Question

Why is an appreciation of free-enterprise important? Give a unique example of those who appreciate free-enterprise and contrast it with an example of those who are hostile toward free-enterprise. Is there any lesson to be learned from this example?

Answer 1

Free enterprise, or capitalism, is an economic system where the individuals in the economy have the freedom to create business and conduct economic activity with almost no government intervention. An appreciation of free enterprise is important because of the following advantages:

1. Supply and demand are determined by the market which leads to socially optimal level of price and quantity.

2. There is large incentive to work hard as businesses keep the profits with themselves, workers get higher wages for working more.

3. The producers are forced to work efficiently because of the presence of competition among the suppliers of goods.

4. There is lot of flexibility in such enterprises which improves overall productivity.

For instance, the United States in the country that promotes free enterprise and thus is an efficient economy in terms of production of goods and services. On the other hand, China is a communist economy and is not very efficient as compared to the United States. Thus, the lesson learnt is clear that appreciation of free enterprise is important.