Download Making Business Decisions

Making Business Decisions
Why It Matters
Discuss with students how business
affects their lives. Ask students what
factors play a part in creating the clothes
that they wear. (Possible answers: natural resources, factories, labor, management) Next ask students how they think
the government might be involved in the
creation of clothes. (Possible answer:
The government might regulate the
safety of the fabric.) Help students to
understand that the decisions made by
businesses affect their lives, even if they
do not work for or own a business.
1. What are the four factors
Business owners must
of production?
make decisions about their
2. What is the government’s role
use of natural resources,
in the economy?
capital, labor, and entrepreneurship. Business owners
are free to make these decisions with little interference from the government.
entrepreneurs:
come up with
business idea
and how to
make it work
466
Teach the Main Idea
Factors of Production
Natural Resources
Items provided by nature without human
intervention that can be used to produce
goods and to provide services are called natural resources. Natural resources can be found
on or in the Earth or in Earth’s atmosphere.
The raw materials needed to produce goods
of all kinds come from the oceans, rivers,
mines, fields, and forests that help make up
the world’s natural resources.
Many natural resources in our country
are limited, however. A natural resource is
considered a factor of production only when
some payment is necessary for its use. For
example, the air you breathe on the beach
is not a factor of production because you do
not have to pay to use it.
For example, consider the resource of land.
Every business needs a place to locate. People
starting a business have several key decisions
to make when choosing where they will set up
shop. They must consider what locations will
best benefit their business. Companies that
provide services need to be in a location that
is convenient for potential customers to reach.
Manufacturers want to be in areas with good
transportation so they can ship their goods.
At Level
Making Business Decisions
questions to teach this section.
2. Apply Have students create an idea web
titled Making Business Decisions. As they
read, have students add details to their web.
3. Review Ask students to share their webs
with the class. Create a master web on the
board, based on students’ webs.
CHAPTER 17
ferent factors of production.
Use a graphic organizer like
this one to take notes on each
factor and its significance.
CHAPTER 17
1. Teach Ask students the Reading Focus
466
natural resources, p. 466
capital, p. 467
labor, p. 467
entrepreneur, p. 468
You have, at one time or another, had to make
a decision about how to spend your money.
Sometimes, there may be only one thing that
you want. That makes the decision easy. If
you want more than one thing—a new game
and some new clothes—and your funds are
limited, you have to make a choice.
Countries make similar choices about
production. Every country must ask “What
are we going to produce?” “How are we going
to produce it?” and “For whom are we producing it?” The answers to these questions
help us decide how to use the four factors of
production: natural resources, capital, labor,
and entrepreneurship.
Factors of Production
capital:
money needed
to start
business
Key Terms
Factors of Production
Taking Notes
As you read, take
NOTES notes on the dif-
If you decide to go into business
for yourself, you will have to make
many business decisions. Most of
these decisions will be about the
four factors of production. For example, suppose that
you want to design and market new computer games.
You will have to decide where to have your offices and
how many people to hire, and that’s just the beginning. You will have to make a business plan that takes
into account all of the factors of production.
Preteach the following terms:
natural resources items provided by
nature without human intervention that
can be used to produce goods and provide
services (p. 466)
capital manufactured goods used to make
other goods and services (p. 467)
labor human effort, skills, and abilities used
to produce goods and services (p. 467)
entrepreneur person who organizes, manages, and assumes the risks of a business
(p. 468)
Vocabulary Activities: Chapter 17
labor:
workers
produce goods
and services
Reading Focus
The Main Idea
Key Terms
natural
resources:
items in nature
used to make
goods and
services; a
factor when
scarce
TAKING
BEFORE YOU READ
4. Practice/Homework Have students
design a DVD cover for an instructional film
entitled Making Business Decisions. The
cover should include a summary of the film.
Encourage students to add comments from
“reviewers” as well.
Cost also plays a role when choosing a
location. Crowded downtown areas are often
more expensive to build or rent office space
in than places on the edge of town. Yet their
access to customers may be worth the higher price. Business owners must also decide
whether to build or rent their facilities. Rent
is money paid to use property owned by
someone else. Building may be more expensive up front but less expensive than renting in the long run. As you can see, business
owners have to consider many such issues
when deciding where to locate.
Capital
Suppose you have opened a bakery. In addition to land, you will also need equipment
such as mixers and ovens. This equipment
is called capital. Capital is the manufactured
goods used to make other goods and services. Capital includes tools, trucks, machines
of all sorts, and office equipment, such as
computers. These tools, machines, and
other items are often called capital goods
Factors
of
to distinguish them from financial capital.
Financial capital is the money that is used
to buy the tools and equipment—the capital goods—used in production.
Where will you get financial capital? If
you have a good business plan and you have
good credit, you might take out a loan from
a bank. You might also apply for a loan from
the Small Business Administration (SBA). The
SBA is an agency of the federal government
whose mission is to provide a variety of assistance programs for small businesses.
Perhaps you will decide instead to seek
one or more other people who are willing
to invest in your bakery business. You also
may decide to set up your business as a corporation and sell stock to raise capital. As
you make these decisions, you must weigh
the opportunity costs and analyze costs and
benefits of each plan.
