The Economic System at Work
Why It Matters
Tell students that American economic
freedoms include the freedom to buy
and sell, to earn a living, to earn a
profit, to compete, and to own property.
Ask students which of these freedoms
they have experienced in their daily
lives. (Possible answers: the freedom
to compete for jobs, the freedom to buy
and sell merchandise or services) Tell
students to consider how these freedoms
are important to the health and well being of U.S. citizens.
TAKING
BEFORE YOU READ
The Main Idea
Reading Focus
Key Terms
Countries form many
types of economic
systems to meet their
citizens’ needs and wants.
The United States has a
market economy.
1. How do different economic
market economy, p. 452
free market, p. 452
profit, p. 453
scarcity, p. 453
law of supply, p. 453
law of demand, p. 453
free enterprise, p. 455
capitalism, p. 455
monopoly, p. 456
systems help satisfy people’s
needs?
2. What factors shape life in a
market economy?
3. What is the U.S. economic
system like?
As you read, take
NOTES notes on economic
systems, life in a market economy,
and the U.S. economic system.
Use a chart like this one to record
your notes.
Key Terms
Preteach the following terms:
market economy economy in which
people are free to obtain goods and services
in almost any way they want (p. 452)
free market right to buy and sell goods as
you want (p. 452)
profit money that a business has left after
expenses (p. 453)
scarcity lack of a particular resource
(p. 453)
law of supply economic principle that
businesses will produce more products
when they can sell them at higher prices and
fewer products when prices are low (p. 453)
law of demand economic principle that
buyers will demand and buy more products
when prices are low and fewer products
when prices are higher (p. 453)
free enterprise principle that business
owners in a free market are allowed to run
their businesses in any way they see fit, with
little government interference (p. 455)
capitalism economic system in which the
means of production are owned by private
citizens (p. 455)
monopoly what a company has when it is
the only one selling a product or providing a
service (p. 456)
Taking Notes
Economic
Systems
• How people
obtain goods
and services
• Traditional,
command,
and market
economies
450
Life in a Market
Economy
• Competition
for resources
• Supply and
demand
• Free
enterprise,
capitalism
CHAPTER 17
Our society is based on principles
of individual freedom. Those same
principles of freedom apply to the
U.S. economic system. We have
what is called a free market economy. This means
that if you want to start a business, you can. Your
success will be determined by your business ability
and the market, not by a government agency.
Economic Systems
Suppose you wanted to make a sandwich
but you discovered that you had no bread.
How could you get more? Would you have
to grind wheat into flour so that you could
bake a new loaf? Might you have to stand
in a long line for hours before someone gave
you a few slices? Of course you wouldn’t.
With a quick trip to the store, you could buy
as many loaves of bread as you wanted.
In other parts of the world, however, getting items like bread is not as simple. How
people get the things they want is determined
by a country’s economic system. The nature
of economic systems varies widely from place
to place. However, they all help people create
and obtain the goods and services they need.
450
The Need for Economic Systems
All around the world, people need certain
things to survive. People cannot live without
food and water, shelter, and clothing. These
basic materials that people cannot live without are called needs.
In addition to their needs, there are many
items that people want in order to make their
lives more comfortable. These items are not
necessary for survival, but they can have great
value to people. For example, you may want
a television, a cell phone, or a car. You do not
really need any of these things in order to live,
but they can make your life easier, more comfortable, or more enjoyable. These types of
items are called wants. Different people have
different wants. In addition, a person’s wants
can change over time.
People satisfy their wants by obtaining
goods and services. For example, if you want
fun, you can buy a new game. The process of
obtaining goods and services to satisfy your
wants is called the want-satisfaction chain.
How people obtain goods and services is what
distinguishes different economic systems from
each other.
CHAPTER 17
Teach the Main Idea
At Level
The Economic System at Work
U.S. Economic
System
• U.S. mixed
economy
• Mostly market
economy
• Some
government
regulation
1. Teach Ask students the Reading Focus
3. Review Create a master list of the section’s
questions to teach this section.
