The Governments role in the Free Enterprise System

Initially, the US began with a

policy toward business. This means: LAISSEZ FAIRE

LEAVE THINGS ALONE, HANDS OFF

This concept is often paired with ,

an economic system based onCAPITALISM

PRIVATE OWNERSHIP OF THE FACTORS OF PRODUCTION.

Why in theory is this supposed to work?

IT SHOULD WORK BECAUSE PRODUCERS WILL CREATE THE GOODS AND SERVICES THAT

CONSUMERS DEMAND.

When did this change?

DURING INDUSTRIALIZATION

Why?

https://beyond-english.wikispaces.com/file/view/rockefeller.JPG/39044570/rockefeller.JPG

BECAUSE ROBBER BARONS WERE CREATING MONOPOLIES AND BAD LABOR CONDITIONS

What is different about this diagram compared to the one we drew on p. 8?

THE GOVERNMENT IS REPRESENTED ON THIS CIRCULAR FLOW CHART

How does this new element interact with the circular flow model?

THE GOVERNMENT INTERACTS WITH BOTH THE FACTOR AND

PRODUCT MARKET AS WELL AS HOUSEHOLDS AND BUSINESSES

PUBLIC SECTOR GOODS & SERVICES:

TOLLS, PARKS, SCHOOLS, USPS

SOLE PROPRIETORSHIPS AND PARTNERSHIPS

WHY DO YOU THINK MARY KAY ASH PROVED SO SUCCESSFUL IN HER COSMETICS VENTURE?

• BECAUSE–Entrepreneurial skills–Innovation in sales

techniques and incentives

Sole ProprietorshipsAdvantages

• Easy to open and close

• Few regulations• Freedom and

control• Owner keeps Profit

Disadvantages• Limited funds• Limited life• Unlimited

liability

Why are sole proprietorships the most common form of business organization in the US?

• Easy to start up• Full control• Relative freedom from regulation• Ability to leave the business at any time• All profits to the sole proprietor

PartnershipsAdvantages

• Easy to open and close

• Few regulations• Access to resources• Joint Decision

Making• Specialization

Disadvantages• Potential for

conflict• Limited life• Unlimited

liability

What do stocks and dividends have to do with corporations?

Stocks are sold to people (shareholders) and those shareholders receive a dividend or check at the end of the year containing a percentage of the corporations profits.

CorporationsAdvantages

• Access to Resources

• Professional Managers

• Limited Liability• Unlimited Life

Disadvantages• Start-Up Cost

and Effort• Heavy Regulation

• Double Taxation• Loss of Control