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American Free Enterprise. Chapter 3. Section 1 The Benefits of the Free Enterprise System. The Tradition of Free Enterprise. America, the land of opportunity , offers special opportunities that have allowed many to be successful business people .
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American Free Enterprise Chapter 3
The Tradition of Free Enterprise • America, the land of opportunity, offers special opportunities that have allowed many to be successful business people. • The key factor has been the social and political commitment to giving people the freedom and flexibility to try out their business ideas and compete in the marketplace.
Constitutional Guarantees and Limitations • Property Rights • The 5th Amendment states that private property may not be taken for public use without just compensation • The 14th Amendment extends this limitation to state governments as well
Taxation • Congress’s powers to tax is limited. • The Constitution required that taxes be the same for everyone. • The 16th Amendment allowed Congress to tax based on income.
Contracts • Individuals and businesses are guaranteed the right to enter into contracts • The Constitution prohibits anyone from usingthe political process to get excused from their contracts.
The Basic Principles of Free Enterprise Seven key characteristics make up the basic principles of free enterprise.
1. Profit MotiveThe drive for the improvement of material well-being.
2. Open opportunityThe ability for anyone to compete in the marketplace.
4. Private property rightsThe right to control your possessions as you wish.
5. Free contractThe right to decide what agreements in which you want to take part.
6. Voluntary exchangeThe right to decide what and when you want to buy and sell a product.
7. CompetitionThe rivalry among sellers to attract consumers.
The Consumer’s Role A fundamental purpose of the free enterprise system is to give consumers the freedom to make their own economic choices.
Through their economic dealings with producers, consumers make their desires known. • When buying products, they indicate to producers what to produce and how much to make. • Consumers can also make their desires known by joining interest groups, which are private organizations that try to persuade public officials to vote according to the interests of the groups’ members.
The Government’s Role Americans expect the government to protect them from potential problems that arise from the production of various products or the products themselves.
Public Interest Both state and federal governments are actively involved in concerns of the public as a whole, such as environmental protection, sanitary food production and workers’ health and safety.
PUBLIC DISCLOSURE LAWS Laws that require companies to provide consumers with important information about their products, such as fuel efficiency of automobiles, side-effects of medication.