2. Apply Have students preview the section
and create a list of all of the illustrations in
the section. Ask them to leave room next to
each illustration description for comments.
As students read the section, ask them
to analyze how each illustration shows a
concept discussed in the text.
illustrations on the board. Ask students
to share their observations about each
illustration.
4. Practice/Homework Have students write
a one-paragraph story to illustrate each of
the four American economic freedoms.
The WantSatisfaction Chain
To satisfy your need for food, you may want a sandwich on a bun.
This want-satisfaction chain shows the steps involved in helping you
satisfy that want.
Reading Focus
How do different economic systems
help satisfy people’s needs?
Economic Systems
Contrast In what ways is a market
1 Grain
2 Flour
3 Bread
becomes Flour
becomes Bread
is Delivered
Farmers harvest grain and send it to
mills where it is ground into flour.
Bakers use flour to make all kinds of
bread products, including sandwich buns.
Kitchens, restaurants, and cafeterias
receive bread from bakeries.
economy different from a command
economy and a traditional economy?
A market economy is based on producers’ and consumers’ freedom to make
decisions about what they buy and
sell, and it involves trade and money.
In a traditional economy, people grow
their own food and make their own
products. In a command economy,
the government makes all economic
decisions.
Elaborate What are some of your
wants, and what influences them?
Students’ answers will vary but should
show understanding of wants and
what influences them.
From the Source: Readings in
Economics and Government: Reading
64: Price Making in a Democracy;
Reading 67: The Affluent Society
4 Lunch is Served
The final step in the want-satisfaction
chain is a tasty sandwich on a bun.
Linking to Today
ANALYSIS
SKILL ANALYZING VISUALS
What different industries are involved in the
want-satisfaction chain?
THE ECONOMIC SYSTEM
Collaborative Learning
451
At Level
Create a Graphic Organizer
1. Organize students into small groups. Have
each group select an economic freedom and
imagine that this economic freedom does
not exist.
2. Have each group create a chart or diagram
describing the problems or limitations that
the U.S. economy would experience if that
specific economic freedom were missing.
For example, students might indicate that
Satisfying Customers’ Wants Sometimes manufacturers change their products in order to better satisfy customers’ wants. For example, the Nabisco
company has been producing cookies
and crackers since 1898. In 2005 the
company introduced new versions of
several kinds of cookies and crackers
made with whole grains. The company
hoped that the new snacks would satisfy
the wants of health-conscious consumers, inspire them to buy the new snacks,
and help the company make money.
consumers would be unable to shop for the
best price if they did not have the freedom to
buy what they want from different merchants.
3. Invite groups to present their charts or
diagrams to the class. Visual/Spatial,
Verbal/Linguistic
Alternative Assessment Handbook: Rubric 13:
Graphic Organizers
Answers
Analyzing Visuals farming, milling,
baking, delivery, food service
451
Types of Economic Systems
There are three basic economic systems in
the world: traditional, command, and market economies. Most countries today use a
mix of these systems to satisfy their citizens’
wants and needs.
In a traditional economy, economic decisions are based on how economic activity has
been carried out in the past. People may grow
their own food and make their own goods.
They might grow and make everything
they need to survive, or they might trade to
obtain things that they cannot make themselves. If they do trade, they may or may not
use money. They may use a barter system in
which they trade goods for other goods.
A second type of economic system is
called a command economy. In this kind of
system, the government makes all economic
decisions. In addition, the government owns
or controls all capital, tools, and production
equipment. It tells managers and workers on
farms and in factories what they can produce, how much of it to produce, and how
much they can charge for it. Historically,
many Communist countries have tried to
set up command economies. Most of these
economies have collapsed, but North Korea
and Cuba still have command economies.
MISCONCEPTION
ALERT
Make sure students understand that the
text refers to the American economic
system in four ways: a market economy,
a free market, capitalism, and a free
enterprise system. Clarify that these
terms all describe the same American
economic system.
