Download Unit 9--Free Enterprise System

Unit #9:
Free Enterprise System
Class Starter
1. Which landmark Supreme Court case ruled
that segregated facilities were constitutional
as long as they were “separate but equal?”
2. Which landmark Supreme Court case did the
Supreme Court rule that only Congress has
the power to regulate interstate trade?
3. List and explain 2 principles of capitalism.
4. How was your Easter break?
Demand
I. What is Demand?
• The amount of a good/service that consumers
are willing to buy
• Law of Demand: people are normally willing
to buy less of a product if a price is high and
more if the price is low
II. Demand Curve
III. What Causes Demand to Change
• More consumers enter the market (more
people want something)
• The incomes, tastes and expectations of
consumers in the market change
• Durability of goods (how long do they last
before you have to buy more?)
• Changes in the price of substitute and
complementary goods
Substitutes
When the price of one
goes up, the demand
for the other goes up
Complements
When the price of one
goes up, the demand for
the other goes down
IV. Demand Elasticity
• If demand is elastic, then a change in the price
of the good/service will cause a change in
demand
• If demand is inelastic, then a change in the
price of the good/service will not cause a
change in demand
V. Diminishing Marginal Utility
• Our additional satisfaction (marginal utility)
tends to go down as we consume more units
of a good/service (causes demand to
decrease)
$3.00
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Class Starter
1.
2.
3.
4.
What is the Law of Demand?
Draw an outline of a demand curve.
What is a trade-off?
What was the major weakness of the
Articles of Confederation?
Supply
I. What is Supply?
• The amount of goods/services that producers
are able and willing to sell at various prices
• Law of Supply: the principle that suppliers will
normally offer more for sale at higher prices
and less for sale at lower prices
II. Supply Curve
III. What Causes Changes in
Supply?
• Costs of production (How much do the factors
of production cost?)
• Changes in government policy
– Taxes and subsidies
• Number of producers
• Expectations of businesses (What will
consumers buy and when?)
vs.
• Technology (What kinds of technology are
used in the production process?)
IV. Supply Elasticity
• If supply is elastic, a change in the price will
cause a change in the # of items produced
• If supply is inelastic, a change in the price will
not cause a change in the # of items produced
V. Diminishing Returns
• A business can produce only so many items to
where the cost of producing extra items will
be more than the business will get in profits
from making and selling the extra items
Class Starter
1. What is the equilibrium price?
2. What do we mean by “a shift” in supply or
demand?
3. What is the difference between a surplus
and a shortage?
4. Give an example of a price floor?
Class Starter
1. What are the 4 types of business
organization?
2. What is stock?
3. Who owns a corporation?
4. What are the steps to amend the
Constitution?
Labor Unions
I. What is a Labor Union?
• An association of workers organized to
improve wages and working conditions
• Examples: United Auto Workers, NBA Players’
Association, North Carolina Association of
Educators, AFL-CIO
II. Collective Bargaining
• Workers must sign contracts to be employed
by a company
• Collective bargaining is the process by which
unions and employers negotiate conditions of
employment
– Major issues: pay, hours, lay-offs, benefits, job
security
III. Negotiating Worker Contracts
• There are many techniques and options that
labor unions and business management have
to negotiate worker contracts and conditions
– Mediation
– Arbitration
• More extreme measures:
– Strikes
– Boycotts
– Lockouts
Class Starter
1.
2.
3.
4.
What is a labor union?
Describe collective bargaining.
What is Congress’ main job?
List the 4 types of committees in
Congress.
Market Competition
I. Competition in our Economy
• Free Enterprise System: an economic system
in which individuals and businesses are
allowed to compete for profit with a minimum
of government interference.
• Free Enterprise is another word for capitalism!
II. What Factors May Decrease
Competition?
• Mergers
– Ex. Verizon and Alltel
• Monopoly
– Ex. DeBeers Company (diamonds)
– Monopolies have considerable control over
the prices they charge because they are the
only producer of a good/service
• Natural Monopolies: a situation where the
costs of production are minimalized by having
only 1 producer
– Ex. Utilities
III. Government Regulation of
Monopolies
• Anti-Trust Laws—laws that make monopolies
illegal and police those that exist
– Sherman Anti-Trust Act (1890)—made
monopolies illegal
– Clayton Act (1914)—set up regulations for
mergers
• Monopolies are regulated by the Federal
Trade Commission (FTC)
Class Starter
• What is a merger?
• What is a monopoly?
