EPF 2: The student will
demonstrate knowledge of the
role of producers and consumers
in a free enterprise or market
economy
EPF 2: The student will
demonstrate knowledge of the
role of producers and consumers
in a free enterprise or market
economy
Google Classroom
Pre-Test
EPF 2: The student will demonstrate knowledge
of the role of producers and consumers in a
free enterprise or market economy
OBJECTIVE
Be able to describe the most important
facets of a “Free Enterprise System”
Free Enterprise
• Freedom of Choice
• Open Mkt. (S & D)
• The Profit Motive
• Competition
• Limit Gov. Control
Free
Enterprise
OBJECTIVE
Be able to identify the
freedoms generally allowed
in a free enterprise system
OBJECTIVE
Be able to identify the
freedoms generally allowed
in a free enterprise system
What Are
They?
Freedom of Choice
• When to Buy
• When to Sell
• To Make Profit
• To Compete
• To Own
• Freedom to Decide
Freedom of Choice
•Or simply put . . . .
Freedom of Choice
•Or simply put . . . .
To be an
Entrepreneur !!!
Freedom of Choice
Seed Question
How would you react or feel if you
lived in a country that did not provide
for these freedoms?
Freedom of Choice
Seed Question
How would you react or feel if you
lived in a country that did not provide
for these freedoms?
When to Buy
When to Sell
To Make
Profit
To Compete
To Own
Freedom to
Decide
OBJECTIVE
Be able to describe the open market
using the concepts of
“Supply & Demand”
Define Supply & Demand
Demand:
The ability & desire of customers to
own products
Supply
Products/Services available for sale
Describe the Laws of Supply & Demand
Price Laws of Demand:
The price law of demand says that as
the price of a good rises, the demand
will go down, and vice versa.
Price Laws of Supply
The price law of supply states that as
the price rises, the amount of a good
supplied rises, and vice versa.
Describe the Laws of Supply & Demand
Quantity Laws of Demand:
If the quantity of a good demanded
falls, the price will fall, and vice versa.
Quantity Laws of Supply
If the quantity of a good supplied
rises, the price falls, and vice versa.
Describe the Laws of Supply & Demand
Quantity Laws of Demand:
If the quantity of a good demanded
falls, the price will fall, and vice versa.
Quantity Laws of Supply
If the quantity of a good supplied
rises, the price falls, and vice versa.
See
Handout
Describe the Laws of Supply & Demand
Equilibrium
The point at which the amount
demanded is equal to the
amount supplied meaning that
there is no wasted product.
Describe the Laws of Supply & Demand
Equilibrium
The point at which the amount
demanded is equal to the
amount supplied meaning that
there is no wasted product.
More on This in the
Pricing Unit
Describe the Laws of Supply & Demand
Supply & Demand
Exercise
Seed Question
Describe some products that you’ve seen
respond to the Laws of Supply & Demand
(Besides Gasoline)
OBJECTIVE
Be able to define the following terms
associated with the concept of PROFIT:
- Income,
- Expenses,
- Costs,
- Gross Profit,
- Net Profit, &
- Risk
Profit = Incentive
Income - the amount of money a business
receives from the sales of its goods/services
Cost - The amount of money a company spends to get
product into the store
Expenses - The amount of money a company spends
on the operation of the business
Profit = Incentive
Gross Profit - Amount of money made after the cost
of goods is subtracted (Income - Cost)
Net Profit - The amount of money made after the cost
of goods & expenses are subtracted out (Income Cost - Expenses)
Risk - The “gamble” a business or person takes that
they might lose something instead of being rewarded
Point to Remember
Point to Remember
Profit is Good
Profit is Good
Seed
Question
Why is it good?
Profit is Good
Seed
Question
Answer: Motivation, Incentive,
Drive, Goals, etc.
Profit is Good
Seed
Question
What are some examples of
economics incentives?
Profit is Good
Seed
Question
Answer: Income, Profit, Interest Income,
Investment Income, etc..
What Do We Risk Losing?
• Our own money
• The money of other people
(friends, relatives, banks, etc.)
• Our time & energy that we could
spend on a career
• Our hopes/dreams (self esteem,
inheritance, freedom, etc.)
OBJECTIVE
Be able to discuss ways a business
can increase its profits
OBJECTIVE
Be able to discuss ways a business
can increase its profits
Because “Profit is Good”
OBJECTIVE
Be able to discuss ways a business
can increase its profits
Common Sense: How would you
increase profits?
Increasing Profits
•Raise Prices
•Increase Sales
•Increase Efficiency
•Boost Productivity
Increasing Profits
•Raise Prices ?????????
•Increase Sales
•Increase Efficiency
•Boost Productivity
Increasing Profits
Raise Prices ?
Increase Sales
Increase Efficiency
Boost Productivity
It’s Called
ROI
“Return on Investment”
th
4
Trait of Free Enterprise
OBJECTIVE
Be able to discuss in a short
answer question the advantages
to competition in our economy
Competition
• A rivalry between two or
35%
more companies to attract
scarce (limited) customer
dollars
• Market Share - A
company’s part of the
total market for a product
How to Compete
• Lower prices of course.
How to Competition
• Prices of course, but how
else might I compete with
another business?
How to Competition
• Lower Prices
• Better Quality Products
• Better Customer Service
• More Convenience
• More Variety of Products
• Better Marketing
Benefits of Competition
• New Products & Services
• Variety of Products/ Services
• Lower Prices
• Better Customer Service
• Higher Quality Merchandise
• More Information Provided
• Etc.
