Entrepreneurship -- Section 3.3

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Chapter 3 Slide 1 Lesson 3.3GOVERNMENT IN A MARKET ECONOMY Explain the government’s effect on what is produced. Recognize the different roles the government plays in a market economy. GOALS


Chapter 3 Slide 2 GOVERNMENT’S EFFECT ON WHAT IS PRODUCED Although the US economy is made up of private companies, the government has an effect on what is produced in three important ways Purchases Taxes Subsidies

Purchases : 

Chapter 3 Slide 3 Purchases The government purchases huge amounts of goods and services NASA is the sole purchaser of various devices produced by aerospace companies Private companies also supply the government with everything from pens to office cleaning supplies

Taxes : 

Chapter 3 Slide 4 Taxes The government taxes certain goods and services Most states charge sales tax on retail sales, most charge extra taxes on certain items such as cigarettes, gasoline, and alcoholic beverages These taxes reduce consumption of these products, reducing producers’ revenues.

Subsidies : 

Chapter 3 Slide 5 Subsidies The government provides subsidies, or payments, to produces of certain kinds of goods Agriculture products are commonly subsidized The government also pays subsidies to companies that locate their business in certain inner-city neighborhoods known as enterprise zones

Roles of the Government : 

Chapter 3 Slide 6 Roles of the Government In a market economy, the government plays different roles The government may serve as a Regulator Provider of public good Provider of social programs Redistributor of income


Chapter 3 Slide 7 ROLES OF THE GOVERNMENT Regulator Inspection Licenses Provider of public good Provider of social programs Redistributor of income

The Government as a Regulator : 

Chapter 3 Slide 8 The Government as a Regulator A market economy is based on private companies producing goods and services in order to earn a profit Sometimes this desire to earn profits motivates a business owner to engage in practices that put the consumer in danger Therefore, the government tries to protect the consumer and employees through different regulations

Inspection : 

Chapter 3 Slide 9 Inspection The US Department of Agriculture (USDA) inspects meat and poultry plants to ensure that appropriate hygienic measures are being observed The US Occupation Safety and Health Administration (OSHA) inspects factories to ensure that conditions are safe for workers

Licenses : 

Chapter 3 Slide 10 Licenses The government also requires that some businesses obtain licenses for operation Barbers and Beauticians must be licensed to practice Pass exams, pay fees before starting business

Provider of Public Good : 

Chapter 3 Slide 11 Provider of Public Good A public good is a good from which everyone receives benefits, not just the individual consuming the good Vaccinations against diseases Armed forces Highways Schools

Provider of Social Programs : 

Chapter 3 Slide 12 Provider of Social Programs The government offers social programs such as Social Security Welfare Medical research The cost of these programs is divided up between tax payers

Redistributors of Income : 

Chapter 3 Slide 13 Redistributors of Income The government further affects the economy by redistributing income People with higher incomes pay more in taxes Lower income people benefit from social programs provided by government An entrepreneur who makes less money at a smaller business will pay less in taxes than a large company with a lot of business

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