Chapter 3- American Free Enterprise

In this lesson, students will identify characteristics of the U.S.A.’s Free Enterprise System.

Students will be able to define and/or identify the following terms:Free Enterprise

Public PolicyPublic Disclosure Laws

Occupational Safety and Health AdministrationEnvironmental Protection Agency

The government insists that warning labels are placed on potentially dangerous products. Companies don’t always want consumers to know.

Our Free Enterprise system is mostly a free market economy. However, the government acts like a lifeguard and

intervenes in the economy when necessary.

Why does the Government sometimes need to intervene in the economy?

• There are many reasons why the government intervenes in the economy. • Some reasons for government intervention are:• To inform consumers about products• To protect the environment• To prevent the sale of dangerous goods• To protect workers

The government does not allow the sale of dangerous products like illegal drugs. The government makes many efforts to protect the public.

Public Policy

• The public interest is the concerns of the public as a whole.• A safer car is in the public interest.• Public policy is laws and standards on topics of public interest.• Requiring car manufacturers to install seatbelts is an example of

public policy.

Public Disclosure Laws• Public disclosure laws are laws requiring companies to provide full

information about their products.• Public disclosure laws exist to ensure that consumers are

knowledgeable about the products they purchase.• An informed consumer is a protected consumer.•We cannot look at a product and know how much fat or cholesterol

it contains.

Workers also need the government’s protection. What prevents business owners from exploiting its workers?Occupational Safety and Health Administration (OSHA)• OSHA is a government agency that issues regulations on workplace

safety.

• OSHA conducts workplace inspections.

• OSHA requires public disclosure of hazards to workers.

What prevents companies from dumping harmful chemicals in ourrivers? The Environmental Protection AgencyThe EPA is a watchdog agency that aggressively targets polluting industries by imposing regulations, cleanup requirements, and penalties and fines.The EPA protects the environment and ensures that companies do not harm the environment.

Questions for Reflection:

• Define Free Enterprise.• Why does the United States have a Free Enterprise system?• Provide an example of Public Policy.• Why do Public Disclosure Laws exist?• How does the EPA benefit society?• How does OSHA benefit workers?

Economics

Section 3-Providing A Safety Net

In this lesson, students will identify the various ways the United States’ government attempts to combat poverty.

Students will be able to define and/or identify the following terms:

WelfareCash Transfers

In-Kind BenefitsTemporary Assistance to Needy Families

Social Security

Economics

During the Great Depression, many Americans suffered. Poverty rates increased.

President Franklin Delano Roosevelt tried to alleviate the problem by creating programs to help the poor and elderly.

Economics

Welfare

•Welfare is a general term that refers to government aid to the poor.• It includes many types of redistribution programs.• Tax dollars are used to provide income and services to

eligible poor people.• Those below the poverty threshold are considered poor.

Economics

Cash Transfers and In-Kind Benefits• The government provides cash transfers and in-kind benefits to

people in need.• A cash transfer is a direct payment of money to eligible poor people.• An in-kind benefit is a good or service provided to eligible poor

people for free or at greatly reduced prices.

Social Security provides cash transfers to the elderly, the disabled, and children who have lost a parent, until the age of 18.

Economics

Food stamps and legal aid are examplesof in-kind benefits. Eligible poor peopleare provided with food or lawyers.

Economics

Temporary Assistance to Needy Families (TANF)

• Today, the federal government provides money to state governments.

• State governments must design and run welfare programs.

• States must adhere to federal rules that create work incentives and establish a lifetime limit for benefits. In the past, there were no limits.

Economics

Eligible poor people receive benefits for a limited period of time. While they receive benefits, they are being trained to reenter the workforce and become independent.

Economics

The Goal of Welfare Reform

• The goal of welfare reform is to help people in need by providing them with financial assistance as well as opportunities to become independent.• Limits exist on welfare to ensure that people are trained and

encouraged to reenter the workforce.• The government’s helping hand ensures that Americans have

a safety net in difficult times.

Economics

Questions for Reflection:

• What is welfare?• Why does welfare exist?• What is the difference between cash transfers and in-kind benefits?• How does Temporary Assistance to Needy Families differ from past

welfare programs?• What is Social Security?

Economics

Providing Public Goods In this lesson, students will examine the government’s role in providing public goods.

Students will be able to define and/or identify the following terms:

Public GoodFree Rider

Positive ExternalityNegative Externality

Economics

Americans need roads but no privatecompany creates roads.

Economics

A Market Failure• A market failure occurs when the market does not

provide the goods or services consumers need.

• Of course, Adam Smith suggested that the market would always fix itself but that doesn’t always happen.

• Coca-Cola creates soda but not libraries. Why?

Economics

A public library doesn’t make a profit.

Economics

Public Goods• When a market failure occurs, people expect the

government to provide the needed good or service through the use of tax dollars.

• A public good is a good or service created by the government through tax dollars.

• Public schools, military defense, and public libraries are examples of public goods.

Economics

Free Rider

• A free rider is a person who would not choose to pay for a good or service but would use it anyway.• To ensure that citizens are not free riders, the government

insists that all citizens pay their taxes.• It is important to note that public goods are paid for with tax

dollars.• If you watched Sesame Street but never made a donation to

PBS, you were a free rider.

Economics

Negative Externalities• Sometimes a good or service has an unintended side

effect. This is called an externality.

• An example of this is pollution from automobiles. The manufacturers of automobiles did not intend to pollute the atmosphere.

• Therefore, pollution is a negative externality.• Automobile pollution is a negative externality.

Economics

Positive Externalities

• Sometimes a good or service has a positive side effect.• An example of a positive externality is the cancer fighting properties

in tomato sauce.• Tomato sauce was created for spaghetti not to fight cancer.

Tomato sauce is a positive externality.

Economics

The government tries to create positiveexternalities in its creation of public

schools.

Economics

Questions for Reflection:

• What is a market failure?• How does the government address a market failure?• Provide two examples of public goods.• What does the government do to prevent citizens from being free

riders?• Provide examples of positive and negative externalities.