Date post: | 04-Jan-2016 |
Category: |
Documents |
Upload: | katherine-leslie-james |
View: | 216 times |
Download: | 2 times |
© South-Western Educational Publishing
GOALSGOALS
LESSON 1.3THE BUSINESS ENVIRONMENT
Relate current economic conditions to consumer expenditures
Compare the legal structures for a business
© South-Western Educational Publishing
Economic Systems
An economic system refers to the way a country uses resources to produce goods and servicesCommand economy
The government owns most of the resources and commands individuals and businesses to product specific items or perform specific jobs North Korea, Cuba
© South-Western Educational Publishing
Economic System
Market economyIndividuals and businesses determine
the products they will produce and sell Purpose of business is to earn a profit Business owner decides what products
to sell
© South-Western Educational Publishing
Market Economies and Scarcity
Driven by scarcity Resources are consumed when a product
is made As resources are used, they become
harder to find, making them more valuable Scarcity describes the situation where
consumers always want more resources than are available
© South-Western Educational Publishing
Market Economy and Supply
SupplyThe law of supply states that
producers are willing to sell more of a product at a higher price than a lower price Ex: Page 17
© South-Western Educational Publishing
Market Economy and Demand
The law of demand states that consumers will demand more of a product at a lower price compared to a higher priceEx. Page 17
© South-Western Educational Publishing
Market Economy and Equilibrium
The equilibrium price for a product is the price at which the quantity supplied exactly equals the quantity demanded
© South-Western Educational Publishing
Economic Conditions
Customers’ confidence in the economy determines the Amount of money they spend, and Types of products they buy
To survive an economic downturn, retailers should Offer products customers need, and Cut back on items that are more expensive
and not necessary
© South-Western Educational Publishing
Legal Structure
4 Main Types of Legal Structures1. Sole proprietorship
2. Partnership
3. Corporation
4. Franchise
© South-Western Educational Publishing
Legal Structures
Sole ProprietorshipSimplest form of businessMost popular form of business
© South-Western Educational Publishing
1. Sole Proprietorship
AdvantagesAdvantagesEasiest and least expensive
structure to set up and dissolve
Profits and losses reported on personal income tax form
Owner makes all business decisions
Flexible—able to respond quickly to market changes
DisadvantagesDisadvantagesAutomatically dissolves
when owner diesOwner has unlimited
personal responsibility for business debts
Growth is limited by personal commitment of owner
Funding is limited to owner’s ability to raise funds
© South-Western Educational Publishing
Legal Structures
General Partnership Formed when two or more individuals are
co-owners of a business operated to earn a profit
Before you begin operating should form a partnership agreement Sets rules for partners and describes actions
partners will take (page 20)
© South-Western Educational Publishing
2. Partnership
AdvantagesAdvantagesEasy and inexpensive to set
up and dissolveProfits and losses reported
on personal income tax returns of each of the general partners
General partners make all business decisions
Flexible—able to respond quickly to market changes
DisadvantagesDisadvantagesDissolves when a partner
dies or withdraws unless specified differently
Partners have unlimited personal responsibility for business debts
Potential for disagreement between partners
Any partner can commit the business to unrealistic obligations
© South-Western Educational Publishing
Legal Structures
CorporationMost complicated legal structureLegal entity separate of individualOwned by share holdersS-Corporation
Has fewer than 35 share holders
© South-Western Educational Publishing
3. Corporation
AdvantagesAdvantagesBusiness is a separate legal
entityExistence of business is not
affected by the death of individual shareholders
Shareholders are not personally liable for business debt
Hired managers make business decisions
DisadvantagesDisadvantagesMost difficult and expensive
structure to set up and dissolve
Business is affected by government regulation
Extensive record keeping required
Not flexible—unable to respond quickly to market changes
© South-Western Educational Publishing
Legal Structures
FranchiseGrants an individual the right to
market a company’s goods or services in a specific territory
Franchise license costs on average between $12,000 and $25,000
© South-Western Educational Publishing
4. Franchise
AdvantagesAdvantagesThe business idea has been
proven to workFranchisee receives
assistance from the corporation
Corporation continues to research and develop new products and methods
DisadvantagesDisadvantagesThe business idea is not
original for the business owner
You must follow the procedures determined by the corporation
You are not free to develop your business by changing your products or methods