The Economic System<br />Chap. 17<br />
The Need for Economic Systems<br />All people have essential needs for survival (food, water, shelter)<br />After needs ar...
Question 1<br />Name one essential need.<br />
Question 2<br />How is a want different than a need?<br />
Types of Economic Systems<br />There are three basic systems<br />Traditional economy: economic decisions are based on how...
2nd type-Command economy<br />Government makes all economic decisions, and owns all capital, tools and production equipmen...
3rd type-Market economy<br />Economic decisions are made by individuals acting on their own interests (United States)<br /...
3. What economic system has the most government involvement?<br />A. Communism<br />B. Capitalism<br />C.  Free Market<br ...
4. How is a market economy different from a command economy?<br />A. More consumer choices<br />B. More government interfe...
Life in a Market Economy: Competition for Resources<br />People are free to start a business and pursue profit (money a bu...
Scarcity (lack of a particular resource) creates competition<br />Scarcity also affects prices <br />
Resources are needed to provide service and make profit<br />
Supply and Demand<br />Changes in price are the result of the laws of supply and demand<br />Law of supply: business will ...
Question 5<br />Why do people establish a business in a market or capitalist economy?<br />A. to make a profit<br />B. to ...
Question 6<br />How are prices determined?<br />A. Businesses pick a number<br />B. Demand by consumers<br />C. Supply by ...
Free Enterprise, Market or Capitalism<br />Is when business owners may operate however they wish in a market economy, with...
Capitalism<br />An economic system in which productive resources are owned by private citizens (US)<br />Linked to free ec...
Question 7<br />Under what system do people own private property, discourage government interference and try to make a pro...
Monopolies<br />The free-enterprise system does not like businesses that limit competition which can happen if a business ...
Question 8<br />What happens if demand for a product exceeds supply?<br />A. Prices for that product will go up<br />B. Pr...
The U.S. Economic System<br />The US has a free Market economy or modified capitalism but there are some instances in whic...
Some nations have a  Mixed Economy aka Socialism<br />An economy that mixes elements of different economic systems<br /> B...
Question 10<br />What do we call an economy that is a combination of both capitalism and other systems?<br />A. Mixed Up<b...
Question 11<br />Why do businesses exist in a capitalist, free enterprise, market economy?<br />A. To provide services to ...
Question 12<br />There are only two companies that produce “Amazing-Gadget-That-Everyone-Wants”. If operating under the US...
Business Organizations<br />Businesses may be owned in three different way in US<br />Sole proprietorship<br />Partnership...
Sole Proprietorships<br />A small business owned by one person<br />Advantages: being your own boss, being able to decide ...
Partnership<br />A business in which two or more people share the responsibilities, costs, profits, and losses<br />Allows...
Corporations<br />A type of business that is recognized as a separate legal entity from the people who own it (includes la...
Question 13<br />How did most American businesses start out?<br />A. As sole proprietorships<br />B. As partnerships<br />...
How Corporations Function:Raising Money<br />Selling stock (shares of ownership) to gain capital<br />Shareholders are peo...
Question 14<br />Why would someone buy a bond or stock of a company instead of putting money in a savings account? (hint: ...
How Corporations Function: Elected Directors<br />Stockholders elect directors of corporation<br />Law requires that at le...
How a Corporation Functions:Debt Responsibility <br />Neither stockholders or executives are responsible for failure<br />...
Question 15, 16 and 17<br />So let’s say Blockbuster goes out of business and declares bankruptcy (a distinct possibility)...
Nonprofit Organizations<br />Organizations that provide goods and services without seeking to earn a profit for stockholde...
Question 18, 19 and 20.<br />18.Why don’t nonprofit organizations pay taxes?<br />19.If you wanted to own a business but n...
Factors of Production<br />Countries and companies must decide (1) what they are going to produce, (2) how they are going ...
 Natural Resources<br />Raw materials needed to produce goods<br />found on or in the Earth or atmosphere<br />Limited and...
Capital<br />The manufactured goods used to make other goods and services<br />Tools, trucks, machines, computers<br />
Labor<br />All human effort, skills, and abilities used to produce goods and services<br />Refers to the actually workers ...
Entrepreneurship <br />A person who organizes, manages and assumes the risks of a business <br />Come up with new product,...
Question 21 and 22<br />21. Name a famous entrepreneur<br />22. What do you think is the most important factor of producti...
The Government’s Role in a Free Market<br />US government does not dictate what type of products are made but they do cont...
Question 23<br />Why do some businesses pay their workers by the hour as opposed to salaries?<br />
Question 24.<br />Do you think the idea of a minimum wage is a good idea or should employers be able to pay whatever wage ...