The third type of economy is the one
found in most countries, including the United States. It is called a market economy. A
market economy is one in which economic
decisions are made by individuals looking out
for their own and their families’ best interests.
People can start businesses to make and sell
any legal products they choose. Based on the
market, they can also set their own prices for
these products. In other words, the government does not tell people what to produce
or buy. In this way, a market economy is the
opposite of a command economy.
A market economy is based on freedom.
People are free to own property, to create companies, and to buy products as they choose.
The right to buy and sell goods as you want
is called a free market. Companies also need
to be free to compete with each other. In a
free market, competition among sellers—not
any government policy—is the main factor in setting prices. Sellers try to price their
goods lower than their competitors so that
people will buy them. At the same time, they
have to be careful not to set their prices so
low that they lose money.
READING CHECK
Explaining Why do countries
need economic systems?
American
Economic Freedoms
Among the basic rights we have as Americans
are certain economic freedoms. These economic
freedoms are the foundation of our free market
economy.
How do these freedoms affect our everyday lives?
Freedom to Own
Property
Freedom to
Compete
452
CHAPTER 17
Differentiating Instruction
Advanced Learners/GATE
Research Command Economies
1. Have students research the Cuban economic
Answers
(photo) Possible answer: They allow us
to make our own decisions about how to
earn and spend money.
Reading Check to satisfy people’s
needs and wants
452
system and another example of a command
economy using reference books and the
Internet. Allow students to use historical
examples, such as the Soviet Union.
2. Ask students to write an informational essay
about the government’s role in the Cuban
economy and the other economy they chose
Above Level
Research Required
that incorporates their research. Remind
them to use specific examples in their essays.
Students may also wish to compare the two
economies in their essays.
3. Allow students to share their essays with the
class. Verbal/Linguistic
Alternative Assessment Handbook: Rubric 42:
Writing to Inform
Supply and Demand
Life in a Market Economy
In a market economy, people are free to start
a business and pursue profit. Profit is the
money a business has left after it has paid its
expenses. The profit motive, or the desire to
make a profit, is essential to a successful market economy. If people do not want profit,
they will not start businesses and people will
have no way to obtain goods and services.
Competition for Resources
In order to make a profit, people need to
provide a good or service. In order to provide a good or service, they need resources.
As you know, however, resources are not
unlimited. As a result, businesses and individuals must compete for the resources
they need. This competition eventually
affects everyone, not just business owners.
In time, it affects the prices we pay for the
goods we want.
One result of the competition for these
resources is scarcity. Scarcity is the lack
of a particular resource. When a resource
becomes scarce, it is harder for producers to
obtain. Products made with that resource also
become more difficult to obtain. As a result,
the prices for these items usually rise.
Changes in prices are usually the result
of the laws of supply and demand. These
laws are among the most basic of all economic principles. The law of supply states
that businesses will produce more products
when they can sell them at higher prices.
They will produce fewer products when
prices are low. The law of demand, on the
other hand, states that buyers will demand,
or want, a greater quantity of a good when
its price is low. Likewise, as prices rise, the
quantity demanded falls. That is, when the
price of a good goes up, people buy less of
that good.
Although you may not realize it, you
are probably already familiar with the principles of supply and demand. Imagine, for
example, that you are paid $100 by each of
your neighbors to mow their lawns. You will
probably want to mow quite a few lawns,
because that is a good price for your service.
Imagine, however, that your neighbors only
wanted to pay you $1 per lawn. Would you
still want to mow as many? Most people
would not, because that price is too low.
That is what the law of supply states—people are more eager to provide a good or service for a high price than for a low one.
Reading Focus
What factors shape life in a market
economy?
Life in a Market Economy
Explain What happens when a
resource becomes scarce? It is harder
for producers to obtain, and prices
for products made with that resource
might rise.
