Characteristics of the US Economy & Types of Businesses

Characteristics of the US Economy 1.Little government interferences Markets are generally allowed to operate without interference from the government. Prices are determined by supply and demand as buyers and sellers interact. 2.Individuals and businesses can own private property without govt. interference Individuals and businesses have the right to own real and personal property as well as the means of production without interference from the government. 3.Individuals and businesses can keep profits Profits are earnings after all expenses, taxes, licenses, etc. have been paid. As long as the business is not in debt, it can keep the money it has earned. 4.Competition = better product and lower prices Rivalry between producers and sellers of a good or service usually results in a better quality product at lower prices. 5.Consumers determine through purchases what should be produced If we buy a product, more will be made. If we do not buy a product, less will be made. This lets the producer know the demand – therefore determining their supply.

So, we keep talking about “businesses” – what types of businesses are there in the US?

Types of Business Ownership Entrepreneur – takes risks to earn a profit; creates a business that uses any of the three models below Proprietorship – ONE owner who takes ALL risks and profits Partnership – TWO or MORE owners who SHARE the risks and profits Corporation – authorized by LAW to act as a legal business; no specific number of owners who SHARE profits and risk.

Economic Flow 1.Individuals – provide labor for businesses and pay tax to govt. 2.Businesses – provide goods/services to individuals and pay tax to govt. 3.Govt. – Provides payments to businesses and provides services for individuals 4.Banks – provide loans to all of the above Loans to individuals to buy products/services Loans to businesses to grow