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
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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