Make Generalizations How do
businesses use the laws of supply and
demand to try to make a profit? To
increase their profit, businesses have
to find the highest price that customers are willing to pay for the goods or
services they offer.
Elaborate What factors might affect
the demand for a good or service?
Possible answers: its price, quality,
usefulness, ease of use, advertising
Political Cartoons for Civics,
Government, and Economics:
Cartoon 12: Concentration of the
Country’s Wealth
Connect to Math
Freedom to Buy
and Sell
Freedom of Workers
to Compete for Jobs
Freedom to
Earn Profits
THE ECONOMIC SYSTEM
Differentiating Instruction
453
Below Level
Learners Having Difficulty
Illustrate Supply and Demand
1. Have students look through newspapers and
brief description of how the laws of supply
and demand explain each headline.
magazines to find headlines about events that
illustrate the effects of supply and demand.
2. Ask each student to cut out these headlines,
paste them onto a sheet of paper, and write a
3. Have volunteers explain their collages to the
class. Visual/Spatial, Verbal/Linguistic
Alternative Assessment Handbook: Rubric 8:
Collages
Supply and Demand To clarify the laws
of supply and demand, present the following problem to students:
Jan’s Records is selling CDs for $18.
Today, Jan sold five CDs. Nita’s Music
is selling CDs for $12. Today Nita sold
ten CDs. Which merchant made more
money? Why? (Jan made $90, while
Nita made $120.) Help students to understand that although Jan wants to supply CDs at $18 a CD, there is limited
demand for CDs at that price. In contrast, Nita is supplying CDs at a price
which customers prefer, or demand.
THE ECONOMIC SYSTEM
453
Info to Know
Copyright Law Article 1, Section
8, Clause 8 of the United States
Constitution reads, “To promote the
Progress of Science and useful Arts, by
securing for limited times to authors
and inventors the exclusive right to
their respective writings and discoveries.” The law protects the works of artists, scientists, authors, and inventors.
File-Sharing and Copyright Law
In June 2005 the U.S. Supreme Court ruled that a popular Web
site was responsible for violating copyright laws. The company
itself did not download illegal material. However, its file-sharing
technology helped individuals share copyrighted materials, such
as movies and music, without paying for them.
Article I, Section 8 of the Constitution
gives Congress the power to make
copyright laws. Copyright laws give artists such as writers,
painters, and performers lifetime ownership of their work.
People who wish to use a copyrighted work must receive
the owner’s permission and often pay a fee. For example,
whenever you buy a CD, the copyright holder gets paid.
But how would the copyright holder get paid if you did
not pay for the CD? People are often tempted to download music files without paying. This is illegal—it violates
the artist’s copyright. For some artists, the lost income
from illegally downloaded works may threaten their ability to continue working. Other artists, however, offer free,
legal downloads of their music on the Internet to attract
more listeners.
Downloading music from the Internet without
paying for it may violate copyright laws.
ANALYSIS
SKILL EVALUATING THE LAW
1. Why do you think the framers of the Constitution
wanted to protect artists’ rights to their works?
2. What do you think can be done to discourage
people from illegally obtaining copyrighted music
and movies?
The law of demand works in the same
way. If you went to a CD store and found
that CDs were priced at $2 each, how many
would you buy? At that price, you might
buy quite a few of them. How many would
you buy, though, if they cost $25 each? You
would probably buy fewer, because the price
is so much higher. That is the basic idea
behind the law of demand.
What business owners hope is that the
supply of and demand for a product will balance each other. Because they want to find
a price at which consumers will continue to
buy a product, the price cannot be too high.
At the same time, however, business owners
need to make a profit. Therefore, the price
cannot be too low either.
454
go.hrw.com
KEYWORD: SZ7 CH17
To understand this balance, imagine that
you are selling lemonade. You need to figure
out a good price to charge for your product.
First you think that you would like to charge
$10 per glass. That way you will make a large
profit on each glass that you sell. Unfortunately, however, people do not want to pay
that much for it, and you are left with lots of
unsold lemonade.
