1. Types of Business Organizations
Extra Info:
Unit 1 and Unit 2

2. Circular Flow Chart
Understand the differences between a Sector and a Market.
Sector = Household & Business Firms
Market = Product & Factor

3. Interest Rates If interest rates rise…
-Increases the cost of borrowing.
-Increases incentive to save rather than spend.
-Rising interest rates affect both consumers and firms.

4. Interest Rates If interest rates decrease…
-Reduces the incentive to save.
-Cheaper borrowing costs.
-Rising prices.
The prices inflate because the lower the interest rate, the more money you’ll have to buy assets.
If the supply is down, and the demand is up, then the price will rise.

5. Stocks
Stock is a share in the ownership of a company. Corporations raise money through stocks
Benefits:
-You earn a share of the corporation’s profit. (Dividend payments)
-Earn money by selling stock at a price greater than the purchase price (Capital gains)

6. Types of Business Organizations
A business organization is an enterprise that produces goods, or provides services, usually in order to make a profit.
3 types of business organizations
Sole Proprietorship
Partnership
Corporation

7. A business organization owned and controlled by one person.
Sole Proprietorship
A business organization owned and controlled by one person.

8. Sole Proprietorship Benefits: Disadvantages:
Easy to start up, and close down
Has satisfaction of running business their way
Few regulations
Keeps all of the profits
Disadvantages:
Limited funds
Limited life
Unlimited liability

9. Partnership
A business co-owned by two or more partners who agree on how responsibilities, profits, and losses of that business are divided.
Examples: McDonalds (Richard and Maurice McDonald), Apple (Steve Jobs and Steve Wozniak), and Microsoft (Bill Gates and Paul Allen)
(All examples above are corporations now)

10. Partnership Benefits: Easy to start up and close down Few Regulations
Greater access to funds
Partners may bring complimentary skills to the business
Disadvantages:
Unlimited liability
Shared decision making may create conflict among partners
Limited Life

11. Corporation
A business owned by stock-holders, who own the rights to the company’s profits but face limited liability for the company’s debts and losses.
Examples: Walmart, Exxon Mobil, Microsoft

12. Corporation Benefits Disadvantages Greatest access to funds
Business run by professionals
Limited liability
Unlimited life
Disadvantages
Difficult to start up
More regulations
Double taxation
Owners may have less control

13. Important Figures in Economics
Milton Friedman
Believed that the market should be free to operate in all fields
Believed the government’s most important role was to control the amount of money in circulation.
Economic advisor to President Nixon and Reagan, and British prime minister Margaret Thatcher

14. Important Figures in Economics
John Maynard Keynes
Introduced the idea of using government action to stimulate aggregate demand.
Aggregate demand = the total amount of goods and services that households, businesses, governments, and foreign purchasers will buy.
Founder of Keynesian economics

15. Important Figures in Economics
Friedrich Hayek
Austrian economist
Strong advocate of free market capitalism
Author of The Road to Serfdom
Awarded the Nobel Prize in Economic Sciences in 1974