1. The Economic System NEXT

2. Section 1: The Economic System at Work Countries form many types of economic systems to meet their citizens' needs and wants. The United 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 economic system like? NEXT The Main Idea

3. 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 Freedom to earn a profit—the profit motive is essential to the system Freedom to own property—private ownership makes the free market possible Section 1: The Economic System at Work 1 SECTION NEXT

5. Section 1: The Economic System at Work 1 SECTION NEXT

6. 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 Section 1: The Economic System at Work 1 SECTION NEXT

7. 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. Section 1: The Economic System at Work 1 SECTION NEXT

8. Question: In what ways can big business help and hurt the free-enterprise system? Section 1: The Economic System at Work 1 SECTION NEXT

9. Question: In what ways can big business help and hurt the free-enterprise system? Helps the System employs many people produces goods more efficiently Harms the System monopolies mergers trusts unfair competition Section 1: The Economic System at Work 1 SECTION NEXT

10. Section 2: Business Organizations 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? NEXT The Main Idea

11. 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 Section 2: Business Organizations 2 SECTION NEXT

12. Different types of business organizations: Partnerships—two or more people share responsibilities, costs, profits, and losses; often more successful than sole proprietorships Section 2: Business Organizations 2 SECTION NEXT

14. Different types of business organizations: Corporations—permanent organizations; most common form for large companies Section 2: Business Organizations 2 SECTION NEXT

15. 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. Section 2: Business Organizations 2 SECTION NEXT

16. 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 Section 2: Business Organizations 2 SECTION NEXT

17. Question: What are the five most important features of a corporation? Section 2: Business Organizations 2 SECTION NEXT

18. 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 electing directors choosing executives Section 2: Business Organizations 2 SECTION NEXT

19. Section 3: Making Business Decisions 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? NEXT The Main Idea

21. The four factors of production are necessary for 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 Section 3: Making Business Decisions 3 SECTION NEXT

22. 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 Section 3: Making Business Decisions 3 SECTION NEXT

23. Question: What are the four factors of production? Section 3: Making Business Decisions 3 SECTION NEXT

24. Question: What are the four factors of production? Factors of Production natural resources capital labor entrepreneurship Section 3: Making Business Decisions 3 SECTION NEXT

25. How do the laws of supply and demand affect the prices of products? What is the free-enterprise system, and what roles do big businesses play in it? What are the major characteristics of corporations, and what are their benefits? What are the advantages and disadvantages of preferred stock and common stock? How are stocks and corporate bonds similar and different? What role does the government play in the U.S. economy? Why must the factors of production be considered when starting a new business? Chapter 17 Wrap-Up NEXT Wrap-Up