civics ch.17

HOLT, RINEHART AND WINSTON11

CIVICSCIVICS IN PRACTICEIN PRACTICEHOLTHOLT

Chapter 17Chapter 17

The Economic SystemThe Economic System

Section 1:Section 1: The Economic System at WorkThe Economic System at Work

Section 2:Section 2: Business OrganizationBusiness Organization

Section 3:Section 3: Making Business DecisionsMaking Business Decisions



The Main IdeaCountries 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?

Section 1: The Economic System at WorkSection 1: The Economic System at Work



Economic Freedoms in the U.S. Economic Freedoms in the U.S. Market EconomyMarket Economy Freedom to buy and sellFreedom to buy and sell——government role is government role is

limitedlimited Freedom to competeFreedom to compete——producers make what producers make what

they think the consumer will buythey think the consumer will buy Freedom to earn a livingFreedom to earn a living——citizens free to citizens free to

seek the best jobs they can getseek the best jobs they can get




Economic Freedoms in the U.S. Economic Freedoms in the U.S. Market Economy Market Economy (continued)(continued)

Freedom to earn a profitFreedom to earn a profit——the the profit motiveprofit motive is is essential to the systemessential to the system

Freedom to own propertyFreedom to own property——private ownership private ownership makes the free market possiblemakes the free market possible




The laws of supply and demand state:The laws of supply and demand state:

The balance of supply and demand determines The balance of supply and demand determines the prices and quantities of goods and services.the prices and quantities of goods and services.

Law of supply—businesses will provide more Law of supply—businesses will provide more products when they can sell them at higher pricesproducts when they can sell them at higher prices

Law of demand—buyers will demand more Law of demand—buyers will demand more products when they can buy them at lower pricesproducts when they can buy them at lower prices




The free enterprise system and big businesses:The free enterprise system and big businesses: Free enterprise systemFree enterprise system——freedom to compete freedom to compete

without government interference allows the without government interference allows the opportunity to enjoy success and profitopportunity to enjoy success and profit

Businesses run risks and must accept losses.Businesses run risks and must accept losses. MonopoliesMonopolies harm a free economy by eliminating harm a free economy by eliminating

competition.competition. Some goods are produced more efficiently by big Some goods are produced more efficiently by big

businesses due to businesses due to economies of scale.economies of scale.




Question: In what ways can big business help and hurt the free-enterprise system?

SECTION 1

The Free-Enterprise System

Big Business

Harms the System

Helps the System

• monopolies• mergers• trusts• unfair competition

• employs many people

• produces goods more efficiently



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?

Section 2:Section 2: Business OrganizationsBusiness Organizations



Different types of business organizations:Different types of business organizations:

Sole proprietorshipsSole proprietorships——small businesses owned by one small businesses owned by one person; owners keep all profits but supply capital, person; owners keep all profits but supply capital, hire help, and pay taxes; solely responsible for losseshire help, and pay taxes; solely responsible for losses

PartnershipsPartnerships——two or more people share two or more people share responsibilities, costs, profits, and losses; often more responsibilities, costs, profits, and losses; often more successful than sole proprietorshipssuccessful than sole proprietorships

CorporationsCorporations——permanent organizations; most permanent organizations; most common form for large companiescommon form for large companies




Features of a CorporationFeatures of a Corporation Raise money by selling stocksRaise money by selling stocks Shareholders receive a portion of the profits in relation Shareholders receive a portion of the profits in relation

to their holdings.to their holdings. States issue charters of incorporation, and corporation States issue charters of incorporation, and corporation

obeys regulations.obeys regulations. Stockholders elect directors and vote on changes.Stockholders elect directors and vote on changes. Board of directors selects corporate officers.Board of directors selects corporate officers. No one is responsible for a corporation’s debt if it fails.No one is responsible for a corporation’s debt if it fails.




Differences between preferred stock Differences between preferred stock and common stock:and common stock: Preferred stockPreferred stock——less risky; dividends guaranteed if less risky; dividends guaranteed if

company is profitable; stockholders do not usually company is profitable; stockholders do not usually vote in company’s affairsvote in company’s affairs

Common stockCommon stock——more risky; dividends only when more risky; dividends only when company is very profitable; benefits include company is very profitable; benefits include possibility of higher dividends, increased stock possibility of higher dividends, increased stock value, and voting on company’s affairsvalue, and voting on company’s affairs




Question: What are the five most important features of a corporation?

SECTION 2

raising money

electing directors

choosing executives

securing the rights to operate

The Most Important Features of a The Most Important Features of a CorporationCorporation

meeting debt responsibilities



The Main IdeaBusiness 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:The four factors of production:

Natural resourcesNatural resources CapitalCapital Labor Labor EntrepreneurshipEntrepreneurship




The four factors of productions are The four factors of productions are necessary to the success of business:necessary to the success of business: Natural resourcesNatural resources——provide physical space and provide physical space and

raw materials for businessraw materials for business CapitalCapital——the money needed to start a businessthe money needed to start a business LaborLabor——the human effort required for the the human effort required for the

business business EntrepreneurshipEntrepreneurship——initiative, decisions, risks, initiative, decisions, risks,

and management involved in a businessand management involved in a business




How government regulates business:How government regulates business: Protects small businesses from big Protects small businesses from big

corporations (monopolies)corporations (monopolies) Protects workers’ health and safetyProtects workers’ health and safety Prevents pollutionPrevents pollution Protects consumers from harmful products Protects consumers from harmful products

and practicesand practices Ensures equal opportunity employmentEnsures equal opportunity employment




Question: What are the four factors of production?

capital

labor

SECTION 3

natural resources

entrepreneurship

Factors of Production



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?

civics ch.17

Education