Explain the characteristics of sole proprietorships.
Analyze the advantages and disadvantages of organizing a business as a sole proprietorship.
Explain the characteristics of partnerships.
Analyze the advantages and disadvantages of partnerships.
Compare and contrast the three forms of business organization.
Describe the role of franchises and nonprofit organizations in market economies.
Explain labor markets, how they work, and their impact on the United States economy.
Explain how supply of and demand for labor affect wages and understand the connection between wages and skill levels.
Describe the role of labor unions in market economies.
Summarize the history of labor unions and methods of contract negotiation by labor and management.
Critique how investments in human capital increase economic growth and standards of living.
Illustrate and interpret circular flow diagrams for the product market, the resource market, households, and firms.
Characteristics of sole proprietorships:
- Owned and operated by a single individual
- Simplest form of business organization
- Owner has unlimited liability for the debts and obligations of the business
- Owner retains all profits and retains total control over business decisions
- Easy and inexpensive to set up and dissolve
Advantages of sole proprietorships:
- Easy and inexpensive to set up
- Owner retains all profits
- Owner has total control over business decisions
- Business taxes are filed as part of the owner's individual tax return
Disadvantages of sole proprietorships:
- Owner has unlimited liability for debts and obligations of the business
- Limited access to capital compared to partnerships or corporations
- Business may have difficulty attracting and retaining employees
Characteristics of partnerships:
- Owned and operated by two or more individuals
- Partners share profits and losses
- Partners have joint and several liability for the debts and obligations of the business
- Partnership agreements outline roles, responsibilities, and profit-sharing arrangements
Advantages of partnerships:
- Shared management and decision-making
- Shared financial responsibilities
- Partners can pool resources and expertise
Disadvantages of partnerships:
- Partners have joint and several liability for debts and obligations
- Disagreements and conflicts among partners can arise
- Limited access to capital compared to corporations
Comparison of the three forms of business organization:
- Sole proprietorships are easy to set up but involve unlimited liability for the owner
- Partnerships involve shared responsibilities and liabilities among partners
- Corporations have separate legal entity status, limited liability for owners, and easier access to capital through the sale of stock
Role of franchises and nonprofit organizations in market economies:
- Franchises allow individuals to own and operate a business using the name, branding, and support of a larger company
- Nonprofit organizations provide services or advocate for causes without the primary goal of making a profit
Labor markets:
- Labor markets are where workers and employers come together to exchange labor in exchange for wages
- Wages are determined by the supply of and demand for labor
Role of labor unions:
- Labor unions advocate for the rights and interests of workers, including negotiating for better wages, benefits, and working conditions
- Unions have historically played a role in improving labor standards and protections
Investments in human capital:
- Investments in education, training, and skills development increase the productivity and earning potential of individuals, ultimately leading to economic growth and higher standards of living
Circular flow diagrams:
- Circular flow diagrams illustrate the flow of goods, services, and resources between households and firms in the product and resource markets
- They show how households supply labor and other resources to firms, which then produce goods and services for households to consume