The Economic System Chapter 17

American Civics: Ms. Shellhaas

The Economic System

• Freedom to Buy and Sell Free Market-the exchange between buyers and sellers who are free to choose.

• Freedom to Compete Free Competition-buyers show which goods they favor every time they make a purchase.

• Freedom to Earn a Living

The Economic System

•Freedom to Earn a Profit profit motive- desire to make a profit, it is essential to a free-economic system. Invest-to put money into various businesses and valuable goods

•Freedom to Own Property copyright-exclusive right granted by law, to publish or sell a written, musical, or art work for a certain number of years patent-gives a person the exclusive right to make and sell an invention for a certain number of years.

The Economic System

• Resources in a Free Market scarcity- the problem of limited resources.

• Supply and Demand Law of supply- businesses will provide more products when they can sell them at higher prices and fewer products when they must sell them at lower prices. Law of demand- buyers will demand more products when they can buy them at lower prices and fewer products when they must buy them at higher prices.

The Economic System

• Capitalism-U.S. economic system is considered to be this. Capital- is the money people invest in business. Not only does this refer to money but also items that people use to produce income, such as tools, buildings, and machines.

• Free-Enterprise System-an economic system in which people are free to operate their businesses as they see fit.

• Rise of Big Business

The Economic System

• Monopolies Monopoly- a company that is the only firm selling a product or providing a service. Merger-occurs when two or more companies combine to form one company. Trust-several companies create a board of trustees.

• Importance of big Business Economies of scale- describes the situation in which things can be produced more efficiently and cheaply by larger companies.

The Economic System

• Regulating Monopolies conglomerate- is formed by the merger of businesses that produce, supply or sell a number of unrelated goods and services. public utilities-companies that provide essential services to the public

• Comparing Economic Systems Command economy- the government owns almost all the capital, tools,and production equipment. Mixed economy-an economic system that combines elements of free and command economies.

Business Organizations Section 2

• Sole Proprietorships- small businesses that are owned by one person

• Partnerships- business organization in which two or more persons share responsibilities, costs, profits, and losses.

• Corporations-business organization chartered by a state government and given power to conduct business, sell stock, and receive protection of state laws.

Business Organizations

• Raising Money stocks- shares of ownership. Stockholders-people who buy corporate stocks. Dividends-corporation profits paid to stockholders.

• Rights to Operate

• Elected Directors

• Choosing Executives

• Debt Responsibility

Business Organizations

• Preferred and Common Stock- Preferred stock-shares of a corporation that earn a fixed dividend but do not give shareholders a voice in managing the company. Common stock-shares of a corporation that do not earn a fixed dividend but give shareholders a voice in managing the company

• Corporate Bonds• Nonprofit Organizations-a business organization that

provides goods and services without seeking to earn a profit

The Stock Market

Use your papers to follow along. Remember you are in charge of your finances.

The Stock Market Key Terms

• Investors-people who lend money to a company in exchange for a share in the company’s profits. You are the investor

• Stocks-the part of the company the investors own. You will be buying into a company through the purchase of stocks.

• Changing value-each day the value of a stock will change. The price will go up and down depending on the market. Each day we will look at the value of your stock to see if you have gained or lost money.

The Stock Market

• Buying and Selling-people buy and sell stocks daily. Their decision is based on news stories and new inventions announced by the company. You will be purchasing stocks for these same reasons. Look over the choices and decide where you want to put your $1,000.00

The Stock Market

Nasdeq stocks- these stocks are electronic stocks. They are based off of computers and run all the time. This means they can be bought and sold at any hour.

Dow Jones- these stocks can be traded online as well as through a stock broker. The Dow Jones is also known as the New York Stock Exchange.

The Stock Market

The Stocks can be watched by:

Television

Newspaper

Internet

The Stock Market

NASDAQ

Sisco

Intel

Microsoft

Amazon

Yahoo

Sun Microsystems

Double click

Apple Computers

Dell

Qualcom

DOW JONES

Pepsi (PEP)

Dayton Power & Light (DPL)

Nike (NKE)

McDonalds (MCD)

Wal-Mart (WMT)

General Motors (GM)

Nokia (NOK)

Abercrombie & Fitch (ANF)

Honda (HMC)

National City Bank (NCC)

Making Business Decisions Chapter 17 Section 3

• Factors of Production- four resources, or means of production-land, capital, labor, and management

• Land Rent- the money a person pays to use land or other property belonging to someone else

• Capital• Labor-human effort used to produce goods and services.

Productivity-amount of work produced by a worker in an hour

Making Business Decisions

•Management- Entrepreneurs- a business owner

•Profits Gross income- total amount of money a company receives from the sale of its goods and services. Net income- money a company has left over after all its costs have been paid

•Government’s role

The American Economic System

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