30 Unit 1 The Economic System
depend on profi ts, 1-4. It is a positive number.
The profi t motive, or the desire for profi t, drives
both individuals and businesses to produce.
Free Economic Choice
In the United States and other market
economies, consumers are free to make many
choices. This is good news for you. Free choice
opens the doors of opportunity in many areas.
Both individuals and businesses have the right
to freely decide how they will earn, spend, save,
invest, and produce. You choose
•
what you will buy
•
where you will buy it
•
how much you are willing to pay
•
whether you will use cash or credit
•
whether you will spend or save
Businesses respond to consumer choices by producing and selling the
goods and services consumers want. In the economy, the combined choices
of individual consumers make the greatest impact. Your decision to buy a
new cell phone will not greatly impact the manufacturer’s bottom line.
However, if thousands of others buy it, the company will make money.
You are also free to choose how to earn your money. There is a vast menu
of job possibilities in a free market economy. Your future income will depend
on the career choices you make and the abilities and skills you develop. If
you are willing to work hard and get the training and education required,
you can succeed in a market economy. This is not always true in a command
economy, where a central authority controls much of the opportunity.
A free market economy is also ideal for starting your own business.
The path of the entrepreneur is not an easy path, but it is open to anyone
with a sound idea and the willingness to take risks and work hard. Take a
look at the stories of those who founded well-known corporations such as
McDonald’s, Microsoft, and Walmart. Almost all of them started with an
idea that greatly appealed to consumers.
Competition
Economic competition occurs when two or more sellers offer similar
goods and services for sale in the marketplace. Each seller tries to do a
better job than the other in order to attract more customers, make more
sales, and earn more profi ts. Businesses compete with each other in many
ways. They compete in the areas of price, quality, features, service, and
new products.
In a market economy, innovation is the engine that sparks growth
and prosperity. Innovation is the process of creating something—new or
improved products and new ways to do things and solve problems.
1-4
All businesses, such as this
neighborhood florist, must
earn a profit in order to
stay open.
Entrepreneurs
Entrepreneurs are people
who organize, operate,
and assume the risk for
a business venture or
enterprise. Successful
entrepreneurs have
business management
skills, marketing knowledge,
and an understanding of
the demand for the product
or service they provide.