To try to sell more, you decide to drop
your price. Now you will sell lemonade for
a nickel a glass. Lots of people are willing to
buy it now. However, you quickly learn that
it costs you more to make the lemonade
than you earn by selling it. Obviously, you
will need to raise your prices if you want to
stay in business for long.
CHAPTER 17
Collaborative Learning
Above Level
Discuss the Use of Copyright Law
1. Tell students that they will create arguments
Answers
Evaluating the Law 1. Possible
answers: to ensure that they could
make a living from their work; to prevent
plagiarism 2. Possible answers: Jail
those who disobey the law; create a
technology that ensures that the material
cannot be copied.
454
for and against the use of the U.S.
copyright law as it pertains to file sharing of
copyrighted material.
2. Have students work in small groups to
portray the following: software companies,
representatives of musical artists, customers
supporting file sharing of copyrighted music,
customers against file sharing of copyrighted
musical material. Have students create
arguments to present in a discussion on
file-sharing.
3. Ask students to present their cases in a
classroom panel. Interpersonal, Verbal/
Linguistic
Alternative Assessment Handbook: Rubric 11:
Discussions
In response, you raise your prices to $2
per glass. You now have fewer customers than
you did before, but your business is still steady.
You are also making less profit per glass than
you did when you charged $10, but you are
not losing money. In other words, you have
managed to achieve a balance between supply and demand.
Free Enterprise
In a market economy, no one orders business owners how to run their businesses. Of
course, if owners do not follow the laws of
supply and demand, their businesses fail. Still,
business owners may operate however they
see fit, with little direction or interference
by government. This principle is called free
enterprise.
The free-enterprise system offers enterprising businesspeople the opportunity to
make huge profits. For example, Bill Gates
and Steve Jobs are two Americans who used
their economic freedom to start successful
companies. With no intervention from the
government, they turned their companies—
Microsoft and Apple Computer—into hugely
successful operations.
Most companies are not as successful as
Microsoft and Apple, though. By accepting
the opportunity to make profits, business
owners also open themselves to the possibility of huge losses if their companies do not
perform well. They might create a product
only to learn that there is no demand for it,
or they might find that they have to charge
more than people are willing to pay for their
goods. Mistakes like these can cost business
owners. Some even end up losing their companies. This is the main risk that people face
in a free-enterprise system.
Competition is vital to the free-enterprise
system. As you have already learned, competition between companies is the main factor in
setting prices. In addition, competition drives
companies to improve their products. Each
company wants the products it creates to be
the best so that people will buy them.
The constant desire to improve products
means that innovation is also important in
free enterprise. Clever thinkers are always
looking for new products they can create or
for ways to improve existing products. They
hope that their innovations will help them
make huge profits from their products.
Innovative people do not want others to
steal their ideas. They want ways to protect
what they have created so that no one else
can take credit for it or make money from it.
In the United States, there are two ways to
protect ideas. A patent gives you the exclusive right to make and sell your invention
for a certain number of years. A copyright is
the exclusive right to publish or sell a piece of
writing, music, or art.
Checking for Understanding
True or False Answer each statement T if it is true and F if it is
false. If false, explain why.
1. The U.S. economic system is
called capitalism. T
2. The U.S. economic system is
also called a free enterprise
system. T
3. There is a lot of government
interference in the U.S. economic
system. F; In the U.S. economic
system, there is freedom to
compete without unreasonable
government interference.
Capitalism
The main driving force behind the American
economy today is capitalism. Capitalism is
an economic system in which the productive resources—farms, factories, machines,
and so on—are owned by private citizens.
Capitalism is closely linked to a market
economy. People are free to buy and sell as
they please. Capitalism also encourages people to invest their money so that they will be
successful financially. If they are successful,
they will be able to improve their quality of
life. Anyone with a little extra money has the
opportunity to invest it, either in a company
of their own or in someone else’s company.