Reading Focus
What are the four factors of
production?
Factors of Production
Identify Name examples of capital
goods that businesses might use. Possible answers: tools, trucks, machines,
office equipment, computers
Make Inferences Why do you think
that renting costs for businesses are
higher in densely populated areas?
Possible answer: because these areas
have the most customers and are the
most desirable, so businesses may
make more sales
Labor
All human effort, skills, and abilities used to
produce goods and services are called labor.
Simulations and Case Studies: Lesson
15: Our Puzzling Economy
Community Service and Participation
Handbook: Chapter 17
Production
The four factors of production—natural resources, capital, labor, and
entrepreneurship—are the basis of most business decisions.
Why do you think entrepreneurship is an essential factor of production?
Linking to Today
Labor
Natural Resources
Capital
Entrepreneurship
THE ECONOMIC SYSTEM
Differentiating Instruction
467
Johnson Publishing Company One
example of a company that successfully used the four factors of production
is the Johnson Publishing Company.
While managing an insurance company’s employee publication that reported
news of the African American community, John Johnson (1918–2005) decided
to start a magazine devoted to African
American news and information. Since
1942 Johnson worked to build the
Johnson Publishing Company into the
publishing empire it is today. In 2000,
the company reported sales of $400 million and employed 2,614 people in its
labor force.
Level Level
Tag
Above
Advanced Learners/GATE
Write a Study for a Business
1. Ask students to think about how their
community or region might be uniquely
suited to provide one or more of the four
factors of production. For example, a seaside
community might be suited for shipping
and fishing businesses because of its natural
resources.
2. Have students select a business that they
believe would thrive in their community.
3. Have students write a study of how one or
more of the four factors of production is
suited to the business they have selected.
Verbal/Linguistic
Alternative Assessment Handbook: Rubric 37:
Writing Assignments
Answers
(photo) Possible answer: because
entrepreneurs play an important role in
starting businesses and creating jobs
467
American
Civil Liberties
Our Career Choices
Reading Focus
What is the government’s role in the
economy?
The Government’s Role
Identify Name a government agency
that helps small businesses. the Small
Business Administration
Analyze Why do you think the government provides loans to businesses?
Possible answer: Some business owners may not have the money or be able
to get a large enough loan through a
bank. Helping businesses be successful
helps keep the economy strong, which
also benefits the government.
There is an old saying that in the
United States anyone can grow up to
be president. In fact, anyone can grow
up to be anything—there are no rules
that require you to take a certain job or
that keep you from your chosen career.
In 1897 New York State tried to limit
bakery employees to working a maximum of 10 hours a day. In Lochner v.
New York (1905), the U.S. Supreme
Court overturned this state law, ruling
that the Fourteenth Amendment gives
citizens the freedom to choose where,
when, and how long they work.
Lochner is no longer the law today.
State governments often do pass
1. Who do you think would have
argued against enforcement of
New York’s 10-hour workday—
employees or employers?
2. Why do you think state governments pass laws to regulate
working conditions and the
amount of hours people can work?
However, the word labor is often used to refer
specifically to workers as opposed to owners
and people who manage companies.
Workers in businesses, industries, and on
farms sell their labor in exchange for money.
Some workers are paid hourly wages for their
labor. Other workers, particularly those who
manage companies or have a great deal of
responsibility, are paid salaries. Salaries are
fixed earnings , rather than hourly wages.
Imagine you owned a bakery. If you performed your own labor, the amount of baked
goods you could produce would be limited.
If you hired more labor, your production
would increase but you would have to pay
higher labor costs.
The money you received for selling the
additional goods needs to be at least enough to
cover all your costs. If it is more than enough,
you will increase your profits. If it is not
enough to pay the workers, you will have to
lay them off, or lower their pay. However, you
might be able to find a way to increase productivity instead. Productivity is the amount
of work produced by a worker per hour.
Reading Skill
Explain to students that
resources such as real estate and
construction play an important role in
the American economy. According to
the Census Bureau, the value of new
construction represented 7.8 percent
of the nation’s gross domestic product
(GDP) in 1998. To predict the impact
of such construction on the economy,
economists study monthly statistics on
housing starts, building permits, new
single-family home sales, and manufacturers’ orders. Organize students into
groups and assign each group one of
these economic indicators. Have each
group research its indicator and create
a poster explaining what the indicator
represents, as well as its significance.
Posters should also include a graph
tracking this indicator for one year.
legislation that protects employees,
such as minimum-wage laws, overtime laws, and occupational safety
regulations. However, the basic idea
that individuals have the right to
choose their own jobs and negotiate
their own employment agreements is
still in effect.
468
Workers often keep track of the hours
they work by punching time cards.
Entrepreneurship
If you start your own business, you may be
an entrepreneur. An entrepreneur is a person
who organizes, manages, and assumes the
risks of a business. Entrepreneurs often come
up with an idea for a new product or a new
way of doing business. They put up their own
labor or capital and take the risks of failure.
In return for taking the risks, an entrepreneur
hopes to make a substantial profit. In our
capitalist system, many people think that the
efforts of entrepreneurs—starting businesses
and creating jobs—are an important part of
creating society’s wealth.
