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Chapter 22: Section 3. New Methods and Business Organizations. Terms to Know. Capitalism Economic system in which individuals, rather than governments, control the factors of production Commercial capitalism

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chapter 22 section 3

Chapter 22: Section 3

New Methods and Business Organizations

terms to know
Terms to Know
  • Capitalism
    • Economic system in which individuals, rather than governments, control the factors of production
  • Commercial capitalism
    • Early economic system in which most capitalists were merchants who bought and sold goods
  • Industrial capitalism
    • Term for changes beginning in the 1700’s, when power-driven machines began to do much of the work that people had done before.
  • Interchangeable parts
    • Identical parts that can replace each other
  • Mass production
    • System of producing large numbers of identical items
  • Corporations
    • Businesses that allow people to buy stock in the company
the main idea
The Main Idea
  • Improved production methods helped to speed industrialization during the late 1800’s.
  • Capitalism
    • Describes an economic system in which individuals or corporations, rather than governments, control the factors of production.
    • Businesses and the means of production are privately owned and operated.
  • Factors of Production
    • 1) Land
    • 2) Capital
    • 3) Labor
  • Commercial Capitalism
    • Before Industrial Revolution
    • Capitalists were merchants who bought and sold goods.
      • Merchant-a person who buys and sells commodities for profit; dealer; trader.
  • Industrial capitalism
    • During the Industrial Revolution (late 18th and early 19th centuries)
    • Capitalists were more involved in producing and manufacturing goods.
division of labor
Division of Labor
  • Factory owners divided the manufacturing process into steps.
    • This increased production
    • Called DIVISION OF LABOR- divides the tasks among the employees
  • Use of machines in many of the steps
    • helped the workers produce more in a shorter time.
  • The lowered cost of production
    • made more profit for the owners.
interchangeable parts
Interchangeable Parts
  • Eli Whitney
    • Used division of power to make muskets in the late 1700’s.
    • PRIOR TO WHITNEY: an entire gun was made by skilled artisans
      • Each gun was slightly different
      • If a part broke, a new one had to be handmade
    • Whitney invented machines that made parts that were all alike.
        • Made it easy to repair
        • Other factory owners saw this and adopted the idea.
the assembly line
The Assembly Line
  • Mass Production- the system of producing large numbers of identical items.
  • Mass Production needs:
    • Division of labor
    • Interchangeable parts
    • Assembly line


    • Parts were made in a different location in the factory
    • Parts were then brought together and assembled at a single location
  • Manufacturers then devised theASSEMBLY LINE
    • The parts were carried from worker to work.
    • Each worker performed a certain task on the part.
the assembly line1
The Assembly Line
  • Henry Ford
    • Founded one of the largest industries in the world
      • FORD
    • Saw potential in the assembly line
    • Used a conveyor belt to carry automobile frames from one worker to the next.
    • Each worker added one or more of the numerous parts in the finished automobile
  • These images show a Ford assembly line in the early 1900’s.
  • Question:
    • How do you think the assembly line might have made work easier for these Ford employees?
      • Answer: The assembly line allowed the workers to perform a task in less time and with less energy.
  • In about 1914 Henry Ford found himself facing a high turnover rate in his labor force. Rather than continue to hire new employees to offset these turnovers, Ford doubled the daily wage of his workers from about $2.50 to $5.00. His tactic paid off in more ways than one. Not only did his labor force stabilize, his operating costs also decreased. These positive factors allowed Ford to increase production.
    • Why was it a good tactic for Ford to double the daily wages to the workers.
    • Answer: Skilled and reliable workers stayed, reducing operating costs.
rise of the corporation
Rise of the Corporation
  • Before the Industrial Revolution, most businesses were very small.
    • Sole proprietorship- business owned and run by just one person
    • Partnership- two or more people ran and owned a business
  • Small Companies and few workers could not afford mass-production methods or machinery for large-scale production.
  • As business grew during the 1800’s, another form of business became common.
    • Corporations
      • Businesses that allow people to buy stock in the company
  • Stocks
    • Allowed people to buy stock in their companies
      • Easier to raise money needed to run and expand a business.
    • Stock holders share profits
      • Depended on how many shares of stock they owned
      • Financial responsibility was limited to the amount he or she had invested.