If a company is successful, it can make
huge profits, and not only for its owners.
All the people who invested in the company can also make profits. By encouraging
investment, innovation, and the production of quality goods, the capitalist system
benefits the American people as a whole.
Monopolies
Since competition is an essential part of the
free-enterprise system, business practices
that limit competition are frowned upon.
Such practices disrupt the free market and
weaken a market economy.
THE ECONOMIC SYSTEM
Collaborative Learning
455
At Level
Research African American Inventors’ Patents
Research Required
1. Tell students that, before the Civil War,
3. Have each group identify and share with
African American slaves could not receive
patents on their inventions. This changed,
however, in the years following the war, when
African Americans were freed from slavery.
2. Divide students into small groups. Have
each group research an African American
inventor—such as Jan Matzelinger, William
Purvis, Andrew Beard, or Granville Woods—
who received at least one patent during the
years 1870–1900.
the class at least one item patented by the
inventor they researched. Students should
explain how each invention works and, if
possible, show a picture of it.
4. Lead a class discussion on how receiving
patents is an important economic freedom for
all Americans. Verbal/Linguistic
THE ECONOMIC SYSTEM
455
The U.S. Economic System
POLITICAL CARTOON
Reading Focus
What is the U.S. economic system
like?
Monopolies
Because monopolies limit competition, they harm our freeenterprise system. As a result, they are outlawed in the
United States.
The U.S. Economic System
A Mixed Economy
www.CartoonStock.com
Identify What are some ways the
government helps protect workers?
by establishing minimum wage laws,
laws guaranteeing workers’ safety,
and laws to protect people from
discrimination
Make Judgments Do you think
that the U.S. government should
control parts of our economy? Why or
why not? Possible answers: Yes—
without government control some
companies would take advantage of
the public interest by polluting, creating monopolies, and other problems.
No—the government should stay out
of business because it interferes with
people’s ability to make a living.
As you have already learned, the United
States has a market economy. For the most
part, people are free to produce and buy any
goods they wish in any way that they wish.
In a few instances, however, the U.S.
government does impose some regulations
on businesses, much like you would find
in a command economy. In this way, our
market economy also includes a mix of elements of other economic systems.
ANALYSIS
SKILL ANALYZING PRIMARY SOURCES
What is the artist’s point of view regarding
monopolies? How can you tell?
As a result, most countries that have
market economies have banned companies from creating monopolies. A company is said to have a monopoly if it is the
only one selling a product or providing a
service. A company that holds a monopoly
can set any price it wants. This can cause
many problems, especially if the item in
question is a necessity.
In the United States, monopolies—
except for certain public utilities—are illegal. The U.S. government watches businesses to see that no new monopolies are
formed and that consumers are protected.
U.S. Supreme Court Case Studies:
Case 10: New Deal Cases
READING CHECK
Finding the Main Idea How
are supply, demand, and free enterprise key to a
market economy?
456
An economy that mixes elements of different economic systems is called a mixed
economy. In most mixed economies, businesses are largely free to operate as they
please. Their operations, however, must
fall within certain regulations set up and
monitored by the government. The U.S.
economic system is a mixed economy.
Many of our government’s regulations
on business are intended to protect people.
For example, federal and state governments
have established laws, such as minimum
wage laws, to help protect workers. Some
laws guarantee workers’ safety and protect
people from discrimination. Other government regulations are intended to protect the
natural environment. For example, the government sets limits on how many chemicals
companies can release into the air or water.
These regulations sometimes cost companies money, which results in higher prices
for consumers. At the same time, however,
the regulations result in cleaner air and water
and less pollution.
The federal government may sometimes
intervene in business to help control prices.
