the economics system at work c hapter 17 s ec. 1
TRANSCRIPT
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CHAPTER 17 SEC. 1
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LEARNING TARGET #1
I can describe the different types of economic systems used around the
world
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ECONOMIC SYSTEMS
3 basic economic systems
Traditional
Command
Market
Most countries use a mix of these 3 to meet their citizens demands
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TRADITIONAL ECONOMY
Economic decisions are based on how the activity was done in the past (traditionally)
People make everything that they need
Ex. People grow their own food, make their own goods or use a barter system to trade
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COMMAND ECONOMY
Government makes all economic decisions, owns/controls all capital, tools, & production equip.
Tells workers what they can produce, how much they can produce, and how much they can charge for it
Ex. North Korea, Cuba
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(FREE) MARKET ECONOMY
Economic decisions are made by individuals looking out for their own best interest
People can start their own business to make/sell any legal product that they choose and set their own price
Companies are free to compete with one another
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LIFE IN A MARKET ECONOMY
People have the ability to pursue a profit.
(def.) – the money a business has left after it has paid its expenses
In order to provide a good/service & make a profit you must have resources
Scarcity – the lack of a particular resource
Lack of a specific resource tends to make the price rise.
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http://video.cnbc.com/gallery/?video=1118024123
Http://www.youtube.com/watch?v=LHT23An4Tno
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SUPPLY & DEMAND
Law of supply – business will produce more products when they can sell them at higher prices.
Ex. Nintendo manufactures more wii’s after Christmas sales go through the roof.
Law of demand – buyers will demand a greater quantity (more) of a good when its price is low. As the price falls, demand rises.
Ex. You stock up on paper/pencils at the beginning of the school year when they are cheapest.
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Free-enterprise – business operate with little interference from the government.
Competition between business is important!
Leads to… Improved products
New innovations
Cheaper products
Our government protects our ideas so no one else can take credit for them
Keeps people inventing, creating, improving, etc.
Patent – exclusive rights of an individual to make/sell a product for a certain number of years
Copyright – exclusive right to publish/sell a piece of writing, music, or art
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Capitalism (def) - economics system where the productive resources are privately owned
Monopoly (def) – only one company is selling a product or providing a service
Highly discouraged in the U.S.
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CHAPTER 17 SEC. 2
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BUSINESS ORGANIZATIONS
Advantages:
You are your own boss
Decide hours
Determine business operation
Take all the profits
Disadvantages:
Owner pays ALL start-up costs
Must be able to pay employees
Responsible for all debts
Sole Proprietorship A small business owned by one person
18 million in the U.S.
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BUSINESS ORGANIZATIONS
Advantages:
More money to invest in business
Decide hours
Determine business operation
Risk is shared
Disadvantages:
Owners pays ALL start-up costs
Disputes can lead to business problems
Responsible for all debts
Partnership
Where two or more people share the costs, responsibilities, etc. of ownership
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BUSINESS ORGANIZATIONS
Corporation
Most of the countries large business that is a permanent organization
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.
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NON-PROFIT ORGANIZATIONS
Provide goods and services without seeking a profit
Charities, scientific research associations, organizations dedicated to cultural and educational programs
Rely on donations from individuals to operate
Are not taxed by the government
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CHAPTER 17 SEC. 3
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THE FOUR FACTORS OF PRODUCTION
Natural resources
Capital
Labor
Entrepreneurship
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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
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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
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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
Freedom to earn a profit—the profit motive is essential to the system
Freedom to own property—private ownership makes the free market possible