Question 25. <br />The state of Pennsylvania has had a lot of new companies come to our state to extract natural gas in a ...
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Ch. 17 the economic system

  1. 1. The Economic System<br />Chap. 17<br />
  2. 2. The Need for Economic Systems<br />All people have essential needs for survival (food, water, shelter)<br />After needs are met they have wants; things not essential for survival (phone, tv, etc)<br />
  3. 3. Question 1<br />Name one essential need.<br />
  4. 4. Question 2<br />How is a want different than a need?<br />
  5. 5. Types of Economic Systems<br />There are three basic systems<br />Traditional economy: economic decisions are based on how economic activity has been done in the past (barter system, making own goods) Common in developing nations<br />
  6. 6. 2nd type-Command economy<br />Government makes all economic decisions, and owns all capital, tools and production equipment (communist or Marxist countries)<br />
  7. 7. 3rd type-Market economy<br />Economic decisions are made by individuals acting on their own interests (United States)<br />Also known as (aka)FreeMarket or Capitalism: based on freedom to buy and sell goods as you want<br />
  8. 8. 3. What economic system has the most government involvement?<br />A. Communism<br />B. Capitalism<br />C. Free Market<br />D. Market<br />
  9. 9. 4. How is a market economy different from a command economy?<br />A. More consumer choices<br />B. More government interference<br />C. Private property<br />D. A & B<br />E. A & C<br />
  10. 10. Life in a Market Economy: Competition for Resources<br />People are free to start a business and pursue profit (money a business has left after it has paid its expenses)<br />
  11. 11. Scarcity (lack of a particular resource) creates competition<br />Scarcity also affects prices <br />
  12. 12. Resources are needed to provide service and make profit<br />
  13. 13. Supply and Demand<br />Changes in price are the result of the laws of supply and demand<br />Law of supply: business will produce more products when they can sell them at higher prices and fewer products when prices are low<br />Law of demand: buyers will demand a greater quantity of a good when its price is low and want less when the price is high<br />
  14. 14. Question 5<br />Why do people establish a business in a market or capitalist economy?<br />A. to make a profit<br />B. to help people<br />C. to provide a service to make the world a better place<br />D. so the government can make more money<br />
  15. 15. Question 6<br />How are prices determined?<br />A. Businesses pick a number<br />B. Demand by consumers<br />C. Supply by producers<br />D. Supply and Demand<br />
  16. 16. Free Enterprise, Market or Capitalism<br />Is when business owners may operate however they wish in a market economy, with little interference from government<br />Opportunities for huge profit (Bill Gates)…as well has huge losses<br />Competition is vital and pushes for improvement of products<br />
  17. 17. Capitalism<br />An economic system in which productive resources are owned by private citizens (US)<br />Linked to free economy; people buy and sell as they please<br />Encourages investment, innovation, and production of quality goods<br />
  18. 18. Question 7<br />Under what system do people own private property, discourage government interference and try to make a profit.<br />A. capitalism<br />B. communism<br />C. free market<br />D. both A & C<br />E. both B & C<br />
  19. 19. Monopolies<br />The free-enterprise system does not like businesses that limit competition which can happen if a business has a monopoly.<br />A company has a monopoly if it is the only one selling a particular product or service. They can set prices regardless of supply and demand because they are the only ones that have the supply. Monopolies are illegal.<br />
  20. 20. Question 8<br />What happens if demand for a product exceeds supply?<br />A. Prices for that product will go up<br />B. Prices for that product will go down<br />C. Prices stay the same<br />D. The government takes over the business in a capitalist nation.<br />
  21. 21. The U.S. Economic System<br />The US has a free Market economy or modified capitalism but there are some instances in which government imposes some regulations (like a command economy)<br />Question 9<br />Give an example of the US regulating a business.<br />
  22. 22. Some nations have a Mixed Economy aka Socialism<br />An economy that mixes elements of different economic systems<br /> Business are free to operate as they wish, but must follow certain regulations that are monitored by the government; include price control and subsidies<br />Intended to protect people and environment<br />Ex. Minimum wage or how much of a chemical can be released into the air<br />
  23. 23. Question 10<br />What do we call an economy that is a combination of both capitalism and other systems?<br />A. Mixed Up<br />B. Mixed or Socialism<br />C. Communism<br />D. Marxism<br />
  24. 24. Question 11<br />Why do businesses exist in a capitalist, free enterprise, market economy?<br />A. To provide services to people<br />B. To provide goods to people<br />C. To give people jobs<br />D. To make a profit for themselves and stockholders<br />
  25. 25. Question 12<br />There are only two companies that produce “Amazing-Gadget-That-Everyone-Wants”. If operating under the US government, would these two companies be allowed to join up and be the sole producer of this product? Yes or no and why?<br />
