ECONOMIC STRUCTURES

Joe's $$$$$$$$$ JOE JOE is an “Entrepreneur”

(Someone who starts a business) QUICK NOTES Entrepreneur: A person who takes a risk to produce goods and services in search of a PROFIT! (Someone who starts a business)

3 Structures of Businesses QUICKNOTES 3 Structures of Businesses Proprietorship: Partnership: Corporation:

PROPRIETORSHIP Joe's $$$$$$$$$ JOE “Entrepreneur”

3 Structures of Businesses QUICKNOTES 3 Structures of Businesses Proprietorship: One owner who takes all the risks and all the profits.

PARTNERSHIP JOE & BOB’S Joe's $$$$$$$$$ $$$$$$$$$ BOB JOE

3 Structures of Businesses QUICKNOTES 3 Structures of Businesses Proprietorship: One owner who takes all the risks and all the profits. Partnership: 2 or more owners who share all the risks and profits.

Joe now “shared” his company with all the stockholders. Remember Joe? Remember how Joe sold stock in his company so he could make his company bigger? Joe now “shared” his company with all the stockholders. JOE Stockholders

$$$$$$$$$$$ $$$$$$ $$$$$$ $$$$$$ $$$$$$ $$$$$$ $$$$$$ JOE Stockholders

WHAT IS A CORPORATION?

3 Structures of Businesses QUICKNOTES 3 Structures of Businesses Proprietorship: One owner who takes all the risks and all the profits. Partnership: 2 or more owners who share all the risks and profits. Corporation: A business authorized by law to act as a legal person regardless of the number of owners. Owners share profits. Profits depend on how much was invested.

CIRCULAR FLOW

CONSUMERS PRODUCERS GOVERNMENT

…LET’S LOOK AT THIS “FLOW” A LITTLE MORE CLOSELY…

CONSUMERS PRODUCERS GOVERNMENT JOE’S PRODUCERS GOVERNMENT

Economic Flow (Circular Flow) QUICKNOTES Economic Flow (Circular Flow) Individual and business saving and investment provide financial capital that can be borrowed for business expansion and increased consumption

BUSINESS FLOW CONSUMERS PRODUCERS SELL GOODS LAND CAPITAL SELL SERVICES LABOR WAGES BUY SERVICES RENT JOE’S PRODUCERS BUY GOODS INTEREST PROFITS

Economic Flow (Circular Flow) QUICKNOTES Economic Flow (Circular Flow) Individual and business saving and investment provide financial capital that can be borrowed for business expansion and increased consumption Individuals (households) own the resources used in production, sell the resources, and use the income to purchase products Businesses (producers) buy resources; make products that are sold to individuals, other businesses, and the government; and use the profits to buy more resources

CONSUMERS PRODUCERS GOVERNMENT JOE’S PRODUCERS GOVERNMENT

BUSINESS FLOW CONSUMERS GOVERNMENT SERVICES LABOR WAGES SERVICES INTEREST GOVERNMENT TAXES BENEFITS

CONSUMERS PRODUCERS GOVERNMENT JOE’S PRODUCERS GOVERNMENT

BUSINESS FLOW GOVERNMENT PRODUCERS SERVICES TAXES BUY SERVICES SELL GOODS BUY GOODS SELL SERVICES JOE’S PRODUCERS

Economic Flow (Circular Flow) QUICKNOTES Economic Flow (Circular Flow) Individual and business saving and investment provide financial capital that can be borrowed for business expansion and increased consumption Individuals (households) own the resources used in production, sell the resources, and use the income to purchase products Businesses (producers) buy resources; make products that are sold to individuals, other businesses, and the government; and use the profits to buy more resources Governments use tax revenue from individuals and businesses to provide public goods and services

CONSUMERS PRODUCERS GOVERNMENT JOE’S PRODUCERS              GOVERNMENT

BUSINESS FLOW

REMEMBER THE GREAT DEPRESSION? Stock Market Crash Investors lose all their money People lose jobs Those who bought stock on margin cannot pay back banks. Businesses fail…there are no investors! People lose life savings Banks fail