The Role of Government in Business Chapter 11 The Role of Government in Business pp. 160-173 Back to Table of Contents

HOW GOVERNMENT AFFECTS BUSINESS Government regulates things to protect Businesses Public From unfair, unsafe, and unethical practices. Promote economic growth by passing laws at local, state, and national levels.

REGULATOR ROLE Three different levels of government Federal State Local Each oversees different levels of business

REGULATES? Federal Government regulates: State Government regulates: Interstate commerce – business that takes place across state lines State Government regulates: Intrastate commerce – business that takes place within the state

REGULATES? (2) All levels of government regulate four aspects of economy: Protecting competition Protecting business agreements Protecting creative properties Regulating the production process Focus on each of these on next slides.

11 Chapter Government regulates these four aspects of the economy. Figure 11.1 GOVERNMENT REGULATIONS Government regulates these four aspects of the economy. Which one do you think has side effects on our environment? Introduction to Business, The Role of Government in Business Slide 6 of 54

PROTECTING COMPETITION Oligopoly – when a small number of businesses control the market What is the market? Market is wherever buyers and sellers get together to exchange goods and services Do we have any of these? Airlines and Gas Companies Government sometimes lets these happen when too expensive for others to compete

PROTECTING COMPETITION Monopoly – One company controls an entire industry No competition, so charge whatever they want. You want product, you pay what they ask Do we have any of these? Cable company, Electricity, Water, AmerenCilco for Gas Government sets maximum prices

PROTECTING COMPETITION Trust – when competing companies agree not to compete with each other to form a monopoly In 1890’s, trusts were in oil, sugar, steel Government has antitrust laws to keep this from happening Law allows government to break up, regulate, or take over monopolies

FEDERAL TRADE COMMISSION (FTC) Regulates Interstate trade Sets standards for honest advertising

PROTECTING BUSINESS Contract – legal agreement between two or more parties to conduct business. Written, verbal, handshake Contract protects all parties involved Customer, business, lender, etc. Breach of Contract – When one party fails to live up to the terms of the contract

PROTECT CREATIVE PROPERTY Creative Property – things like inventions and artwork Protected with copyright, patent, or trademark

CREATIVE PROPERTY Copyright – gives artist sole right to their own creation, such as plays, photos, music, paintings, and books. Lasts for 70 years after artist dies You get paid for use of your copyright material

CREATIVE PROPERTY Patent – sole right to your invention Should patent any invention you create Trademark – brand name, trade characteristic, or any combination given legal protection by federal government Doritos, VISA, M & M’s Trademarks

PRODUCTION PROCESS Tries to stop industrial pollutants with regulations When Federal government can not enforce, state and local take over Budget cutbacks have caused this area to be overlooked

11 Chapter WORKING FOR TAXES Figure 11.2 WORKING FOR TAXES During an average eight-hour workday, nearly three hours of your workday goes to paying federal, state, and local taxes. This comparative chart shows where people work the most and least for taxes. Name some ways in which the government spends the money for projects or services on your community. Source: Tax Foundation Introduction to Business, The Role of Government in Business Slide 16 of 54

GOVERNMENT AS PROVIDER Government provides things that you can not provide for yourself Roads Safety Military Water treatment Money to pay for these services comes from taxes

GOVERNMENT AS PROVIDER Government is also a business Buys and sells goods and services People tell government what they want it to buy through elected officials Government often has to choose which needs/wants to satisfy Government also has to consider public welfare

GOVERNMENT AS PROVIDER You do not always benefit from services you pay for School – if no children Fire department – if your house never burns People that use these goods do not pay full cost of services All people (through taxes) share costs

GOVERNMENT AS PROVIDER Government spending directly affects how resources are allocated. Wherever government decides to spend money, jobs, and more money will come to those areas Missile and urban example Government spending influences distribution of income (transfer payments) Amounts paid to needy families can be altered as needs arise

PROVIDING PUBLIC SERVICE Government is single largest provider of services in the country. Largest expenditures are transfer payments Welfare, unemployment, and social security

PROVIDING PUBLIC SERVICE Provide NECESSARY services for safety Military, Police, Fire Protection Provide promotion of social welfare Parks and Libraries Provide services for Society Schools, roads, courts, post offices, etc.

PROVIDING PUBLIC SERVICE Cost to provide services is HUGE Taxes – What the government collects to pay for services Revenue – The money the government takes in.

TAXES Taxes are raised at each level Federal (income tax most common) Used for social security, defense, highways and education State (sales tax and income tax) Used for courts, roads, and education Local (property tax, sales tax) Used for parks, fire and police and education

PROVIDING WORK Government is single largest employer in US Over 3,000,000 people (three million) President, mayor, state representative Police, army, teachers, public library, city bus Government also pays unemployment insurance to people out of work Also has welfare and job training programs

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ASSISTING BUSINESS Government is largest consumer of goods and services Buys and uses more goods and services than any other organization in the United States Government assists small business owners with the Small Business Association (SBA) Helps with loans

ASSISTING BUSINESS Also loans money to big businesses to help them stay in business Good for economy – keep jobs

ASSISTING BUSINESS - INCENTIVES Subsidies – What the government pays to businesses to help with their costs Corn producers have to lower their costs to compete, government pays the difference Tax Incentives – lower taxes for businesses If being socially responsible Conserving energy or resources Businesses can get BOTH of these incentives

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