One way the government does this is by subsidizing, or giving money to, certain industries. For example, to make sure that people
can buy flour, cereal, and other wheat products cheaply, the government might give
subsidies to wheat farmers. Because they
are receiving money from the government,
CHAPTER 17
Critical Thinking: Evaluating
At Level
Chart the Pros and Cons of Monopolies
Answers
Analyzing Primary Sources The
artist does not approve of monopolies
and refers to their unfair practices:
rigging markets, restraining trade, and
suppressing competition.
Reading Check In a market economy,
supply and demand help determine what
goods are produced and how much
manufacturers can charge for them; free
enterprise allows business owners to
make their own decisions.
456
example, a water and sewage monopoly might
be beneficial because one company can do the
legal, such as a public utility company. Have
job more efficiently. However, consumers might
students divide a sheet of paper into two
not be able to get the company to improve
columns and write the name of the monopoly
service or lower its prices.
at the top of the chart. Have them label the
first column Pros and the second Cons.
3. Have students share their charts with the
2. Ask students to list reasons that the monopoly
class. Visual/Spatial, Verbal/Linguistic
is beneficial in the first column. Have them list
Alternative Assessment Handbook: Rubric 13:
Graphic Organizers
its negative effects in the second column. For
1. Ask students to think of a monopoly that is
the farmers do not have to charge high
prices for their crops. As a result, prices for
wheat products stay low.
Comparing
American Business
Command, market, and traditional economies differ in the
way goods are produced and sold. Most countries use a mix
of two more of these systems.
Think about the companies that made some
of the products you own. What do you know
about these companies? Most of the products
you own were probably made by large companies. Many of the businesses we deal with
in the United States today are huge. They
employ millions of people and do business
all around the world. This has not always
been the case, however.
In the early days of the United States,
most businesses were small. They served only
local needs. Few people ever needed to do
business with people who lived far away. For
example, a farmer who needed a new piece
of equipment probably only had to travel a
few miles to purchase it.
In the late 1800s, however, larger businesses began to develop in the United States.
Improvements in transportation allowed big
companies to sell to customers who lived far
away. As businesses became more successful,
they gained more money. By reinvesting this
money in their businesses, they were able to
grow even larger.
Today, big businesses are essential to the
American economy. Many of the goods and
services we use every day could not be produced by small companies. For example, to
produce steel, electricity, automobiles, and
ships requires large and expensive machines.
Only large companies have the resources and
the tools to produce these goods efficiently.
Economists refer to this ability of large companies to produce many goods efficiently as
the economy of scale.
In the last few decades of the 1900s,
companies began to grow even larger. Businesses began to join together to form huge
organizations called conglomerates. A conglomerate is formed by the merger of businesses that produce, supply, or sell a number
Economic Systems
Info to Know
This sign explains
to customers that
they are limited
to only 113
grams of bread
per person.
Command
Market
The Microsoft Monopoly In May 1990
the Federal Trade Commission began
an epic antitrust investigation of the
Microsoft Corporation, charging that
the software company illegally impeded
competition with unfair pricing and hid
codes in its operating system to prevent
the use of competitors’ software applications. On June 7, 2000, after many
legal battles, a federal judge ruled that
Microsoft should be divided into two
smaller companies. A year later a federal appeals court reversed the decision,
but ruled that Microsoft had broken
antitrust laws. In 2001 the Justice Department proposed a settlement requiring Microsoft to, among other things,
allow computer manufacturers to decide
which Microsoft products to load into
their computers. The settlement was approved in 2002, but Microsoft still faced
anti-trust complaints from other private
companies.
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Online Resources
KEYWORD: SZ7 CH17
ACTIVITY: The U.S.
Economic System
Traditional
ANALYSIS
SKILL ANALYZING VISUALS
How is the United States a mix of different
economic systems?
THE ECONOMIC SYSTEM
Differentiating Instruction
Learners Having Difficulty
1. Tell students that American conglomerates
today produce a variety of well-known brandname products.
2. To help them understand the role of
conglomerates in their life, have students list
five products that they buy or use on a regular
basis.
