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How Does Free Enterprise Allocate Resource? How Does Free Enterprise Allocate Resource?

How Does Free Enterprise Allocate Resource? - PowerPoint Presentation

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Uploaded On 2016-09-02

How Does Free Enterprise Allocate Resource? - PPT Presentation

Profit Profit is the money left over after the costs of producing a good or service have been subtracted from the revenue gained by selling that good or service Producers Seek Profits Example Coffee shop owners are motivated by the desire to earn profits ID: 458964

producers profit free coffee profit producers coffee free carb system government consumers enterprise mixed profits foods high motivated sales

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Slide1

How Does Free Enterprise Allocate Resource?Slide2

Profit

Profit is the money left over after the costs of producing a good or service have been subtracted from the revenue gained by selling that good or service. Slide3

Producers Seek Profits

Example: Coffee shop owners are motivated by the desire to earn profits.

Coffee producers charge the highest price consumers are willing to pay.

What is something worth?

Motivated by profit, other producers enter the coffee business. The profit seeking of producers, then, has helped in the allocation of resources. Slide4

Consumers Vote with Their Wallets

When consumers choose to buy a product, the are “voting” for their choice against competing products.

These “votes” help determine what will be produced in the future.

Example: Low-carb foods.Slide5

High-Carb

Foods

Product

Unit

Sales, 2003

(in millions)

Percentage

Change Over 2002

Instant Rice79.1-8.2Bulk Rice180.2-4.9Cookies1,839.7-5.5Regular Carbonated Soda7,032.5-5.9Dry Pasta1,227.0-4.6White Bread1,606.1-4.7

Low-Carb

/High-Protein Foods

Product

Unit

Sales, 2003

(in millions)

Percentage

Change Over 2002

Frozen

Meat/Seafood

483.5

+7.7

Meat

Snacks

105.4

+7.6

Nuts

679.3

+8.8

Diet

Carbonated Drinks

2,828.6

+1.0

Cheese

3,424.0

+4.0

Wheat

Bread

873.1

+4.0Slide6

Modified Free Enterprise Economy

A mixed economy that includes some government protections, provisions, and regulations to adjust the free enterprise system.

The United States, though bases on the market system, is mixed. Government is an important element in the American economic system, but its role is relatively limited. Slide7

Government in the Circular Flow Model