Transcript Chapter 17: The Economic System

HOLT
American Civics
Chapter 17
The Economic System
Section 1: The Economic System at Work
Section 2: Business Organization
Section 3: Making Business Decisions
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
Section 1: The Economic System at Work
OBJECTIVES
 What are the freedoms found in the U.S.
economy?
 What do the laws of supply and demand state?
 What is the free-enterprise system, and how
can big businesses both harm and help it?
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
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
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
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
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
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
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
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.
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
Section 2: Business Organizations
OBJECTIVES
 What are the different types of business
organizations?
 How do corporations function?
 What is the difference between preferred stock
and common stock?
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
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
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
Section 2: Business Organizations
Corporations
 Raise money by selling stocks
 Shareholders receive a portion of the profits in relation
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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.
HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
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
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
Section 3: Making Business Decisions
OBJECTIVES
 What are four factors of production?
 How are the four factors of productions
necessary to the success of business?
 In what ways does the government regulate
business?
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
Section 3: Making Business Decisions
The four factors of production:
 Natural resources
 Capital
 Labor
 Entrepreneurship
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
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
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HOLT, RINEHART
AND
WINSTON
HOLT
Chapter 17
American Civics
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
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HOLT, RINEHART
AND
WINSTON