Overview
This chapter focuses on the characteristics of free enterprise . The major features of free enterprise are competition, private property, choice, voluntary exchange, and incentives. This chapter also goes in depth on the discrition of profits and losses. It teaches how to compute the total revenue, total cost, and the losses and profits. The effect of ethics on the economy and government's role are also included in this chapter.
Key Terms
Circular Flow of Economic Activity - the economic relationships that exist between different economic groups in an economy
Contract - an agreement between two or more people to do something
Entrepreneur - a person who has a special talent for searching out and taking advantage of new business opportunities
Ethics - the principles of conduct, such as right and wrong, morality and immorality, good and bad
Excludable Public Good - a public good that individuals can be excluded (physically prohibited) from consuming
Free Rider - a person who recieves the benefits of a good without paying for it
Household - an economic unit of one person or more that sells resources and buys goods or services
Loss - the amount of money by which total cost exceeds total revenue
Negative Externality - an adverse side effect of an act that is felt by others
Nonixcludable Public Good - a public good that individuals cannot be excluded (physically prohibited) from consuming
Positive Externality - a beneficial side effect of an action that is felt by others
Private Good - a good of which one person's consumption takes away from another person's consumption
Private Property - any good that is owned by an individual or business
Profit - the amount of money left over after all the costs of production have been paid. Profit exists whenever total revenue is greater than total cost
Public Good - a good of which one person's consumption does not take away from another person's consumption
Public Property - any good that is owned by the government
Comprehension/Critical Thinking and Writing
William Bradford claimed that private property, in lieu of common property, saved the Plymouth colony from failure and starvation. On what was this belief based? Do you agree or disagree? Why?
In coming to America, the Pilgrims had to figure out many new things for themselves in this new land. One factor they had to determine was the issue of private property versus common property. The Pilgrims attempted both, but only one would see them through.
Upon first arriving in America, the Pilgrims made the decision to share land. Unfortunately, their first time period there ended in near failure. After switching to private property, the Pilgrims experienced success. This led Bradford to proclaim the supremacy of private property over common.
I agree with Bradford, because private property motivates people to do more. Sharing space with other people wards off competition - competition that can be healthy for the flow of the economy. Having private property will keep people trying harder, and this is what the Pilgrims' change in success can be attributed to.
This chapter focuses on the characteristics of free enterprise . The major features of free enterprise are competition, private property, choice, voluntary exchange, and incentives. This chapter also goes in depth on the discrition of profits and losses. It teaches how to compute the total revenue, total cost, and the losses and profits. The effect of ethics on the economy and government's role are also included in this chapter.
Key Terms
Circular Flow of Economic Activity - the economic relationships that exist between different economic groups in an economy
Contract - an agreement between two or more people to do something
Entrepreneur - a person who has a special talent for searching out and taking advantage of new business opportunities
Ethics - the principles of conduct, such as right and wrong, morality and immorality, good and bad
Excludable Public Good - a public good that individuals can be excluded (physically prohibited) from consuming
Free Rider - a person who recieves the benefits of a good without paying for it
Household - an economic unit of one person or more that sells resources and buys goods or services
Loss - the amount of money by which total cost exceeds total revenue
Negative Externality - an adverse side effect of an act that is felt by others
Nonixcludable Public Good - a public good that individuals cannot be excluded (physically prohibited) from consuming
Positive Externality - a beneficial side effect of an action that is felt by others
Private Good - a good of which one person's consumption takes away from another person's consumption
Private Property - any good that is owned by an individual or business
Profit - the amount of money left over after all the costs of production have been paid. Profit exists whenever total revenue is greater than total cost
Public Good - a good of which one person's consumption does not take away from another person's consumption
Public Property - any good that is owned by the government
Comprehension/Critical Thinking and Writing
William Bradford claimed that private property, in lieu of common property, saved the Plymouth colony from failure and starvation. On what was this belief based? Do you agree or disagree? Why?
In coming to America, the Pilgrims had to figure out many new things for themselves in this new land. One factor they had to determine was the issue of private property versus common property. The Pilgrims attempted both, but only one would see them through.
Upon first arriving in America, the Pilgrims made the decision to share land. Unfortunately, their first time period there ended in near failure. After switching to private property, the Pilgrims experienced success. This led Bradford to proclaim the supremacy of private property over common.
I agree with Bradford, because private property motivates people to do more. Sharing space with other people wards off competition - competition that can be healthy for the flow of the economy. Having private property will keep people trying harder, and this is what the Pilgrims' change in success can be attributed to.
Above is an example of the Circular Flow of Economic Activity. It shows the relationships between the economic groups. For example, you can see that house holds pay taxes to the government and in return, they receive benefits like social security.
