Call to Order 1. Describe two details in the picture. 2. Using the picture, define the word: “Competition” 3. Why might competition between two companies be good for consumers (people who buy a good)?
Economics: Recap The study of: • Production (making goods) • Consumption (buying goods) • Distribution (selling goods) An economy is where all of these actions occur together.
Northern & Southern Economies North: • Moved towards industrialization • “Industrialization” is the development of industry, or an increase in manufacturing (through factories) • Needed people for factory jobs; some needed skills South: • Agriculturally based • Depended on the growing and selling of crops • Needed people for manual labor • Didn’t necessarily need people with skills
The Rise of Industry • The North did not have good enough land to rely on farming (agriculture) to make money • After the Civil War, people begin to create new products and machines. • Due to this, American life changed dramatically, and the US evolved from a largely agricultural nation into a largely industrial society.
Capitalism • the economic system in which factories, equipment, and other means of production are privately owned instead of owned by the government.
Changes in Communication & Transportation • Electricity was invented and brought dramatic changes to communication. • Telegraph lines were laid throughout the country • Alexander Graham Bell invented the telephone • The automobile and airplane were invented
Explosion of Industrial Growth • The growth of technology and creation of communication and electric power helped fuel American industry • Companies who had once been local expanded nation-wide • Systems of mass production came about and factories were used to produce goods in large quantities
Factories • Work was done by specialized machinery that could produce identical parts. • Unskilled workers were used to run the machines • Engineers divided up the production process so that each worker did a single task. • This sped up production and increased profits. • Increased production led to cheaper goods
Factors of Production • As businesses grew, they needed three factors of production: • Land- includes soil, forests, minerals, etc. • Labor- people to work • Capital- money, buildings, tools, machinery
Corporations • A company that is independent from its owners. That means, a “corporation” can own property, borrow money, sue, or be sued. • People can invest in a corporation by buying stock
Holding Company • When a company invests so much (buys so much stock) in other companies that they have a say in what the other companies do.
Competition • Two companies might compete for the same group of people’s business • Competition among corporations provide customers with a choice • Also drives down prices
Monopoly: • a company that dominates a particular industry • This reduces competition by buying or bankrupting competitors. • John D. Rockefeller was successful with this in the oil industry. • He bought out or merged with other companies; his competitors went bankrupt
Pools • A voluntary agreement among companies that • fixes prices • Divides business • allocates sales and market territories
Horizontal Integration • This was a way that corporations got bigger • Owning all businesses in a particular field. • Example: Rockefeller of Standard Oil bought up oil refineries and gained control of the whole industry.
Vertical Integration • Owning businesses involved in each step of the manufacturing process • Example: Andrew Carnegie and his steel company: he bought iron mines, then the mills they were sent to, then ships and railroads that moved finished products. He gained control of the steel industry
Laissez-Faire • Means “hands off” or “allow to do” in French • Lawmakers were not willing to intervene in business • They adopted laissez-faire, meaning that the market would regulate itself and that government would not interfere in it. • This allowed businesses to do what they wanted, including raise prices and decrease competition.
Social Darwinism • This also did not want the government to be able to regulate business practices • “Survival of the fittest” in the business world • It argued that the government should leave businesses alone to succeed or fail on their own.
Which is Laissez Faire? • Statement A: "The best way to economic recovery is to subsidize industry so that it will hire more workers and expand production." • Statement B: "If jobs are not available, the government must create jobs for those who are unemployed." • Statement C: "According to human nature, the most talented people will always come out on top." • Statement D: "Our government is responsible for the nation’s economic well-being."
Which economic term applies to the scenario? A new steel company is opened that is going to produce steel for all the major railroad companies in the United States. Rather than the government owning this, the factories, equipment, and other means of production are all bought and owned by one person- Ms. Zeins. Because Ms. Zeins privately owns all of the factors of production for this steel industry, she makes all the profits and becomes very rich.