2.  I. New Methods and Business Organizations A. Capitalism Capitalism- an economic system in which individuals or corporations, control the factors of production In capitalist system, businesses and the means of production are privately owned and operated. Before the Industrial Revolution most capitalists were merchants who bought and sold goods. Commercial Capitalism- capitals were merchants that bought and sold goods Industrial Capitalism- capitalists became more involved in producing and manufacturing goods

3.  B. Division of Labor and Interchangeable parts industrialization changed process the way people worked factory owners divided the manufacturing process into steps the hire of unskilled labor and assigned one step to each worker division of labor increased production machines helped workers produce more in a shorter time lowered cost of production made more profit for the owners Interchangeable Parts- identical parts that can replace each other C. Assembly Line Mass Production- system of producing large numbers of identical items Er

4.  In the 1800’s each part of an item was made in a different location in the factory. All the parts were brought together and assembled at a single location. Manufactures then devised the assembly line, by which the parts were carried from worker to worker. Each worker performed a certain task on the part. This saved time and energy. The number of times per hour that a worker could perform a task increased. Henry Ford used the assembly line for the making of his cars he used a conveyor belt American and European manufacturers began to mass-produce many items like clothing, furniture and machinery this reduces production costs, manufacturers were able to lower prices more and more people could afford to buy a greater variety of goods and enjoy a higher standard living

5.  II. Rise of the Corporation A. Corporation before the industrial revolution most businesses were very small Sole Proprietorship- a business owned and ran by one person Partnership- one owned and run by two or more people Corporations- business that allows people to buy stock in the company 1800’s businesses grew into corporations in the late 1800’s and early 1900’s some corporations had became very large and powerful JP Morgan was founder of the United States Steel Corporation

6.  Monopoly- complete control over of a single good or service in the US company’s became monopoly's and in Germany in the 1900 several giant corporations combined to control every stage of entire industries example of this is steel industry, they would own coal and iron mines, steel mills, and factories Cartels- corporation combinations that control entire industries B. Business Cycle Business Cycle- alternating periods of prosperity and decline Ex: a rising demand for goods increased the demand for machines to make more goods falling of demand for goods had opposite result

7.  Depression- a period in which the decreased demand of goods causes the entire economy to sink III. Living and Working Conditions A. Economic Theories in 1700’s a group of economists called Physiocrats attacked the ideas of mercantilism Adam Smith accepted some of their ideas and wrote books on this topic Inquiry into the Nature and causes of the Wealth of Nations B. Laws of Economies Smith had two natural laws of business 1 st law of supply and demand that prices and profits depended on the both the amount of available goods and the demand for those goods

8.  If an item was scarce and in great demand, people would pay a high price for it and profits would rise. 2 nd - Law of Competition manufacturers compete with each other to sell their products, they must reduce prices Manufacturers who cut prices too much, however, might lose money and even go out of business. Supply then tends to go down and prices rise. Free Enterprise- system in which economic forces work automatically and naturally without mercantilist laws and regulations Two other guys that wrote about economics are Thomas Malthus and David Ricardo Malthus wrote Principle of Population Ricardo wrot e Principles of Political Economy and Taxation

9.  C. Laissez-faire belief that government should not interfere with the operations of businesses D. Early Reform Laws the working conditions troubled the British public Parliament started to pass reforms Factory Act of 1802 shortened hours and improved conditions for children Factory Act of 1833 laws mills from employing children under the age of 9 yrs. children at ages of 9-13 could only work no more than 8 hrs 6 days a week older children could work no more than 12 hrs a day coal mines couldn’t hire any women or children under age of 10

10.  E. Collective Actions to improve their lives they banded together Strikes- a large group of people stop working most of the strikes were for higher wages and better working conditions Unions- association that protect workers IV. Socialism A. Socialism Means of Production- everything used to produce and exchange goods a socialist government owns the mean of production and operates them for the benefit of the people Robert Owen- 1771-1858 lived in England an was a utopian socialist quit school at the age of 10 and went to work by 19 he managed a large cotton mill

11.  Karl Marx and Fredrich Engels these guys had the same ideas and that changes in history come from changes in economic conditions Marx thought that capitalist system should be destroyed Marx wrote The Communist Manifest all wealth is created by labor B. Variations of Socialism Communism- authoritarian socialism, government controls everything Democratic Socialism- people retain partial control over economic planning through electing officials