EXTRA CREDIT #5: A Question of Wright and Wrong

For EXTRA CREDIT, read this short Jeff Jacoby editorial about the Obama speech and either

1. Complete a response chart

OR

2. Respond to Jacoby's main points in 150 words.

EXTRA CREDIT #4: A More Perfect Union

For extra credit, write down your thoughts in response to the Obama speech we watched today in class.

What was his overall message? Did you agree/disagree? What was good/bad about the speech?

If you need some help focusing your thoughts, you may also consider the following questions:

• According to Obama, what was Reverend Wright's mistake?
• What is the point of the story about Ashley Baia?
• How would you describe his delivery of the speech?
• Was the speech a balanced and accurate view of race relations?
• According to Obama, what are the main causes of black and white unhappiness?
• What solutions does Obama propose? Do you agree/disagree?
  

What is a Stock?

When you buy stock you become part owner of a public company—no matter how many shares
you own. Most people buy stock to make money by: earning dividends (cash paid to investors from the company’s profits) or selling the stock at a higher price. If the stock price exceeds what you paid for it, your investment increases in value. If the stock price goes lower than what you paid for it, your investment decreases in value. However, stocks have limited liability, since you risk only the money you invest.

Not all companies are public. Private companies are composed of an individual/family or a small group of investors that have private sources for funding growth; their shares are not for sale to the general public. Mars Corp, the snack food giant, is privately held. Google, the search engine company, was privately held until 2005, when it went public, offering its stock for sale.

If a company’s product or service is in great demand, demand may outstrip the ability of banks and venture capitalists (who privately supply funding) to provide money for the company’s expansion to meet that demand. At that point company leaders may decide to “go public.”

Company management goes to investment bankers to negotiate an agreement to underwrite a stock offering known as an IPO (Initial Public Offering). The investment bankers buy all the shares that will be offered to the public at a set price (primary market). The investment bankers then sell the stock to the general public (secondary market) in the hopes of making a profit. These bankers also prepare what is known as a tombstone ad to announce the IPO in financial publications such as the Wall Street Journal. The underwriters may also organize meetings with people who buy large amounts of stock for institutions such as pension funds, mutual funds, banks or insurance funds that they hope will buy shares in the company.

A stock exchange provides a platform (live, electronic, or both) for investors to buy and sell stock with each other. There are three major US stock exchanges: the American Stock Exchange, the NASDAQ Stock Market, and the New York Stock Exchange. Each exchange has its own listing standards, rules, and methods.

In addition to finding underwriters, company management must register its stock with the Securities and Exchange Commission (SEC) before “going public.” Generally, companies can offer two types of stock, common and preferred. Common stock entitles the owners (called stockholders or shareholders) to collect dividends, if the company declares them. It also entitles the owners to vote in company elections and decisions. Stockholders who purchase common stock share in most of a company’s profits and losses.

Stockholders who purchase preferred stock are usually guaranteed a dividend payment. This payment is made before any payments to common stock holders. If a company fails, preferred stock holders are repaid before common stock holders. Preferred stock holders do not share in most of a company’s profits or losses. Preferred stock holders also do not have any voting rights.

An important difference between common stock and preferred stock is that the price of the preferred stock tends to be more stable, changing little over time, than that of common stock.

Stockholders should make investment decisions based upon their “risk tolerance.” A number of issues contribute to an investor’s overall risk tolerance, including the investor’s age, health and their overall financial outlook. An investment with a lot of risk but great potential for return might make sense for someone who is 28 and financially stable, but not for someone who is sixty and plans to retire in five years.

Questions: Indicate whether each of the following statements is true or false. For true statements write a reason or example in the space below. For false statements, rewrite the sentence to correct it.

1. _____ Stockholders can only make money by collecting dividends.

2. _____ People who invest in the stock market will automatically make money.

3. _____ People can only buy stock in publicly held companies.

4. _____ Preferred stock means the company is preferred over other companies in a particular industry.

5. _____ A dividend is a portion of a company’s profits paid to its shareholders.

6. _____ Profits represent ownership of shares of a company.

7. _____ Risk is only associated with the purchase of common stocks.

8. _____ A person who is 25 should not be willing to take the same amount of risk when investing as someone who is 55.

9. _____ It is possible for stockholders to lose more money than they invested, if a company fails.

10. ____ A tombstone ad is prepared for companies that are facing bankruptcy and financial failure.

11. ____ Investment bankers buy shares of stock on the same type of market that the general public does.

12. ____ The general public buys new issues of stock on the primary market.

