in Scotland in 1723

University of Glasgow at age 14

Economy evolved People traded with once another

Adam Smith Born in Scotland in 1723

University of Glasgow at age 14

Economy evolved People traded with once another