Economics

Economics-11/7/13 SSEMI4 The student will explain the organization and role of business and analyze the four types of market structures in the U.S. economy. a. Compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation. b. Explain the role of profit as an incentive for entrepreneurs. c. Identify the basic characteristics of monopoly, oligopoly, monopolistic competition, and pure competition. November 7, 2013 Appetizer: Which of the following is the best example of the Law of Supply? (A) A sandwich shop increases the # of sandwiches they SUPPLY every day when the price is increased. (B) A food producer increases the # of acres of wheat he grows to SUPPLY a milling company. (C) A catering company buys a new dishwasher to make their work easier. (D) A milling company builds a new factory to process flour to export. Main Course: •Groups can present their business organization or market structure from my computer to show the class •You will fill out your chart as you hear info you need, so pay attention! •SSEMI4 The student will explain the organization and role of business and analyze the four types of market structures in the U.S. economy. • •a. Compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation. • •Sole proprietorship •A business owned and run by one person. • •Advantages- ease of start-up, ease of management, owner can enjoy all profits, owner has full control, easy to discontinue, business itself is exempt from tax on income. • •Disadvantages- unlimited liability (owner is personally and fully responsible for all losses and debts of business), difficulty of raising financial capital, amount of work for one person may be overwhelming, limited life. • • •Partnership •A business jointly owned by two or more people. • •Advantages- ease of start-up, each partner brings a unique skill to the partnership, larger pool of capital, lack of special taxes on partnership itself. • •Disadvantages- each partner is fully responsible for partner, unlimited liability for partnerships that are not limited liability partnerships (LLP), limited life, potential for conflict with partners. • • • • •Corporation •A business organization that is owned by stockholders and recognized by law as a separate legal entity having all the rights as an individual. • •Advantages- ease of raising financial capital through the sale of stock or the issuance of bonds, limited liability for owners, unlimited life, ease of transferring ownership. • •Disadvantages- difficult to start, owners/shareholders often have little say in how the business is run, many more legal requirements and regulations, double taxation. • • •b. Explain the role of profit as an incentive for entrepreneurs. •Entrepreneurs are willing to risk their own resources in order to sell them for financial gain or profits. Entrepreneurs are successful when they provide consumers with goods and services that consumers highly value. Financially successful entrepreneurs have some common characteristics. First, they are willing to assume risk, and high risk can lead to high rewards. Second, entrepreneurs have unique skills that help them develop new products or new cost-cutting production methods or new ways to serve consumers. Third, many entrepreneurs also have the discipline to work long and difficult hours to achieve their goals. These same entrepreneurial characteristics can help anyone to be successful even one who doesn't start a business. If you want to earn more income, develop valuable skills and use them in ways that are highly valued by others. • • •c. Identify the basic characteristics of monopoly, oligopoly, monopolistic competition, and pure competition. • •Monopoly •A market structure in which there is a single supplier of a good or service. Also, a firm that is the single supplier of a good or service for which there are no close substitutes; also known as a monopolist. • •Oligopoly •A market structure in which a few, relatively large firms account for all or most of the production or sales of a good or service in a particular market, and where barriers to new firms entering the market are very high. Some oligopolies produce homogeneous products; others produce heterogeneous products. • •Monopolistic competition •A market structure in which slightly differentiated products is sold by a large number of relatively small producers, and in which the barriers to new firms entering the market are low. • •Pure competition •A market structure in which a large number of relatively small firms produce and sell identical products and in which there are no significant barriers to entry into or exit from the industry. Firms in perfect competition are price takers and in the long run will earn only normal profits. •Words on back of sheet (market structures) must be defined. Also, you are asked to list your top 3 favorite jeans, shampoo, cologne, etc. You should also complete this so we are ready to talk about product differentiation and non-price factors.