3. Have students conduct research to determine
whether any of the products on their list
457
Below Level
Research Required
are sold by a conglomerate. Based on their
findings, ask each student to create a chart
identifying the company that produces each of
the five products and if any of the companies
are part of a conglomerate. Have students add
other companies or products owned by the
same conglomerate to their charts.
4. Ask students to share their charts with the
class. Verbal/Linguistic
Answers
Analyzing Visuals The U.S.
government imposes some regulations on
businesses, but Americans are generally
free to produce, buy, and sell whatever
goods and services they choose.
457
PRESS CONFERENCES
Close
Discuss with students the structure
of the U.S. economic system and the
government’s role in regulating it.
Review
Online Quiz, Section 1
Quiz Game
Assess
SE Section 1 Assessment
Daily Quizzes: Section 1
Understanding Publicity
In 1997 the federal government charged the Microsoft
corporation with violating antitrust laws. To announce
the trial and its results, both the government and
Microsoft used a powerful tool—the press conference.
During a press conference reporters gather to hear
statements from an individual or an organization. They
generally report the information to the public in newspapers, on radio and television, or on the Internet.
Often people hold press conferences to express their
point of view. Press conferences are good publicity tools
because they give people control over the way in which
information is presented. They are an opportunity for
photographs to be taken with a background and
presentation.
Reteach
Main Idea Activities for Differentiated
Instruction: Section 1
An attorney for
the U.S. Justice
Department
holds a press
conference during the Microsoft
antitrust trial.
ANALYSIS
SKILL
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MEDIA INVESTIGATION
KEYWORD: SZ7 CH17
What steps would one have to take to hold a press
conference?
of unrelated goods. For example, a single
conglomerate might control communication
systems, insurance companies, hotel chains,
and many other businesses. The government
monitors conglomerates closely to be sure
that economic competition is not harmed.
Of course, small businesses have never
disappeared in the United States. Even
as big companies get bigger, many small
companies continue to thrive. It is largely because of the mix of large and small
businesses that the U.S. economy remains
powerful today.
READING CHECK
Summarizing What is the U.S.
economy like today?
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Online Quiz
KEYWORD: SZ7 HP17
SECTION 1 ASSESSMENT
Reviewing Ideas and Terms
Critical Thinking
1. a. Define Write a definition for the terms market
economy, free market, profit, scarcity, law of
supply, and law of demand.
b. Analyze Information How are scarcity and
the laws of supply and demand connected?
2. a. Define Write a definition for the terms
free enterprise, capitalism, and monopoly.
b. Draw Conclusions How do monopolies
harm free enterprise?
3. a. Summarize Why is the United States described
as a mixed economy?
b. Analyze How is capitalism linked to a market
economy?
4. Summarizing Use your notes and a graphic
organizer like this one to identify the five economic
freedoms that Americans enjoy.
458
Economic
Freedoms
Focus on Writing
5. Contrasting Explain how the U.S. economic
system differs from the economic system in Cuba.
CHAPTER 17
Section 1 Assessment Answers
1. a. market economy, p. 452; free market,
p. 452; profit, p. 453; scarcity, p. 453; law of
supply, p. 453; law of demand, p. 453 b. When
a good is scarce, the demand for it is greater
than the supply, and its price might go up.
Answers
Media Investigations prepare a
statement; inform the press
Reading Check It is a mixed economy
with many large and small businesses.
458
2. a. free enterprise, p. 455; capitalism, p. 455;
monopoly, p. 456 b. They limit competition and consumer choice and may make a
necessity too expensive.
3. a. because it mixes elements of different
economic systems b. Capitalism requires the
freedom of a market economy to allow pri-
vate citizens to invest their money and make
other economic choices.
4. Students should identify the freedoms to
buy, sell, earn a living, earn a profit, and own
property.
5. Students should explain how Cuba’s command economy differs from the American
mixed economy. For example, the Cuban
government makes all economic decisions. In
the United States, people are free to buy and
sell products as they choose.