• What is the government’s role in
regulating monopolies and mergers?
• What are appropriations bills?
Economic Indicators:
The Business Cycle
I. The Business Cycle
• 4 Phases
– Expansion: Real GDP goes up; the economy
grows
– Peak: The economy is a top performance
• “Full Employment”—3-4% unemployment
– Recession (contraction): Real GDP goes
down for 6 straight months; unemployment
goes up
– Trough: Lowest point of a recession; might
become a depression
The Business Cycle
Year
The Business Cycle—Again
Class Starter
• What is the business cycle?
• List and explain the 4 phases of the business
cycle.
• List and describe 2 roles of the president.
Economic Indicators
B. Unemployment Rate
• The % of the civilian labor force (age 16
and up) not working but looking for jobs
• Doesn’t include everyone not working!!!
B. Fiscal Policy
• The federal government’s use of spending and
taxation policies to affect overall business
activity
-During expansion, the government raises
taxes
-During recession, the government cuts
taxes and spends more money to
stimulate economic growth
*Deficit spending
C. Inflation
• A sustained increase in the general level of
prices
-High inflation is bad because it causes
people to be able to buy less
-Inflation is measured with Consumer Price
Index (CPI)
D. Stock Market
-Stock value indexes: Dow Jones Industrial
Average, NASDAQ, S & P 500
*These stock value indexes tell us how
much the stock market is worth
*If these values go up, the economy is
doing better; if they go down, the
economy is doing worse
Study for your vocabulary quiz!
Class Starter
1. List and describe the 5 economic indicators.
2. What is gerrymandering?
3. What is a subcommittee?
Money
I. Functions of Money
1. Medium of Exchange—we trade money for
goods and services
2. Store of Value—we hold our wealth in the
form of money
3. Measure of Value—“measuring stick” that
can be used to assign a value to a good or
service
II. Types of Money
-Money is anything that we are willing to accept
in exchange for goods or services
*Money has value only because we believe
it has value!
-Money used in history: salt, animal hides,
gems, tobacco
-Money used today: currency (coins and paper
money)
Class Starter
• When and why was the Department of
Homeland Security created?
• What does the FBI do?
• What is judicial review?
• Which Supreme Court case established
the power of judicial review?
The Financial System
I. Types of Financial Institutions
• Commercial banks—banks that offer full
banking services to individuals and businesses
for a profit
• Credit unions—banks sponsored by large
organizations that offer financial services at
low costs; usually operate as cooperatives
(non-profit)
• When you deposit money into these
institutions, they use your money to
provide loans to other people
II. Keeping Our Financial System Safe
• The US has one of the safest banking systems
in the world
• Great Depression
1. The banking industry is heavily regulated by
the federal government
2. The banking system is now insured
– Federal Deposit Insurance Corporation (FDIC)—
insures individual bank accounts up to $250,000
Class Starter
1. What happens to the deposits you
make at a bank?
2. What is the FDIC?
3. What is a pocket veto?
4. Explain the War Powers Act of 1973.
The Federal Reserve
I. What is the Federal Reserve
• Central bank of the US
• Created in 1913 to standardize banking
procedures
• Nicknamed “The Fed”
• Has 12 district banks under it across the US
• Important to you because they control
interest rates, credit availability, and $ supply
II. Responsibilities of the Federal
Reserve
• Regulates consumer borrowing laws, large
commercial banks, and US banks overseas
• Acts as the federal government’s bank
• Controls monetary policy
– Policy that involves controlling the supply of
money in circulation
– See chart for details!
Class Starter
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•
•
•
1. What is the Federal Reserve?
2. Why was it created?
3. What is monetary policy?
4. What actions can the Federal Reserve take
to impact the economy?
Class Starter
• How does the US economic system allow for
individual freedom and economic security? (1
paragraph)
Notebook Check #9
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Ballot Box #9 Study Guide
BB #9 Vocabulary
Supply Notes
May 7 Starter
Goal 9 Vocabulary
• NAFTA: North American Free Trade
Agreement; agreement made between US,
Mexico and Canada that says the 3 countries
will trade without any restrictions
• Outsourcing: sending work to other countries
so that it can be done more cheaply
• Excise tax: a tax on items that are considered
luxuries
Goal 9 Vocabulary
• Anarchy: a situation where there are no clear
laws and no organizations to enforce laws
• Dictator: a ruler of a country that establishes
total control
• Free trade: trading without any restrictions or
barriers