The U.S. economic system of free enterprise operates according to
five main principles: the freedom to choose our businesses, the right
to private property, the profit motive, competition, and consumer
Freedom to Choose Our Businesses
In this country, the decision whether or not you should go into
computer services or any other kind of enterprise (business) is
basically yours alone to make. You will decide what fees to charge
and what hours to work. Certain laws prohibit you from cheating or
harming your customers or other people. But, in general, you will be
left alone to run your business as you see fit.
Right to Private Property
Private property is a piece of land, a home, or a car owned by an
individual, a family, or a group. It differs from a public building,
or public property, such as the city hall, a park, or a highway, all
of which provide a government service for all citizens. In the U.S.
economic system, people's right to buy and sell private property is
guaranteed by law. People must use the property in safe and
reasonable ways, of course. In setting up computer systems for your
customers, for example, you do not have the right to interfere with
the electrical, telephone, or computer systems of other people.
The main reason why you or any enterprising person organizes a
business is to make money. You do this by earning more money than you
spend. The amount of money left over after subtracting your business
expenses from your business income is known as your profit. In the
free enterprise system, business firms try hard to keep costs down
and increase their income from sales. The better they succeed at
this, the higher are their profits. Economists describe the efforts
by business firms to earn the greatest profits as the profit motive.
Just as you are free to start a computer business, so is everyone
else. The rivalry between sellers in the same field for consumers'
dollars is called competition. If your business is profitable, it is
likely that others will enter the same business hoping to be as
successful as you are. They will be competing with you for the same
customers. To win a share of the computer business, other sellers may
try to offer more and better services, or services at lower prices.
Because of the pressure of competition, business firms must
constantly try to provide the best services and create the best
products at the lowest possible prices.
In the end, it is the customers, or consumers, who determine
whether any business succeeds or fails. In the U.S. free enterprise
economy, consumers are said to have sovereignty-the power or freedom
to have final say. Consumers are free to spend their money for
Product X or for Product Y. If they prefer Y over X, then the company
making X may lose money, go out of business, or decide to manufacture
something else (perhaps Product Z). Thus, how consumers choose to
spend their dollars causes business firms of all kinds to produce
certain goods and services and not others.
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