This Chapter 7 was taken from the book ECONOMICS 3rd edition by Feliciano Fajardo. This is for classroom instruction purposes.. Thank you

1. PRINCIPLES OF ECONOMICS
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2. Business organizations constitute a major
component of the whole economy. They create
investments, employments, productions and incomes.
The management of any business organization
has a social responsibility to its customers as well as to
the community.
Peter Drucker, a management specialist, said
that the purpose of business is to create customers. In
the same manner, William Stanton, a marketing expert,
stated that the wants of the customers should be
identified and satisfied.

3. 1. Single or Sole Proprietorship. It is a form of business
organization which is owned by one person.
Advantages:
• It is easy to organize
• The single proprietor is the boss
• The owner acquires all the profits from his business
Disadvantages:
• Financial resources are not enough
• Benefits of specialization are not present in small-scale proprietorship
• The owner has unlimited liability

4. 2. Partnership. It is a form of business organization which
two or more person agree to own and operate a business.
Advantages:
• It is easy to organize
• Better management because of more participants in the operation of
business
• Possibility of bigger resources
Disadvantages:
• Conflicts or quarrels between or among the partners
• It lacks stability
• Unlimited liability

5. 3. Corporation. It is a legal entity, distinct and separate
from the individuals (stockholders) who own it. They must
not be less than 5 but not more than 15, all of legal age
and majority of whom are residents of the Philippines.
Advantages:
• A member has a limited liability.
• It has the most effective means of raising money capital for its
operations, by selling stocks and bonds. Stocks are certificates of
ownership while bonds are certificates of indebtedness.
• It has a permanent existence. The life span of corporation is 50 years.
• It is capable of getting the most efficient management considering its
huge resources and large-scale operations.

6. Disadvantages:
• It is not easy to organize a corporation.
• Abuses of corporation officials likely to emerge in situations where many
stockholders do not participate actively in the affairs of their
corporation.
• Some corporations are engaged in questionable activities.
• There is a very impersonal or formal relationship between the officers
and employees of corporation.

7. 4. Cooperative. Only organizations composed primarily of
small producers and consumers who voluntarily join
together to form business enterprises which they
themselves own, control and patronize.
Similarities between cooperative and corporation:
• Factors of production are privately owned and managed..
• Both depend on business efficiency to survive in a competitive market.
• Their activities and operations are both regulated and supervised by the
government.
• Both enjoy a reasonable degree of economic freedoms.

8. Differences between cooperative and corporation:
• A cooperative is for service while a corporation is for profit.
• Membership in a cooperative is open and voluntary while in a corporation
membership is only for wealthy relatives and friends.
• Government in cooperative is democratic. It is one man one vote and no
proxy voting. In the case of corporation, it is one share one vote , and
more shares more votes. It is the rule of minority (richer members).
• Savings or net profits are refunded to the members of a cooperative on
the basis of their individual patronage while in a corporation, profits are
distributed to the stockholders on the basis of number of their shares.

9. Management has three social responsibilities: to
their company, to their employees and to their
customers. For the company, the responsibility of
management is to make good profits for stockholders.
For their employees, they should be given fair wage
and favorable working environment. And for their
customers, they should be provided with goods and
services which satisfy their needs at reasonable prices.