Characteristics of the US Economy

Activate Prior Knowledge:
Think of the last thing that you bought for yourself with your own
money and answer the following questions:
1.

What did you buy?

2.

How much was it?

3.

Where did you buy it?

4.

Was it available at another store?

5.

Why did you buy it there? Was there an incentive to buy it there
and not from another store?

★ Today we’re going to talk about these things when you learn about

markets, private property, competition, profit, and consumer
sovereignty.

★ Today I can identify the characteristics of the US economy by

correctly matching 4 out of 5 scenarios.

There are five important characteristics that

are evident in our USeconomy.

1) Markets & Limited Government

★ In economics, a market is

not necessarily a physical
place.

★ It is the exchange of goods

and services between buyers
and sellers.

★ The term market refers to

theentire activity of buying
and selling that takes place
out in the world.

Markets & Limited Government

★ Markets are generally allowed to operate without undue

(excessive/unnecessary/too much) interference from the
government.

★ This means that government lets people make their own

economic decisions without interfering too much.

★ Why is there some government involvement in the

markets? To protect citizens(consumers & businesses)

Check & Connect: Government involvement in markets:
For example, government regulates the quality of certain foods
(ensures food companies sell safe food), inspects workplaces for
hazardous conditions, creates labor laws, creates regulations
concerning the disposal of hazardous wastes,sets safety
standards for products.

The government regulates certain industries to prevent
businesses from abusing or cheating workers and consumers.

Markets & Limited Government

★ Why is there some government involvement in the

markets?
○ The government’s main role is to make sure the market

is fair and producers have the chance to compete.
Government regulates businesses to promote
(encourage) competition.

★ Government intervenes in a

market economy when the
perceived benefits of a
government policy outweigh the
anticipated costs.

Markets & Limited Government

★ In the markets, prices

are determined by
supply and demand
as buyers and sellers
interact in the
marketplace.

2) Private Property

★ Private property is property that is

owned by individuals instead of by
government.

★ Private property rights give us the

desire to work, save, and invest
because we know we can keep any
gains that we earn.

★ People are free to buy whatever they

can afford or they’re free sell whatever
they own.

❖ Individuals and businesses have the right to own real and personal

property as well as the means of production without undue
(excessive/unnecessary/too much) interference from the government.

❖ This means that we have the freedom to own and use our personal

property (as well as factors of production) as we choose.

❖ The government provides key public services such as schools, roads,

courts, and law enforcement.

Individuals & businesses are owners and
decision makers for the private sector.
(houses, shops, factories, land, farms, cars,
tools, etc.)

Government is owner & decision maker
for the public sector (roads, courts,
schools, law enforcement, etc.)

3) Profit

★ Profit consists of earnings after all

expenses have been paid.

★ The profit is the incentive for

businesses to exist.

★ When people create a business,

they do so in order to make a
profit—the money left over after
all the costs of production have
been paid.

★ Profit is a motivation in business.

○ The possibility of financial

gain leads many to take risks
in hopes of earning a profit.

4) Competition

★ Rivalry between producers

and/or between sellers of a
good or serviceusually
results in better quality
goodsand services at lower
prices.

★ A large amount of competition creates

choices and lots of options for goods and
services for consumers.

★ If one company tries to raise its prices,

buyers can go elsewhere.

★ If one company produces a bad product,

buyers can go to another company that
produces a similar, but better product.

★ Competition rewards the most efficient

producers (maximum productivity with
minimum wasted effort or expense)and
forces the least efficient producers out of
business.

★ Competition makes for efficient

production, higher quality products, lower
prices and more satisfied customers.

What effect does competition have on prices
and WHY?

5) Consumer Sovereignty

★ Consumers determine through purchases what goods and services

will be produced.

★ Government involvement in the economy is limited.
➔ Government does not make rules about what and how much gets

produced.

Most decisions regarding the production of goods and services are made
in the private sector.

★ Businesses produce the products

that people want most. (If you buy
it, they will make it.)

★ Consumer sovereignty means the

consumer is the ruler, or “king”, of
the market, the one who determines
what products will be produced.

★ Buyers determine what should be

produced by choosing what they
want to buy.

★ The number of people willing to

buy a product determines its
success or failure.

★ The consumer decides what will

sell on the market …or what won’t
sell!

Who determines what is offered for
sale in the US economy? How?

Which entrepreneur is more successful? How do you know?
What has she figured out?

Many products are presented to consumers, but consumer
sovereignty determines which ones will be successful.

Multiple Choice

“I just bought 50 acres of prime farmland. This land is mine, and I will use it to create a Christmas tree farm to start a Christmas tree business”

• consumer sovereignty

• profit

• free enterprise; markets and limited government

• competition

• private property

Multiple Choice

"Before our company opens our Christmas tree stand and before we start selling, we have to get a business license to sell our trees. The licenses are issued by the government to protect the public health and safety.

• consumer sovereignty

• profit

• free enterprise; markets and limited government

• competition

• private property

Multiple Choice

"Although some families have chosen to buy an artificial tree to use every year, many more families still like the tradition of going out to pick their tree every year and having that fresh Christmas tree smell in their house. There is still a need for families to buy a real Christmas tree every year. As long as people keep buying our trees, we'll keep selling them."

• consumer sovereignty

• profit

• free enterprise; markets and limited government

• competition

• private property

Multiple Choice

"Another Christmas tree farm down the street is lowering the cost of their trees. What can we do to make ours more appealing so that we don't lose business to the other farm?"

• consumer sovereignty

• profit

• free enterprise; markets and limited government

• competition

• private property

Multiple Choice

"Even after expenses (paying for seedlings, tools, labor, etc.) we doubled our money-making this year!"

• consumer sovereignty

• profit

• free enterprise; markets and limited government

• competition

• private property