2. Principles of Our Market Economy  Circular flow – people exchange their labor to buy goods and services from many businesses.  Circular Flow - 8 minCall Me Maybe Parody Circular Flow - 8 minCall Me Maybe Parody

3. Supply & Demand Supply and Dance Man

4. Law of Demand  Demand – the amount of a product or service that buyers are willing and able to buy at different prices.  When the price of a good or service falls, consumers will buy more of it. As the price of a good or service increases, consumers will buy less.

7. What factors affect demand?  Market size - # of consumers  Consumer tastes – popularity (is it in style?)  Consumer expectations – will it be cheaper later?  Substitutes – can I buy something else?  Complements – if I buy one item I need something to go with it  Income – make more, buy more

8. What factors affect demand?

9. Law of Diminishing Marginal Utility  The benefit for using each additional unit of a good or service during a given time period tends to decline as each is used.

10. Law of Diminishing Marginal Utility

11. Law of Supply  Supply --- the amount of a product that producers are willing and able to offer at different prices.  Producers are willing to sell more of a good or service at a higher price than they are at a lower price.

14. Supply and Demand  Market price is the price at which buyers and sellers agree to trade (where supply and demand meet).  The Law of Supply and Demand - 3 min The Law of Supply and Demand - 3 min

16. Role of Business in the American Economy  Role of the Entrepreneur  A person who starts a business.  Begins with an idea for a new product, a new way of producing something, or a better way of providing a service.  Steve Jobs' Advice Steve Jobs' Advice

17. Types of Businesses  Sole Proprietorship  Partnership  Corporation

18. Sole Proprietorship  Business owned by an individual.  Most common form of business.  70% of businesses in U.S. -- most are small businesses such as restaurants, repair shops, small groceries, etc.  Advantages --- freedom, profits belong to owner.  Disadvantages --- owner bears all responsibility for debts, hard to borrow enough money to start, huge responsibility on owner’s shoulders.

19. Partnership  Two or more people share ownership.  Advantages – more than one person shares the risks and benefits.  Disadvantage – potential for conflict among owners. Scrub Daddy

20. Corporation  Business that is separate from the people who own it and legally acts as a single person.  Shares of a corporation are called its stock owned by stockholders.  Many sell stock to the public to raise funds.  Advantages --- raise large quantities of money through selling stock, stockholders are not responsible for company’s debt.  Disadvantages --- more difficult & expensive to start, limited by government regulations.

21. These 10 corporations control almost everything we buy…

22. Labor in the American Economy  Industrialization created change  1800s – improvements in farm machinery meant that farms needed fewer workers.  Rapid industrialization – machines could produce more goods more cheaply than could people making goods by hand.  Many people became wage laborers – exchanged their labor for payment called wages (worked in mines, factories, workshops).

23. Labor in the American Economy (early on)  Poor working conditions ---  many wage laborers had to accept whatever work was available at any wage or starve.  Business owners took advantage of the situation.  Paid very low wages.  Dangerous working conditions.  Wage laborers, many of them children, worked 6 days a week (12-16 hours a day).

25. The Rise of Labor Unions  Labor union – organizations of workers that seek to improve wages and working conditions & to protect members’ rights  Collective bargaining – process by which representatives of unions and business try to reach agreement about wages and working conditions

26. Labor Unions Weapons of labor  Slowdown – workers stay on the job, but do job much more slowly  Sit-in strike – stop working, but refuse to leave factory  Boycott – urge people to buy employer’s products  Strike – workers refuse to work unless employers meet certain demands Weapons of business  Use ‘scabs’ to keep factory running (nonunion workers)  Hire private police to allow scabs in, break-up union meetings, harass union members  Lockout – refuse to let union members enter factory & replace them with scabs  Forced workers to sign “yellow-dog contracts” – promise never to join union