Demand Chapter 21: Demand and Supply Desire, willingness, and ability to buy a good or service Law of Demand Buy more at lower prices Buy less at higher prices Diminishing Marginal Utility satisfaction decreases as more of a product is consumed Changes in Demand Changes in numbers of consumers Changes in consumers tastes Changes in consumers expectations Changes in substitutes Changes in complements Demand Elasticity Elasticity measure of how a quantity supplied or demanded changes in response to a price change Elastic demand: change in price causes a large change in demand Substitutes are available Purchase can wait Inelastic demand change in price has little effect on demand No substitute Examples: milk, pepper, gas Supply Changes in Supply Quantity producers are willing to sell at all possible prices Law of Supply Produce more at higher prices Produce less at lower prices Supply is based on profit Changes in cost of resources Productivity Technology Changes in government policies Changes in taxes Number of suppliers 1
Supply Elasticity Elasticity measure of how a quantity supplied or demanded changes in response to a price change Supply elastic: quantity changes in response to change in price Supply inelasticity: quantity changes very little to change in price Example: Oil (cannot quickly dig new oil wells, but oil is always needed) Markets and Prices Surplus Shortage Equilibrium Price Price Ceiling Price Floor Minimum wage Supply/Demand Graphs See Smart Notebook Chapter 22: Business and Labor Section 1: Types of Businesses Business Organizations Sole Proprietorships Most common form of business organization Business Organizations Sole Proprietorships Partnerships Corporations Full pride in ownership Receives all profits Complete responsibility for all debts and damages Small businesses owned by one person Ex: drug stores, gas stations, hair salons Businesses in which two or more people share the responsibilities, costs, profits, and losses Ex: law firms, contractors Big business organization run by many people and charted by the state; a permanent organization Ex: Walmart, Lowes, Food Lion 2
Partnerships Partnerships Two kinds General All partners are equally responsible for business Limited At least one partner is not involved in daily running of the business Sharing ownership Raise more money Special talents from each partner Larger more efficient operations Complex structure Each owner is responsible for debts Corporations Corporations Must receive a charter from the state Must have stocks Board of Directors Easily raise money to expand Easily raise capital Expensive and complex Owners have little say in running the business More government regulation Organization of Corporations Common Stockholders: people who buy stock * provide capital as stockholders * elects directors Board of Directors: * makes corporation policies * votes dividends (profits paid to stockholders) * appoints president and other officers Corporate Officers: * corporate president, chief executive officer, treasure, vice presidents of divisions Department Heads: * Leaders of departments: advertising, finance, personnel, sales Other Business Organizations Nonprofit Organizations Provide goods and services without seeking to earn a profit charities Cooperatives Voluntary business to perform economic activities that benefit members electricity Employees: * work in all areas to contribute to the corporation s success 3
LABOR AND MANAGEMENT Section 2: The American Labor Force Rise of Labor Unions American businesses expanded Groups formed to improve wages and working conditions Organization of workers became labor unions Collective bargaining representatives of labor union meet with representatives of employer to reach an agreement METHODS USED BY LABOR Strike members walk off job if employers refuse to bargain Picketing prevent hiring of replacement workers by walking back and forth in front of building carrying signs Job Action workers stay on the job but work more slowly than usual METHODS USED BY EMPLOYERS Hire strikebreakers to replace workers on strike Blacklists list sent to other companies asking them not to hire anyone on the list (workers active in labor union) Lockouts closed the factory and locked out workers, preventing them from earning wages CLOSED AND OPEN SHOPS AFL verses CIO Closed shop workers cannot be hired until they first become members of the union Open shop anyone can be hired Union shop employer can hire any qualified worker, but workers must join union within a short time period to keep their job Agency shop worker cannot be forced to join the union, but they must still pay the union dues Right-to-work laws passed by many states; no one may be forced to join a union American Federation of Labor (AFL) Created by Samuel Gompers Formed by craft unions (carpenters, plumbers, bakers, etc) Weakened by factories of mass production Congress of Industrial Organizations (CIO) Led by Walter Reuther Formed by industries (steel, automobile, electrical, etc) Included unions that had African Americans, immigrants, and women as members 4
AFL verses CIO LABOR LAWS Workers confused about which union to join Rivalry between AFL and CIO lasted for years 1955 AFL and CIO merged to form AFL- CIO Largest American labor group 13 million workers (not all unions belong) National Labor Relations Act (Wagner Act) Provides ways of settling disputes between labor unions and employers using representatives Labor-Management Relations Act (Taft-Hartley Act) Allows the president to order any union to delay a strike for 80 days Landrum-Griffin Act Prevents abuses by union officials; prohibits convicted criminals from serving as union officials for 5 years after being released from prison COLLECTIVE BARGAINING TODAY Mediation Labor union and employers cannot reach an agreement; call in an expert to examine the issue and recommend a solution Recommendations are suggestions and do not have to be followed Arbitration Expert called in to make a decision Decision is final and binding on both sides 5