For example, Bill Gates and other entrepreneurs in the computer industry have
provided people with innovative computer
software. Entrepreneurs have also shaped
the development of the computer and Internet industries around the world. In doing so
they have made important contributions to
the nation’s economy.
READING CHECK
Making Inferences Why is
labor considered a factor of production?
CHAPTER 17
Differentiating Instruction
Level Level
Tag
Above
Special Needs Students
Create Factors of Production
Flash Cards
Answers
American Civil Liberties
1. employers and possibly some
employees 2. Possible answer: to
protect workers from unfair and harmful
treatment
Reading Check because human effort,
skills, and abilities are needed to produce
goods and services
468
Materials: Newspapers and magazines, scissors,
glue, cards or paper
1. Review with students the factors of
production—natural resources, capital,
labor, and entrepreneurship—and what each
includes.
2. Have students cut pictures out of old
newspapers and magazines that represent
different factors of production. Have them
glue each picture to a separate index card or
sheet of paper. On the opposite side of each
flash card, have students write the factor of
production the picture represents.
3. Have students take turns showing their cards
to the class. The class must guess which
factor of production each flash card shows.
Have students explain the reasoning behind
their guesses. Visual/Spatial
The Government’s Role
Although the U.S. government does not
tell business owners what products to make
or how much to charge, it does influence
business in many ways. For example, government ensures that big corporations do
not destroy competition from small businesses. The government also protects a
person’s rights to own private property and
to buy and sell in a free market. In addition, the federal government taxes business
income. Changes in the tax code can affect
business plans.
Many agencies of the federal government
help businesses. For example, the Small Business Administration helps small businesses
as they compete in the economy. The government plays many other roles in business.
It helps business by providing information
that managers can use in planning their production levels, sales, and costs. It sometimes
provides loans and other types of assistance
to businesses. The government also tries to
keep the economy running smoothly.
The government protects workers’
health and safety, prevents pollution of the
environment, and protects buyers from dis-
honest practices and harmful products. The
government also ensures that employers
cannot discriminate against workers or job
applicants. Congress has also established a
federal minimum wage law. This law requires
a minimum hourly wage for employees who
are not exempt.
Some people believe that the government
has gone too far in doing its job as overseer.
For example, tens of thousands of pages are
needed to print all the business regulations
issued by the federal government. On the
one hand, some regulations are necessary.
Others, however, are criticized for adding to
the cost of doing business without providing
much benefit to people. These higher business costs can be passed on to consumers as
higher prices.
Achieving the correct level of government involvement is difficult. How much
regulation is needed is a subject of great
debate. As a citizen in a free economy, you
will help decide this issue with your vote and
your voice.
Close
Discuss with students the four factors of
production and government’s role in the
economy. Write students’ observations
on the board.
Review
Online Quiz: Section 3
Quiz Game
Vocabulary Activities: Chapter 17
Assess
SE Section 3 Assessment
Daily Quizzes: Section 3
Reteach
Main Idea Activities for Differentiated
Instruction: Section 3
READING CHECK
Finding the Main Idea Why
does the government need to regulate businesses
in the United States, and how does it do so?
go.hrw.com
Online Quiz
KEYWORD: SZ7 HP17
SECTION 3 ASSESSMENT
Reviewing Ideas and Terms
Critical Thinking
1. a. Define Write a brief definition for each of the
following terms: natural resources, labor, capital
and entrepreneur.
b. Analyze Information What are three ways
people get capital for their businesses?
c. Draw Inferences and Conclusions
Why do businesses need labor, and how are they
affected by productivity?
2. a. Elaborate What are some of the ways in which
the government regulates business?
b. Defend a Point of View Do you think the
government should regulate business? Why or why not?
3. Summarizing Copy the graphic organizer. Use it
and your notes to identify the four factors necessary
for a business to be successful.
Successful Business
Focus on Writing
4. Making Decisions Imagine that you are planning to open a small business in your community.
Make a list of the decisions that you must make
before you can open your store.
THE ECONOMIC SYSTEM
469
Section 3 Assessment Answers
1. a. natural resources, p. 466; labor, p. 467; capital, p. 467; entrepreneur, p. 468 b. from bank
or government loans, partners, or stock sales
c. to produce goods and services; businesses
make more profit with higher productivity and
less profit with lower productivity
2. a. Students should list some of the ways the
government regulates business given on
p. 469. b. Possible answers: Yes—otherwise
businesses would not operate in the public’s
interest. No—there are too many regulations
that cause added costs to consumers.
3. Students should use the graphic organizer to
show how natural resources, capital, labor,
and entrepreneurship are necessary for a
business to be successful.
4. Students’ lists will vary but should determine
and address the factors of production.
Answers
Reading Check to protect workers’
health and safety, prevent pollution
of the environment, protect buyers
from dishonest practices and harmful
products, ensure that employers do
not discriminate against workers or job
applicants, establish a minimum wage,
preserve competition, protect citizens’
property rights, and keep the economy
running smoothly; through taxes, laws,
and agencies
469