D3 - Microeconomics
Types of Business
Organizations
Sole Proprietorships
Easy start up
Few regulations
Full control
Sole receiver of profits
Unlimited liability
Low taxes
Most Businesses are
SP’s
D3 - Microeconomics
…Types of Business
Organizations
Partnerships
General / Limited /
Limited liability
Ease of start up
Shared decision making
Larger pool of capital
Low taxes
Unlimited liability (unless
a LLP)
Conflict
D3 - Microeconomics
…Types of Business
Organizations
Corporations
Has stockholders. Part
owners of the company
Dividend – portion of profits
paid to stockholders
Potential growth
Offers bonds – formal
contract to repay borrowed
money at a fixed rate
Limited liability
Must file a certificate of
incorporation
High taxes
D3 - Microeconomics
…Types of business
organizations
Franchise
Semi-independent
business
Pays fee to parent
company for the
exclusive right to sell a
product in a given area.
Example: Wendy’s,
Burger King
D3 - Microeconomics
Labor Force All nonmilitary people
who are employed or
unemployed
D3 - Microeconomics
Bureau of Labor and
Statistics (BLS)
Gathers and reports
data concerning
employment and
unemployment
D3 - Microeconomics
Learning Effect The theory that learning
increases productivity
and results in higher
wages.
D3 - Microeconomics
Contingent
Employment
A temporary or part-
time job.
D3 - Microeconomics
Trend in wages and
benefits.
Benefits are up
More service jobs and less
manufacturing jobs
More women and minorities
entering the workforce due
to nature of jobs changing.
Labor unions down
Glass Ceiling – invisible
barrier that prevents women
and minorities from
advancing in businesses
dominated by white males.
D3 - Microeconomics
Organized Labor Strike – Organized work stoppage
Right-to-work laws – Ban mandatory union membership
Blue Collar / White Collar
Collective Bargaining –unions and management meet to negotiate labor contracts. Negotiate benefits, working conditions and pay.
Mediation – nonbinding
Arbitration - binding
D3 - Microeconomics
Union Membership policies Closed shop – companies
must hire only union
members. Taft-Hartley Act
outlawed this
Union Shop – new
employee must join the
union after a specified
period.
Agency Shop – employees
are not required to join the
union but must pay union
dues.
D3 - Microeconomics
Three uses of money Medium of exchange
Unit of account
Store of value
D3 - Microeconomics
6 characteristics of
money
Durable
Portable
Divisible
Uniform
Acceptable
Limited supply
D3 - Microeconomics
3 sources of money’s
value (types of money)
Commodity money
Wheat / gold
Representative money
Silver certificates / IOU’s
Fiat money
Today’ Federal Reserve
money
D3 - Microeconomics
Free Banking era 1837-1863
Number of state-
chartered banks tripled
Bank runs / panics
D3 - Microeconomics
Federal Reserve
System
Created in 1913 w/ the
Federal Reserve Act
12 district banks
Helped restore
confidence in the
Nation’s Banking
System
D3 - Microeconomics
FDIC – Federal Deposit
Insurance Corporation
Created in 1933
Insures accounts up to
$100,000.
D3 - Microeconomics
Banking Today M1 – money that is liquid
(can be easily turned to
cash or used immediately) –
Cash, checking accounts,
debit cards
M2 – M1 plus “near money”.
Savings accounts, Money
market accounts
Fractional Banking System
– Bank keeps a fraction of
deposits on hand (10%) and
lend out the rest
D3 - Microeconomics
…Banking Today Mortgage – a specific
type of loan that is used
to buy real estate.
Principal – the amount
originally borrowed
Interest – the price paid
for the use of borrowed
money
ATM’s
D3 - Microeconomics
Types of Financial
Institutions
Commercial Banks
Savings and Loan
Associations
Credit Unions
Finance Companies
D3 - Microeconomics
Difference in Saving
and Investing
Saving is putting assets
away for future use.
Investing is putting
assets away w/ hopes
for future benefit -
Gaining a return
D3 - Microeconomics
Diversification Spreading out of
investments to reduce
risk.
D3 - Microeconomics
Mutual Fund A fund that pools the
savings of many
individuals and invests
this money in a variety
of stocks, bonds etc.
D3 - Microeconomics
Relationship b/w risk,
liquidity, and return
The greater the risk the
greater the
POTIENTIAL return /
loss. The greater the
liquidity, the less return.
Examples: Saving
Account / CD
D3 - Microeconomics
Three components to a
bond
Coupon Rate
Maturity
Par Value
D3 - Microeconomics
Types of Bonds Savings
Treasury Bonds, Bills
and Notes
Municipal Bonds
Corporate Bonds
Junk Bonds
D3 - Microeconomics
Securities and
Exchange Commission
An independent agency
of the government that
regulates financial
markets and investment
companies.
D3 - Microeconomics
The Stock Market Share – portion of stock. Shows ownership
Equities – Claims of ownership in a corporation
Capital Gain / Capital Loss
Stock Exchange – market for buying and selling stock.
Bull market – Market is rising
Bear Market – Market is falling.
NYSE, AMEX, NASDAQ
DJIA, S&P 500,
Crash of 1929 – “Speculation”