Procter & Gamble - How A Company is Organized

Due: Tuesday 3/18

Read the following text and answer the questions below.

P&G — Production & Growth

What’s 99.44% pure and floats? The answer is Ivory soap. But it didn’t always float, and it wasn’t always called Ivory. An accident changed that. In 1879, Procter & Gamble Company was producing a new white soap by boiling and stirring various ingredients with a steam-powered mixer. One day, a worker went off to lunch and forgot to turn the mixer off. Upon returning, he discovered a foamy mixture overflowing from the vat. The unusual mixture still looked like soap, so workers poured it into molds, cooled it, cut it into cakes, and shipped it off for sale.

Floating Soap
Not long afterward, customers began asking for “the floating soap.” At first, no one at Procter & Gamble knew what their customers meant. But someone remembered the accident, and the company decided to conduct more experiments. Once they figured out what had happened, the soap floated from that day on.

These events would not have occurred had it not been for two terrible illnesses. When James Gamble was 16 years old, he and his family left their home in Northern Ireland to go to Illinois. Towards the end of that trip, they were floating down the Ohio River on a flatboat when James became very ill. So his parents rushed him ashore at Cincinnati to find a doctor. Luckily, James recovered, but he and his family stayed and made Cincinnati their home. The year was 1819.

At the time, Cincinnati’s main business was the slaughtering of hogs. Soap making was also an important industry because a main ingredient of soap was animal fat from local packinghouses. No wonder James eventually entered the soap-making business.

During that same period, William and Martha Procter were traveling from England to a new home in Kentucky. They, too, were traveling down the Ohio River on a flatboat when illness suddenly struck. In this case, Martha became seriously ill with cholera, so they also stopped in Cincinnati to look for a doctor. Tragically, Martha died a few days later, leaving William Procter alone and grief- stricken. He decided to stay in Cincinnati, however, where he eventually started his own candle-making business.


The Proprietor
The business William started was a proprietorship because he was the sole owner. A proprietorship is a company owned and run by one person who receives its profits and bears its losses. William had no trouble starting a proprietorship because he didn’t have to fill out any legal papers or sign any agreements. He just opened his small store in Cincinnati and started selling his candles.

Okay, Partner
The work was hard and his life was lonely, so William must have been very happy when he found a new wife. His new wife’s sister was married to James Gamble, so James Gamble, the soap maker, and William Procter, the candle maker, became brothers-in-law. After a few years, James and William decided to combine their businesses by forming a partnership. A partnership is just like a proprietorship, except two or more people own and manage the business. Like a proprietor, partners in a business receive any profits or bear any losses. James and William signed a formal partnership agreement in 1837, and Procter & Gamble was born.

The partners became widely known as honest people who produced high quality soap and candles. As years passed, the company prospered and grew. In 1851, William’s oldest son joined the company and eventually became a third partner. In later years, sons from both families joined the partnership. Still later, a member of the third generation, Cooper Procter, joined the business. By the company’s 50th birthday in 1887, annual profits had grown, and the number of family partners had risen to seven. The company’s future looked bright, and the partners wanted to develop and market many new products. But producing new products costs a lot of money. The company would have to build new plants, buy new equipment, and conduct new research.

Let’s Incorporate
These new projects would cost more than the
partners could afford. So the youngest partner, Cooper Procter, suggested that the partnership become a corporation. Cooper believed that, as a corporation, the company could raise enough money to develop and sell its new products.

A corporation exists independently of the particular stockholders who own it and of the managers who run it. It’s a legal entity with rights and responsibilities just like a person. So changing the partnership into a corporation was a big step. In a partnership the owners and managers are usually one and the same. As partners, the family members were legally responsible for all taxes, expenses, or debts their business produced — even if they had to pay with their savings or sell their property.

A corporation, however, conducts business and pays its expenses as a separate legal entity. The owners risk their money when they buy shares of stock in a corporation. But, unlike a proprietor or a partner, their potential loss is limited to the amount invested in their shares of stock.

Having this “limited liability” is an attractive feature of corporations. But a corporation’s separate legal status also gives investors another advantage: They know they’re investing in a business that will last. The stockholders and managers of a corporation may change, but the business will continue.

Compare the life of a corporation with that of a proprietorship or a partnership. If an owner of a proprietorship or a partnership dies, the business dies, too. As a result, these types of businesses usually don’t last as long as a corporation.

