Understanding the U.S. Business System

Define the nature of U.S. business and its goals.

        Businesses are organizations that produce or sell goods or services to make a profit. Profits are the difference between a business's revenues and its expenses.

Differentiate among types of economic systems according to how each one controls and uses the factors of production.

        An economic system is a nation's system for allocating its resources among its citizens. Economic systems differ in terms of who owns and/or controls the four basic factors of production: natural resources, labor, capital and entrepreneurs. In planned economies, the government controls all or most factors. In market economies, individuals control the factors. Market economies are based on the principles of capitalism. Most countries today have mixed economies that are dominated by one of these systems but include elements of the others.

Describe how demand and supply affect resource distribution in the United States.

        The U.S. economy is strongly influenced by markets, demand, and supply. Demand is the willingness and ability of buyers to purchase a product or service. Supply is the willingness and ability of producers to offer a good or service for sale. Demand and supply work together to set a market, or equilibrium, price and quantity.

Identify the elements of private enterprise and the various degrees of competition in the U.S. economic system.

        The U.S. economy is founded on the principles of private enterprise: private property rights, freedom of choice, profits, and competition. Degrees of competition include pure competition, monopolistic competition, oligopoly, and monopoly.

Explain the criteria used to assess how well an economy meets its goals and how the U.S. government attempts to manage the economy.

        The basic goals of an economic system are stability, full employment, and growth. Gross national product, productivity, the balance of trade, and national debt are measures of how well an economy has accomplished these goals. The U.S. government uses monetary and fiscal policies to manage the economy.