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Ever found yourself undecided about what brand of shoes or cell phone to buy? In that moment, you were benefitting from free enterprise. In nations where people can choose which job they want or what type of business they plan to start, the free enterprise system has created a multitude of opportunities. In this summary, we explore the concept of free enterprise and look at examples of how these economic characteristics impact daily lifein the United States.
The free enterprise system refers to an economy where free markets determine prices of goods and services rather than the government.
The free enterprise system allows for competition and choice in the pursuit of jobs, the creation of businesses, and investing options. Primarily, the ability of owners and workers to make money is the highlight of free enterprise.
The ability to choose one's job based upon agreed-upon pay/salary allows a worker to earn money and spend freely in society. Business owners set their prices for goods and services to generate profits while providing products that are beneficial to consumers' needs and wants.
In this system ofcapitalism, the free market allows businesses to operate free of government control. The American economic model has been emulated globally and is credited with creating vast wealth and individual prosperity.
capitalism
Capitalismis货物是由一个经济体系private individuals or businesses in a profit-based manner.
In a capitalist system, government interaction is primarily through taxation and regulation, but not ownership or control.
In a capitalist, free-market economy, individuals rather than governing authority decide what they will produce and where they will work to earn income. The basis of this system are core concepts embedded in the U.S. Constitution. The founders of the U.S. political system designed an organized governmental structure with the following:
The concept of free enterprise is often viewed as a core value of the U.S., alongside个人主义,equalityof opportunity, rule of law, andlimited government.
The notion oflimited governmentconnects to alaissez-faire(French for "let it be" or "leave alone") economic system in which the government exhibits a "hands-off" relationship to business ownership and operation. The federal government is limited in the affairs of economic transitions between consumers and businesses.
Free enterprise stands in sharp contrast to command-and-control economies such as North Korea or Cuba. The U.S. government does not set prices, wages, or regulate the production of goods or availability of services, unlike more socialist economies where governments direct people's work and the ability to own businesses. Typically, these governments limit choices in the marketplace as well.
Free enterprise is enshrined in various parts of the U.S. legal system.
在宪法,国会正在考虑到authority in Article 1, Section 8 to grant copyrights and patents to regulate intellectual property and promote fair commerce. Federal statute also explicitly endorses a free enterprise system:
TheCongressof the United States recognizes the vital role of free enterprise in achieving rising levels of production and standards of living essential to economic progress and development."
-22 U.S. Code § 2351 - Encouragement of free enterprise and private participation
The Founding Fathers also envisioned limited federal government involvement in business. This is reflected the 10th Amendment, for example, which references the omission of specifically delegated powers:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people."
The ability to make money is the hallmark of free enterprise systems. Over America's history, economic growth has been based on the economic model ofcapitalism.
Proponents of this model highlight the moral argument that individuals should be free to achieve success based on their own merits. By this rationale,work exchanged for pay results in citizens gaining a sense of accomplishment while also meeting their financial needs, and is preferable to peoplereceiving economic resources from a governmental entity.
Critics of this system point to the inequities that result fromcapitalism. Profits generated by corporations and businesses create high amounts of wealth for ownership, while workers make proportionally much less than owners.
A free enterprise economy is marked by the following conditions:
Ability to own private property with legal, individual control of money earned.
Limited government restrictions that are not cost-prohibitive and focus mainly on public safety
A free market of exchange for goods and services with competition and flexible wages.
A system of profit and loss where businesses create value and attempt to create more revenue than expenses.
The U.S. economy is the largest in the world, with a Gross Domestic Product (sum of all goods and services in a year) of over $20 trillion! With the 3rd largest world population of around 330 million, the U.S. dollar is the most recognized and used currency globally and the nation attracts the most immigrants each year. The influence of the financial system,stock market,and corporations weigh heavily on global economies and individual trading partners.
One of the central themes of a free enterprise system iscompetition. When an economic system promotes competition, the quality of goods must be high to attract and retain customers and prices must be fair, otherwise, citizens will seek other options. Consumers have choices for products and services, which allows pricing to fluctuate according to the supply and demand of goods. When the availability of a product is high and demand is low, prices drop. Conversely, high demand and low supplies of a product result in high prices.
Citizens in a free market economy can also invest money to create profits and earn more money. From savings accounts, savings bonds, stocks, and cryptocurrencies to real estate, gold, and collectibles, options exist beyond working for or owning a business. The government similarly regulates but does not control these options, allowing individuals to accumulate wealth.
America's industrial and entrepreneurial past demonstrate the growth and expansion of a free market economy.
Over time, more citizens have been able to choose their profession or job and negotiate wages. As industrialization in the 19th century expanded, a push to form labor unions resulted in rising wages and working conditions when factory workers confronted factory owners in a unified manner.
Henry Ford famously increased workers' wages in 1914, from about $2.30 per day (9 hours) to $5.00. This was to be the minimum Ford wage if all requirements were met. Responding to high employee turnover, the industrialist raised wages through a profit-sharing system, which kept employees on the line producing more vehicles than before and famously increasing their chances of buying their own Ford. Importantly, employees' ability to choose their employer led to increased wages personally and industry-wide.
Voluntary work and financial success related to employment have allowed the U.S. economy to grow to the world's largest as a result of job growth but also business creation. Americanentrepreneurshave been among the leaders in worldwide innovation for centuries.
Entrepreneur
An entrepreneur is an individual who takes theinitiative to create a business, service, or product to earn a profit on their endeavor.
There are over 30 million small businesses in America, and each year over 3 million new businesses are created. Since the free market system encourages business ownership, new companies range from one-person service enterprises to start-up companies and large corporations.
Many entrepreneurs have their first taste of free enterprise as a child, operating small businesses including babysitting services, lawn-mowing, and lemonade stands. The essential components of start-up capital, risk, pricing, competition, and supply costs factor into the equation for business owners young and old.
The free enterprise system refers to an economy where the market determines the prices of goods and services rather than the government.
A free enterprise economy is marked by the ability to own private property, limited government restrictions, a free market, and a system of profit and loss.
In a capitalist, free-market economy, individuals not a governing authority decide what they will produce and who they will work for to earn a living.
Citizens in a free market economy can also invest money into financial options to create profits and earn more money. The government regulates but does not control these options, allowing individuals to build wealth and improve the quality of their lives.
Business owners have to adjust prices and wages to attract and maintain customers and employees.
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