A corporation’s long life and stockholders’ limited liability help make this type of business appealing. Investors also like corporations because they can easily sell their shares of ownership in the stock market. Investors in a corporation may also benefit from managers who have specialized knowledge and abilities. As a corporation, for example, Procter &
Gamble was able to hire managers with special skills and knowledge. The abilities of these managers then benefited stockholders by helping to make the business more profitable.

Potential investors in a corporation see the benefit of limited liability, long life, ease of transferring ownership, and specialized management. These benefits allow corporations, in general, to raise more money for expansion and growth than a proprietorship or a partnership could. No wonder Cooper Procter recommended that Procter & Gamble become a corporation. The partners agreed, and the company was incorporated in 1890. As a corporation, Procter & Gamble was able to raise lots of money for growth by selling new shares of stock to many investors.

Procter & Gamble has since grown to one of the largest companies in the world. It produces nearly 300 different products for consumers and employs more than 100,000 people. On sales of more than $40 billion in 2002, it earned about $4 billion for its many shareholders — or about $3 per share, from which it paid an annual dividend of more than $1.50.

Answer the following questions in complete sentences:

1. What type of business organization did William Procter use when he began to produce and sell candles in his small shop in Cincinnati?



2. Name a business in your community that illustrates the same type of organization used by William Procter in his original candle-making business.



3. When James Gamble and William Procter started the Procter & Gamble Company in 1837, the business was a partnership. Briefly explain the difference between a partnership and proprietorship.


4. What is “limited liability”?


5. Did limited liability apply to William Procter's candle-making business or to the partnership formed by William and James Gamble in 1837? Explain


6. By 1887, the partnership had grown to include five sons. Why did Cooper Procter recommend ending the partnership and turning the business into a corporation?


7. What is a corporation?


8. Compared with a proprietorship or a partnership, a corporation is usually better at raising funds for growth. Describe at least two features of a corporation that make it attractive for potential investors.

Photography Project#2

• Choose 5 terms from the vocab list below and demonstrate them using the photographs you took in class (located in Student Share>12th Grade Civics/Economics>Photography).

• If you weren't in class, you may use images from the internet.

• In either case, you must write a 1-2 sentence caption for each picture in order to explain how it demonstrates the term.

Basic Economic Terms

Economics – The study of how society chooses to satisfy wants and needs by using its scarce resources to produce goods and services for present and future consumption

Wants – things that people value but are not basic necessities

Needs – things needed for human survival (food, clothing, and shelter)

Scarcity – when there are not enough resources to satisfy people’s wants or needs

Goods – material objects that satisfy people’s wants or needs; commodities

Services – actions that satisfy people’s want or needs

Consumption – buying or using goods or services (unless it is an investment)

Investing – spending money in hope of making a profit

Profit – the money left after all the costs of production have been paid

Means of Production – the things needed to produce g/s: land, labor, capital, and
entrepreneurship

Labor – human effort necessary to produce goods and services

Asset – anything of value that is owned

Capital – assets used to invest or produce goods/services (stocks, equipment, technology, money)

Entrepreneurship – willingness to take on the risk of producing goods/services

Capitalism – an economic system where individuals own the means of production

Laissez Faire – the policy of government keeping its “hands off” business (pure capitalism)

Invisible Hand of the Market– Adam Smith’s idea that L.F. benefits society as a whole by letting individuals pursue their own self-interest (1. More motivated workers ; 2.
Talented workers in every profession; 3. Better, cheaper g/s in the right amounts)

Market – a system of exchange in which things are sold for money

Supply – the amount of a good or service that producers are willing or able to sell

Demand – the amount of a good or service that consumers are willing or able to buy

Monopoly – when there is only one supplier of a certain good or service

Competition – rivalry among businesses to win the same customer or market

Efficiency - producing something with a minimum of waste, expense, or effort

Productivity – the ability to produce more goods and services faster

Division of labor – breaking down a job into small tasks performed by different workers (assembly line)

Adam Smith Document Worksheet

If you want an extra credit assignment, you may complete the worksheet given out in class today using the documents below.

Document 1 – Adam Smith

It is not from the benevolence [goodness] of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.
...By pursuing his own interest, [man] frequently promotes that of the society more effectually than when he really intends to promote it.

Document 2 – Adam Smith

The desire of food is limited in every man by the narrow capacity of the human stomach; but the desire of the conveniences and ornaments of building, dress, equipage and household furniture, seems to have no limit or certain boundary.

Document 3 – Adam Smith

The property which every man has is his own labor; as it is the original foundation of all other property, so it is the most sacred… To hinder [prevent] him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbor is a plain violation of this most sacred property.