OBJECTIVE
Be able to identify the
consequences of a lack of
competition in our economy
Consequences of No Competition
(Also Called Colluding or Price Fixing)
• Prices will go up
• Innovation will slow
• Service might suffer
• Quality might suffer
Consequences of No Competition
(Also Called Colluding or Price Fixing)
• Prices will go up
• Innovation will slow
• Service might suffer
• Quality might suffer
• And some experts believe it
takes only 35% of market control
to influence prices in a market
OBJECTIVE
Be able to describe the role of
government in a Free Enterprise system
OBJECTIVE
Be able to describe the role of
government in a Free Enterprise system
The role of government in a Free
Enterprise economy is limited
OBJECTIVE
Be able to describe the role of
government in a Free Enterprise system
The role of government in a Free
Enterprise economy is limited
Primarily, the role of government
is to protect competition
But we’ll talk more about
that in EPF 8
Free Enterprise in the USA
REVIEW
• Freedom of Choice
• Open Mkt. (S & D)
• The Profit Motive
• Competition
• Limit Gov. Control
Free
Enterprise
OBJECTIVE
Be able to define the term
Producers or “Businesses”
OBJECTIVE
Be able to define
the term
“Business”
and controlling . . .
An activity . . .
and market . . .
by planning,
economic wants & needs
goods & services
organizing,
resources . . .
that satisfies . . .
to produce . . .
Be able to
define the term
“Business”
Unscramble the
Definition on
Quizlet Scatter
OBJECTIVE
and controlling . . .
An activity . . .
and market . . .
by planning,
economic wants & needs
goods & services
organizing,
resources . . .
that satisfies . . .
to produce . . .
“Business”
An activity that satisfies
economic needs by planning,
organizing, & controlling
resources to produce & market
goods & services
Business
An activity . . .
Something done
that satisfies . . .
Makes someone happy
economic wants & needs . . .
Has monetary value
by planning,
Developing a process
organizing,
Getting resources in order
& controlling . . .
Directed by management
resources . . .
Factors of production
to produce . . .
Create, improve upon, change
& market . . .
Moving goods to consumers
goods & services.
Products or things done for others
Business Activity
For the businesses listed below, explain how each
meets the definition of business:
• McDonald’s
• Nichols Hardware
• Google
• (Your Choice)
1. An activity . . .
2. that satisfies . . .
3. economic wants & needs
4. by planning,
5. organizing,
6. & controlling . . .
7. resources . . .
8. to produce . . .
9. & market . . .
10. goods & services.
OBJECTIVE
Be able to describe the three major
types of business ownership &
discuss their advantages &
disadvantages
SOLE PROPRIETORSHIP
• Owned & operated by one
person (Usually highly
skilled)
• employs large %
of the workforce
• examples include
plumbers, dentists,
beauticians, small shop
owners, etc.
PARTNERSHIP
• Two or more
people legally
agree to share the
ownership &
responsibilities of
a business
CORPORATION
• A charted (legal) entity that
operates apart from the
owners
• the corporation will often
sell stock
• the stockholders will
elect a board of directors
to run the company
CORPORATIONS
(Discussion)
Doctors will often
incorporate their
practice; Why?
(Discussion)
SOLE PROPRIETORSHIP
PARTNERSHIPS
CORPORATIONS
ACTIVITY: Identify three advantages & disadvantages of each
Advantages
1.
2.
3.
Disadvantages
1.
2.
3.
SOLE PROPRIETORSHIP
Advantages
• easy to start
• decisions are easy
to make
• low taxes
• fewer gov.
regulations
• you get all the
money!!
Disadvantages
• capital ($) is
limited
• can’t have
“group-think”
• no help available
w/ other skills
• big Risk
PARTNERSHIPS
Advantages
• more ideas &
opinions to
consider
• you have help to
run the business
• the risk is shared
• more capital
available
Disadvantages
• more ideas & opinions
to consider (?)
• harder to make
decisions
• personally at risk
• death of a partner
causes problems
CORPORATIONS
Advantages
• liability is limited to
your investment
• it is easy to raise more
capital (sell more stock)
• it is easy to get into &
out of the corporation
(sell or buy stock)
Disadvantages
• often a complex &
changing ownership
picture making
decisions difficult
• highly regulated
• higher tax rates
OTHER FORMS OF BUSINESS OWNERSHIP
Franchise:
• a legal agreement to operate a business in
the name of a recognized company.
Advantages
Franchisor offers help
Disadvantages
Expensive to buy
Planning already done Limited creativity
OTHER FORMS OF BUSINESS OWNERSHIP
Franchise:
• a legal agreement to operate a business in the name
of a recognized company.
• (Franchisee must follow Franchiser’s Guidelines
regarding business name, slogans, prices, products,
etc.)
Advantages
Franchisor offers help
Disadvantages
Expensive to buy
Planning already done Limited creativity
OTHER FORMS OF BUSINESS OWNERSHIP
Cooperative:
• A company owned by the
customers of that company.
Advantages
Disadvantages
Customer Support
Frequent Ownership Changes
Positive Image
Disputes Among the Owners
Loyal Customers
Complete
the EPF
Quizlet #2
HOMEWORK
STUDY
Complete the
EPF 2 Quiz
STUDY
Complete the
EPF 2 Quiz
And Bring
Some
Cash to
Class Next
Time