2. Sole Proprietorship
Advantages
1. Easy to get
started.
2. Ease of mtg.
3. One person gets
all profits.
4. Ordinary taxes.
5. Easy to get out of
business.
Disadvantages
1. Unlimited liability.
2. Hard to raise
money.
3. Size/Efficiency
issues.
4. Hard to find
employees. Why?
5. Limited life of co.
3. Partnerships: Two or More
Owners
Advantages
1. Easier to mtg.
2. Ease of est.
3. No corp. taxes.
4. Easier to get loans.
Disadvantages
1. Fully responsible for
other partner.
2. Potential for conflict.
3. Life of co. limited.
4. Corporations
Advantages
1. Easier to raise
money. Stocks/Bonds.
2. Professional mtg.
3. Limited liability.
4. Possible long life.
Coke?
Disadvantages
1. State charter.
2. Double taxation.
3. More government
regulations.
5. How Can Corporations Grow?
1. Borrow money
from banks.
2. Venture
capitalists.
3. Reinvest profits.
4. Acquisitions.
4. Issue bonds.
5. Go public. Issue
stock.
6. Have a merger.
6. Reasons for Corporation
Mergers?
1. Better efficiencies.
Walmart?
2. Acquire new
product lines. Drug
co.
3. Acquire copy
rights or patents.
4. Eliminate rivals.
5. Get access to
new/bigger markets.
CVS?
7. Horizontal & Vertical Mergers
1. Horizontal: Two co. that are in the same business.
Two banks become one. H.P. and Compac.
2. Vertical: A co. that owns a business from raw
materials to finished product.
8. Conglomerates
1. A co. that owns at least four
businesses that do unrelated things.
2. Examples: General
Electric, Samsung, or Tyco.
9. Multinationals
1. A corporation that has markets and
productions in two or more countries.
2. All conglomerates and any corporation
of any size are multinational.
10. Other Organizations…
1. Non-Profits.
2. Cooperatives.
3. Labor Unions.
4. Professional assn.
AMA.
5. Business assn.
11. Chapter Four
Microeconomics:
The study of individual
elements of the
economy with the study
of consumer and
business behavior.
Demand:
The desire, ability, and
willingness to buy a
product or service.
12. Demand Curve or Schedule
Demand Curve
1. D.C. is the
illustrated/graphic
PICTURE that
shows the
relationship between
demand and price.
Demand Schedule
1. D.S. is a listing or
table showing the
relationship between
price and demand.
14. Law of Demand
1. Higher the price, the lower demand.
2. The lower the price, the higher
demand.
3. Duhhhhhhhh!
15. Demand and Marginal Utility
Diminishing Marginal Utility: The more we
have of any one item, the less value each
INDIVIDUAL item has to us.
16. Shifts in Demand
1. A shift in demand is a major change in
consumer spending for a good or service.
2. A shift in demand can be cause by
many reasons, such as:
18. Substitution Effect
1. Sustained high prices of a product will cause
consumers to “Substitute” to another.
2. Japanese cars in the 1970’s.
3. Beef. Early 1970’s.
4. Coffee. Early 1980’s.
20. What Determines Elasticity?
1. Can purchase be delayed?
2. Possible substitutes?
3. Is it a big chunk of your income?
4. Can a product change from inelastic to
elastic?
21. Inelastic Demand
1. For some goods and services price do not
affect demand.
2. Why does price not affect the demand for
insulin or heart-by-pass surgery?
3. Does price have an impact paperclips?
4. What does an inelastic graph look like?
22. What is Supply?
Supply
The amount that
of a product or
service that can
be offered at all
possible prices.
Law of Supply
The higher the
price paid, the
more that
producer will offer.
23. Supply Curve & Schedule
Supply Curve
Graphic that
shows all
products offered
at all possible
prices.
Supple Schedule
A listing or table
of products
offered at all
possible prices.
24. What two direction does the
supply curve ALWAYS go?
1.UP and to the right!
25. Changes in Supply
1. Cost of inputs.
2. Productivity.
3. Technology
4. Taxes and
subsidies.
5. Expectations.
6. Gov’t regulations.
7. Number of sellers.
