HOLT, RINEHART AND WINSTON1 CIVICS IN PRACTICE HOLT Chapter 17 The Economic System Section 1:The...

HOLT, RINEHART AND WINSTON1

CIVICS IN PRACTICEHOLT

Chapter 17

The Economic System

Section 1:The Economic System at WorkSection 2:Business OrganizationSection 3:Making 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 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)

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:

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: 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.




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: 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 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: 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




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 Corporation

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?

Section 3: Making Business Decisions



The four factors of production:

Natural resources Capital Labor Entrepreneurship




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: 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?

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?

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?

HOLT, RINEHART AND WINSTON1 CIVICS IN PRACTICE HOLT Chapter 17 The Economic System Section 1:The...

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