Document 4 – Adam Smith

Where competition is free, the rivalship of competitors, who are all endeavoring [trying] to jostle one another out of employment, obliges every man to endeavor to execute his work with a certain degree of exactness...

Document 5 – Adam Smith

The natural effort of every individual to better his own condition ... is so powerful, that it is alone… capable of carrying on the society to wealth and prosperity.

Document 6 – Adam Smith

Such is the delicacy of man alone, that no object is produced to his liking. He finds that in everything there is need for improvement.... The whole industry of human life is employed not in procuring the supply of our three humble necessities, food, clothes and lodging, but in procuring the conveniences of it according to the nicety and delicacy of our tastes.

Document 7 – Adam Smith

Capital has been silently and gradually accumulated by the private frugality [thriftiness] and good conduct of individuals, by their universal, continual, and uninterrupted effort to better their own condition. It is this effort… which has maintained the progress of England towards opulence [wealth] and improvement in almost all former times...

Document 8 – Adam Smith

The real and effectual discipline which is exercised over a workman is ... that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence [carelessness].

Document 9 – Adam Smith

According to the system of natural liberty, the sovereign [ruler] has only three duties to attend to ... first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, so far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice, and thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain...

Document 10 – Adam Smith

In exchanging the complete manufacture either for money, for labor, or for other goods over and above what may be sufficient to pay the price of the materials and the wages of the workmen, something must be given for the profits of the undertaker of the work who hazards his stock in this adventure… He could have no interest to employ them, unless he expected from the sale of their work something more than what was sufficient to replace his stock to him; and he could have no interest to employ a great stock rather than a small one; unless his profits were to bear some proportion to the extent of his stock.

Economics Independent Reading Project

Overview: You must finish reading at least 250 pages of your book by Monday, April 14th. To do so, you must read your book every day. If you read 6 pages every day, you will finish by the due date.

The TWO parts of the IR project are described below. You must turn in all parts of the IR project and receive a passing grade (65% or above) on them in order to pass Economics.

WEEKLY RESPONSES

• Two-paragraph response on the reading you complete each week (should be roughly 50 pages)
• Due on the following Mondays: 3/10, 3/17, 3/31, 4/7, 4/14
• Each one counts as two homework grades
• In the HEADER for your weekly assignment, be sure to include the following information:

1. Author's name
2. Title of the book
3. Date the assignment is due
4. Pages read that week

• PARAGRAPH #1: summarize the most important/interesting aspects of the week’s reading

• PARAGRAPH #2: will be based on one of the following options:

1. Quote: Copy a significant passage from the book (with a citation), explain briefly the context of the quote, and then describe its significance. Why did you choose it? What does it mean to you? How is it important in the book?
2. Economics Reflection: How does the book relate to economics? What “economics” concepts do you see at work in the book? How so?
3. Personal Connection: Write about something in the book that relates to something you’ve experienced or felt. Describe the moment in the book. Then, discuss how you can relate.
4. The Curious Mind: Research something that catches your attention in the book that you want to understand a little better. Explain what you find out and cite any sources.
5. Bias: Discuss whether the author of your book lets his/her personal opinions affect the way they write about their subject. Where do you think they fit on the political spectrum? Use specific examples from the book to support your ideas.
6. Vocabulary: Find at least 5 challenging vocabulary words in your book. For each word, quote the sentence from the book that contains that word (include the page number), and write the dictionary definition. Note: You must also use the vocab words in your 1st paragraph summary

• You may only repeat an option once except #2 for which there is no limit.

FINAL BOOK REPORT

• 750 word (minimum) essay due Monday, April 28th
• Counts as a test grade
• A first draft of your introduction will be due on Wednesday, April 16th
• Choose 1 of 3 essay options below to write about
• Whatever option you choose, your essay must have at least 4 citations and a works cited page

Essay Options

1. ECONOMIC TERMS: Choose at least 4 economics terms from class and explain how these ideas are illustrated in the book. Give specific examples from the book to support your claims.


2. ECONOMIC LESSONS: Discuss what we can learn about “economics” from this book. Use specific examples from the book to support your claims.


3. PROBLEM/SOLUTION/PERSPECTIVE: Identify one social problem discussed in the book and answer the following questions:
a. According to the author, what are the root-causes of this problem? (1¶)
b. Does the author think this problem can be solved? Why or why not? Describe any solutions offered. (1¶)
c. Based on your answers to the questions above, where on the political spectrum would you place this author (ex: liberal, conservative, centrist, etc.)? Why? (1¶)
d. Do you agree/disagree with the way this problem is presented? Do you think the solutions offered by the author will work? (1¶)