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HOW DOES THE U.S. FREE ENTERPRISE SYSTEM OPERATE?The U.S. economic system of free enterprise operates according to five main principles: the freedom to choose our businesses, the right to private property, the profit motive, competition, and consumer sovereignty. 
In this country, the decision whether or not you should go into computer services or any other kind of enterprise (business) is basically yours alone to make. You will decide what fees to charge and what hours to work. Certain laws prohibit you from cheating or harming your customers or other people. But, in general, you will be left alone to run your business as you see fit.
Private property is a piece of land, a home, or a car owned by an individual, a family, or a group. It differs from a public building, or public property, such as the city hall, a park, or a highway, all of which provide a government service for all citizens. In the U.S. economic system, people's right to buy and sell private property is guaranteed by law. People must use the property in safe and reasonable ways, of course. In setting up computer systems for your customers, for example, you do not have the right to interfere with the electrical, telephone, or computer systems of other people.
The main reason why you or any enterprising person organizes a business is to make money. You do this by earning more money than you spend. The amount of money left over after subtracting your business expenses from your business income is known as your profit. In the free enterprise system, business firms try hard to keep costs down and increase their income from sales. The better they succeed at this, the higher are their profits. Economists describe the efforts by business firms to earn the greatest profits as the profit motive.
Just as you are free to start a computer business, so is everyone else. The rivalry between sellers in the same field for consumers' dollars is called competition. If your business is profitable, it is likely that others will enter the same business hoping to be as successful as you are. They will be competing with you for the same customers. To win a share of the computer business, other sellers may try to offer more and better services, or services at lower prices. Because of the pressure of competition, business firms must constantly try to provide the best services and create the best products at the lowest possible prices. Consumer Sovereignty In the end, it is the customers, or consumers, who determine whether any business succeeds or fails. In the U.S. free enterprise economy, consumers are said to have sovereignty-the power or freedom to have final say. Consumers are free to spend their money for Product X or for Product Y. If they prefer Y over X, then the company making X may lose money, go out of business, or decide to manufacture something else (perhaps Product Z). Thus, how consumers choose to spend their dollars causes business firms of all kinds to produce certain goods and services and not others. Back To Class Page
Free enterprise is a common term, but do you know what it means? Find out more. What is free enterprise?Free enterprise, also known as free market or capitalism, is an economic system driven by supply and demand. Private businesses and consumers control the marketplace with little to no interference from the government. In this type of system, the government does not have a central plan for the nation’s economy. Deeper definitionThe components of free enterprise include:
In a free enterprise system, consumers are the people who pay for products and services. Ultimately, it is their self-interest that helps drive this type of economic system. Consumers decide what they want to spend their money on and which businesses they want to purchase goods and services from. They shop around for the best possible goods at the lowest prices. One of the biggest components of free enterprise is that people are free to choose. This also extends to workers, who have the freedom to choose the type of employment they wish to have. They not only get to choose which field they want to work in, but also which employers they wish to work for. Businesses are the producers in a free market system. It is the businesses that are responsible for producing the highest quality goods and services at prices that maximize profits. Businesses respond to what consumers want and what consumers are spending their money on. While free enterprise allows entrepreneurs to open any kind of business they choose, it offers no guarantees that the business will succeed. Free enterprise promotes economic growth by encouraging entrepreneurs to start new businesses. Multiple businesses offering the same or similar goods and services leads to competition, which is good for the consumer. When businesses compete with each other to produce better products at better prices, the consumer reaps the benefits. Likewise, competition can lead to innovation as businesses strive to come up with new ways to maximize their profits. Free enterprise exampleIn free enterprise, there are three types of markets: resource, product and financial. Resource markets are marketplaces where businesses can obtain labor, raw materials and capital. Businesses tap into the resource market when they need to find new employees to work for their company. Product markets are the marketplaces where businesses sell their finished goods and services. This does not include the sale of raw materials or other intermediate goods needed to produce the final product. Financial markets are marketplaces where buyers and sellers exchange assets such as stocks, bonds, securities, currencies and more. Whereas a free enterprise system has very little government interference, a socialist economic system comes with heavy government regulations. In between free enterprise and socialist economies are mixed economies. The United States has a mixed economy. While it is largely a free market, it is not unregulated. The government does impose some regulations to protect consumers and workers without infringing on the freedoms awarded to businesses in a free enterprise economic system. Use Bankrate’s calculator to figure your debt-to-income ratio, which is a key consideration of lenders when you want to borrow money. More From Bankrate
What are the rights that must be protected for a free enterprise system to work?Free enterprise requires a legal framework that recognizes and protects the private ownership of property—the right to create it, the right to use it, the right to trade it away—so long as in doing so, the private owner does not infringe on the equal rights of other property owners.
What are the roles of consumer and producers allocating resources?The Roles of Producers and Consumers
In figuring out what they think will bring them the most profits, producers influence resource allocation. Consumers, on the other hand, influence the allocation of resources through what they buy.
What are the 5 main elements of free enterprise?The U.S. economic system of free enterprise has five main principles: the freedom for individuals to choose businesses, the right to private property, profits as an incentive, competition, and consumer sovereignty.
What are the 4 characteristics of a free enterprise economy?Characteristics of a capitalistic free enterprise economy include economic freedom, voluntary exchange, private property rights, the profit motive, and competition.
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What are some of the rights that must be protected for a free enterprise system to work?
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