Chapter 17 The Economic System American Civics 4/19/2017 Chapter 17 The Economic System Section 1: The Economic System at Work Section 2: Business Organization Section 3: Making Business Decisions Chapter 17

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 Section 1: The Economic System at Work 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) Section 1: The Economic System at Work 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: Section 1: The Economic System at Work 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: Section 1: The Economic System at Work 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 SECTION 1 Question: In what ways can big business help and hurt the free-enterprise system? The Free-Enterprise System Big Business Helps the System Harms the 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: Section 2: Business Organizations 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 Section 2: Business Organizations 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: Section 2: Business Organizations 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

The Most Important Features of a Corporation SECTION 2 Question: What are the five most important features of a corporation? The Most Important Features of a Corporation raising money securing the rights to operate meeting debt responsibilities choosing executives electing directors

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: Section 3: Making Business Decisions The four factors of production: Natural resources Capital Labor Entrepreneurship

Section 3: Making Business Decisions 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: Section 3: Making Business Decisions 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

Question: What are the four factors of production? SECTION 3 Question: What are the four factors of production? capital natural resources Factors of Production labor 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?