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Ch. 17 the economic system
 

Ch. 17 the economic system

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    Ch. 17 the economic system Ch. 17 the economic system Presentation Transcript

    • The Economic System
      Chap. 17
    • The Need for Economic Systems
      All people have essential needs for survival (food, water, shelter)
      After needs are met they have wants; things not essential for survival (phone, tv, etc)
    • Question 1
      Name one essential need.
    • Question 2
      How is a want different than a need?
    • Types of Economic Systems
      There are three basic systems
      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
    • 2nd type-Command economy
      Government makes all economic decisions, and owns all capital, tools and production equipment (communist or Marxist countries)
    • 3rd type-Market economy
      Economic decisions are made by individuals acting on their own interests (United States)
      Also known as (aka)FreeMarket or Capitalism: based on freedom to buy and sell goods as you want
    • 3. What economic system has the most government involvement?
      A. Communism
      B. Capitalism
      C. Free Market
      D. Market
    • 4. How is a market economy different from a command economy?
      A. More consumer choices
      B. More government interference
      C. Private property
      D. A & B
      E. A & C
    • Life in a Market Economy: Competition for Resources
      People are free to start a business and pursue profit (money a business has left after it has paid its expenses)
    • Scarcity (lack of a particular resource) creates competition
      Scarcity also affects prices
    • Resources are needed to provide service and make profit
    • Supply and Demand
      Changes in price are the result of the laws of supply and demand
      Law of supply: business will produce more products when they can sell them at higher prices and fewer products when prices are low
      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
    • Question 5
      Why do people establish a business in a market or capitalist economy?
      A. to make a profit
      B. to help people
      C. to provide a service to make the world a better place
      D. so the government can make more money
    • Question 6
      How are prices determined?
      A. Businesses pick a number
      B. Demand by consumers
      C. Supply by producers
      D. Supply and Demand
    • Free Enterprise, Market or Capitalism
      Is when business owners may operate however they wish in a market economy, with little interference from government
      Opportunities for huge profit (Bill Gates)…as well has huge losses
      Competition is vital and pushes for improvement of products
    • Capitalism
      An economic system in which productive resources are owned by private citizens (US)
      Linked to free economy; people buy and sell as they please
      Encourages investment, innovation, and production of quality goods
    • Question 7
      Under what system do people own private property, discourage government interference and try to make a profit.
      A. capitalism
      B. communism
      C. free market
      D. both A & C
      E. both B & C
    • Monopolies
      The free-enterprise system does not like businesses that limit competition which can happen if a business has a monopoly.
      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.
    • Question 8
      What happens if demand for a product exceeds supply?
      A. Prices for that product will go up
      B. Prices for that product will go down
      C. Prices stay the same
      D. The government takes over the business in a capitalist nation.
    • The U.S. Economic System
      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)
      Question 9
      Give an example of the US regulating a business.
    • Some nations have a Mixed Economy aka Socialism
      An economy that mixes elements of different economic systems
      Business are free to operate as they wish, but must follow certain regulations that are monitored by the government; include price control and subsidies
      Intended to protect people and environment
      Ex. Minimum wage or how much of a chemical can be released into the air
    • Question 10
      What do we call an economy that is a combination of both capitalism and other systems?
      A. Mixed Up
      B. Mixed or Socialism
      C. Communism
      D. Marxism
    • Question 11
      Why do businesses exist in a capitalist, free enterprise, market economy?
      A. To provide services to people
      B. To provide goods to people
      C. To give people jobs
      D. To make a profit for themselves and stockholders
    • Question 12
      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?
    • Business Organizations
      Businesses may be owned in three different way in US
      Sole proprietorship
      Partnership
      Corporation
      Each one is slightly different from each other.
    • Sole Proprietorships
      A small business owned by one person
      Advantages: being your own boss, being able to decide business hours, and taking all profits
      Disadvantages: must have or borrow all money for rend and equipment, must be able to pay employees, personally liable for taxes
    • Partnership
      A business in which two or more people share the responsibilities, costs, profits, and losses
      Allows for more capital (money to invest) and better chances of success
      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
    • Corporations
      A type of business that is recognized as a separate legal entity from the people who own it (includes large business)
      Permanent organization(doesn’t end when owner dies)
    • Question 13
      How did most American businesses start out?
      A. As sole proprietorships
      B. As partnerships
      C. As corporations
      D. The government created them
    • How Corporations Function:Raising Money
      Selling stock (shares of ownership) to gain capital
      Shareholders are people who buy corporate stocks
      Dividends are corporate profits paid to stockholders
      Selling bonds (loans)
      People buy bonds are loaning money to the company, which will then have to pay interest before it pays the stockholders
    • Question 14
      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?)
    • How Corporations Function: Elected Directors
      Stockholders elect directors of corporation
      Law requires that at least one stockholder meeting be held each year
      Board of directors chosen at this time
      Votes on changes in the business structure
      One share = one vote
    • How a Corporation Functions:Debt Responsibility
      Neither stockholders or executives are responsible for failure
      If a corporation goes out of business, its assets (property, building, valuables) are sold
      Money raised goes towards paying the debt
    • Question 15, 16 and 17
      So let’s say Blockbuster goes out of business and declares bankruptcy (a distinct possibility)-what happens to the stores, employees and stockholders?
    • Nonprofit Organizations
      Organizations that provide goods and services without seeking to earn a profit for stockholders
      Charities, research associations, educational programs
      Don’t make profit, so don’t pay taxes
      Large nonprofits are corporations
      Red Cross, United Way, Girl Scouts
    • Question 18, 19 and 20.
      18.Why don’t nonprofit organizations pay taxes?
      19.If you wanted to own a business but not be the only person sharing responsibility, what type of business organization should you create?
      20.Explain the difference between bond and a stock.
    • Factors of Production
      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.
      To answer these three questions the four factors of production must be taken into consideration-natural resources, capital, labor and entrepreneurship.
    • Natural Resources
      Raw materials needed to produce goods
      found on or in the Earth or atmosphere
      Limited and only considered a factor when you have to pay for it
    • Capital
      The manufactured goods used to make other goods and services
      Tools, trucks, machines, computers
    • Labor
      All human effort, skills, and abilities used to produce goods and services
      Refers to the actually workers rather than the business owners
      Paid hourly or with fixed earnings (salary)
    • Entrepreneurship
      A person who organizes, manages and assumes the risks of a business
      Come up with new product, put in their own time and capital and hopes to make a substantial profit
    • Question 21 and 22
      21. Name a famous entrepreneur
      22. What do you think is the most important factor of production and why?
    • The Government’s Role in a Free Market
      US government does not dictate what type of products are made but they do control:
      Monopolies
      Protects personal rights
      Taxes
    • Question 23
      Why do some businesses pay their workers by the hour as opposed to salaries?
    • Question 24.
      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
    • Question 25.
      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.
      Bonus: What does “aka” stand for?