Chapter 17 The Economic System - PowerPoint PPT Presentation

Presentation Transcript

Section 1:The Economic System at Work

Section 2:Business Organization

Section 3:Making Business Decisions

Chapter 17The Economic System

Section 1: The Economic System at Work

The Main Idea

Countries form many types of economic systems to meet their citizens’ needs and wants. The Untied States has a market economy.

Reading Focus

How do different economic systems help satisfy people’s needs?
What factors shape life in a market economy?
What is the U.S.S economic system like?

Economic Freedoms in the U.S. Market Economy

Freedom to buy and sell—government role is limited
Freedom to compete—producers make what they think the consumer will buy
Freedom to earn a living—citizens free to seek the best jobs they can get

Economic Freedoms in the U.S. Market Economy (continued)

Freedom to earn a profit—the profit motive is essential to the system
Freedom to own property—private ownership makes the free market possible

The laws of supply and demand state:

The balance of supply and demand determines the prices and quantities of goods and services.
Law of supply—businesses will provide more products when they can sell them at higher prices
Law of demand—buyers will demand more products when they can buy them at lower prices

The free enterprise system and big businesses:

Free enterprise system—freedom to compete without government interference allows the opportunity to enjoy success and profit
Businesses run risks and must accept losses.
Monopolies harm a free economy by eliminating competition.
Some goods are produced more efficiently by big businesses due to economies of scale.

The Free-Enterprise System

Helps the System

Big Business

Harms the System

SECTION 1

Question: In what ways can big business help and hurt the free-enterprise system?

monopolies
mergers
trusts
unfair competition

employs many people
produces goods more efficiently

Section 2: Business Organizations

The Main Idea

American businesses may be organized as sole proprietorships, partnerships, corporations, or nonprofit organizations.

Reading Focus

What are the different types of business organizations?
How do corporations function?
What is a nonprofit organization?

Different types of business organizations:

Sole proprietorships—small businesses owned by one person; owners keep all profits but supply capital, hire help, and pay taxes; solely responsible for losses
Partnerships—two or more people share responsibilities, costs, profits, and losses; often more successful than sole proprietorships
Corporations—permanent organizations; most common form for large companies

Features of a Corporation

Raise money by selling stocks
Shareholders receive a portion of the profits in relation to their holdings.
States issue charters of incorporation, and corporation obeys regulations.
Stockholders elect directors and vote on changes.
Board of directors selects corporate officers.
No one is responsible for a corporation’s debt if it fails.

Differences between preferred stock and common stock:

Preferred stock—less risky; dividends guaranteed if company is profitable; stockholders do not usually vote in company’s affairs
Common stock—more risky; dividends only when company is very profitable; benefits include possibility of higher dividends, increased stock value, and voting on company’s affairs

raising money

securing the rights to operate

choosingexecutives

electingdirectors

SECTION 2

Question: What are the five most important features of a corporation?

The Most Important Features of a Corporation

meeting debt responsibilities

Section 3: Making Business Decisions

The Main Idea

Business owners must make decisions about their use of natural resources, capital, labor, and entrepreneurship. Business owners are free to make these decisions with little interference from the government.

Reading Focus

What are the four factors of production?
What is the government's role in the economy?

The four factors of production:

Natural resources
Capital
Labor
Entrepreneurship

The four factors of productions are necessary to the success of business:

Natural resources—provide physical space and raw materials for business
Capital—the money needed to start a business
Labor—the human effort required for the business
Entrepreneurship—initiative, decisions, risks, and management involved in a business

How government regulates business:

Protects small businesses from big corporations (monopolies)
Protects workers’ health and safety
Prevents pollution
Protects consumers from harmful products and practices
Ensures equal opportunity employment

capital

labor

SECTION 3

Question: What are the four factors of production?

natural resources

Factors of Production

entrepreneurship

Chapter 17 Wrap-Up

1. How do the laws of supply and demand affect the prices of products?
2. What is the free-enterprise system, and what roles do big businesses play in it?
3. What are the major characteristics of corporations, and what are their benefits?
4. What are the advantages and disadvantages of preferred stock and common stock?
5. How are stocks and corporate bonds similar and different?
6. What role does the government play in the U.S. economy?
7. Why must the factors of production be considered when starting a new business?