  26. 26. Business Organizations<br />Businesses may be owned in three different way in US<br />Sole proprietorship<br />Partnership<br />Corporation<br />Each one is slightly different from each other.<br />
  27. 27. Sole Proprietorships<br />A small business owned by one person<br />Advantages: being your own boss, being able to decide business hours, and taking all profits<br />Disadvantages: must have or borrow all money for rend and equipment, must be able to pay employees, personally liable for taxes<br />
  28. 28. Partnership<br />A business in which two or more people share the responsibilities, costs, profits, and losses<br />Allows for more capital (money to invest) and better chances of success<br />Advantages and disadvantages similar to sole proprietorship except that there are multiple people to provide capital and share responsibilities. Owners must cooperate or lose efficiency <br />
  29. 29. Corporations<br />A type of business that is recognized as a separate legal entity from the people who own it (includes large business)<br />Permanent organization(doesn’t end when owner dies)<br />
  30. 30. Question 13<br />How did most American businesses start out?<br />A. As sole proprietorships<br />B. As partnerships<br />C. As corporations<br />D. The government created them<br />
  31. 31. How Corporations Function:Raising Money<br />Selling stock (shares of ownership) to gain capital<br />Shareholders are people who buy corporate stocks<br />Dividends are corporate profits paid to stockholders<br />Selling bonds (loans) <br />People buy bonds are loaning money to the company, which will then have to pay interest before it pays the stockholders<br />
  32. 32. Question 14<br />Why would someone buy a bond or stock of a company instead of putting money in a savings account? (hint: what is riskier, what could you more money?)<br />
  33. 33. How Corporations Function: Elected Directors<br />Stockholders elect directors of corporation<br />Law requires that at least one stockholder meeting be held each year<br />Board of directors chosen at this time<br />Votes on changes in the business structure <br />One share = one vote<br />
  34. 34. How a Corporation Functions:Debt Responsibility <br />Neither stockholders or executives are responsible for failure<br />If a corporation goes out of business, its assets (property, building, valuables) are sold<br />Money raised goes towards paying the debt<br />
  35. 35. Question 15, 16 and 17<br />So let’s say Blockbuster goes out of business and declares bankruptcy (a distinct possibility)-what happens to the stores, employees and stockholders?<br />
  36. 36. Nonprofit Organizations<br />Organizations that provide goods and services without seeking to earn a profit for stockholders<br />Charities, research associations, educational programs<br />Don’t make profit, so don’t pay taxes<br />Large nonprofits are corporations <br />Red Cross, United Way, Girl Scouts<br />
  37. 37. Question 18, 19 and 20.<br />18.Why don’t nonprofit organizations pay taxes?<br />19.If you wanted to own a business but not be the only person sharing responsibility, what type of business organization should you create?<br />20.Explain the difference between bond and a stock.<br />
  38. 38. Factors of Production<br />Countries and companies must decide (1) what they are going to produce, (2) how they are going to produce it and (3) who is going to buy it.<br />To answer these three questions the four factors of production must be taken into consideration-natural resources, capital, labor and entrepreneurship.<br />
  39. 39. Natural Resources<br />Raw materials needed to produce goods<br />found on or in the Earth or atmosphere<br />Limited and only considered a factor when you have to pay for it<br />
  40. 40. Capital<br />The manufactured goods used to make other goods and services<br />Tools, trucks, machines, computers<br />
  41. 41. Labor<br />All human effort, skills, and abilities used to produce goods and services<br />Refers to the actually workers rather than the business owners<br />Paid hourly or with fixed earnings (salary)<br />
  42. 42. Entrepreneurship <br />A person who organizes, manages and assumes the risks of a business <br />Come up with new product, put in their own time and capital and hopes to make a substantial profit<br />
  43. 43. Question 21 and 22<br />21. Name a famous entrepreneur<br />22. What do you think is the most important factor of production and why?<br />
  44. 44. The Government’s Role in a Free Market<br />US government does not dictate what type of products are made but they do control:<br />Monopolies<br />Protects personal rights<br />Taxes<br />
  45. 45. Question 23<br />Why do some businesses pay their workers by the hour as opposed to salaries?<br />
  46. 46. Question 24.<br />Do you think the idea of a minimum wage is a good idea or should employers be able to pay whatever wage they can to fill their needs? Explain<br />
  47. 47. Question 25. <br />The state of Pennsylvania has had a lot of new companies come to our state to extract natural gas in a process known as hydraulic fracturing or “fracking”. Of the four factors of production which one best explains why these companies are locating here.<br />Bonus: What does “aka” stand for?<br />

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