6 Characteristics of USA Economy
Competition
Capitalism
Private Property
- The Government has a Capitalist system, which is another name for market economy.
- Individuals own the factors of production, but can only use them within legal limits.
- Used to be that the government had no hand in regulating the economy, being a LAISSEZ-FAIRE economy.
- For example, while in a communist government, their would be a limit to how much you could buy of something legally, were as in the US, your only limit, provided what you are buying is legal, is how much their is and how much you can afford. Their is less regulation in the US economy, with the government having less control
- Competition is rivalry among producers/sellers of similar goods/services to win more business
- This fighting usually consists of lowering prices to sell more in bulk, or to make a better, more demanded product.
- While other governments, such as communism, generally have no competition and have the government and producers working together to make everything equal, this system requires the government to have only a little involvement, and has instead of one standard business, has multiple fighting for the consumers attention
- For Competition to be effective, you need many competitors, so no single company has to much power.
- Property is owned by individuals or groups rather than the government
- The ability to own is limited by what you can legally buy and what you can afford.
- With this property holds also the right to invest, own productive assets, and more opportunities and costs.
- Their are, like in all aspects, still regulations like income and property tax, though this is mainly on houses and land, not stuff like toilet paper, maybe.
Profit Incentive
Freedom of Choice
- Profit is the amount left over after all costs of production have been paid.
- Profit Incentive is what drives the economy and business, as the goal of every business is to make a profit. It is this desire that motivates people to make or sell things, in order to make money.
- A man notice he has a large amount of socks, and he doesn't want socks, he wants money, so he sells his socks fora profit, and uses some of it to buy more socks for him to sell. Soon, he is the main seller and distributor of socks around, all because he wants to make more and more money, and now people have socks.
- Buyers, not sellers, make the decision about what should or should not be produced.
- The buyers are given a wide range of products to chose from, and so their decisions about what is popular to them determines what will be made, as businesses want to sell more in order to make a bigger profit.
- This range of products and this want of customers is possible by COMPETITION
- People by more video games than boardgames, so more video games are produced than boardgames. Because they are in much more demand, they can be sold for higher prices, as people will still want them
Free-Enterprise System
- Free-Enterprise is another name for a market economy
- People can own factors of production and go into business for themselves and make a profit, but must obey certain laws, like tax laws or labor laws.
- An example would be making a business of making fertilizer. One could make a profit, but must first register for a loan, register with the government on business tax, and about potential environmental dangers of such a business