REGULATORY ACTIVITIES
Business activity in the United States is structured as a private enterprise or free market system. Private organizations own the factors of production. They choose efficient methods of production in order to earn a profit. Price and output decisions are made not by the government, but by businesses and consumers acting under varying economic conditions.
Government does get involved in some areas of business activities. These include regulating utilities and preventing unfair business practices.
Regulation of UtilitiesMost goods and services you use come from private businesses. These businesses are for the most part free of government regulation. A public utility is an organization that supplies a service or product vital to all people. These include companies that provide local telephone service, water, and electricity. A public utility is chosen to serve a community. If your city had six different electric companies, each might have its own utility poles, lines, and expensive equipment. The service you would get would be more expensive and less efficient. The extra poles and wires would create an unattractive environment.
While many utility companies are privately owned, usually government closely regulates them. The rates they can charge for things such as electricity, water, or natural gas have to be approved by government agencies. In recent years, there has been a trend toward deregulation of prices where competition can be introduced.
Prevent Unfair Business Practices
Most businesspeople are fair and honest. A few may try to take advantage of their customers or competitors. Government attempts to promote fair competition. If a company charges different prices to different people for the same product, it is treating its customers unfairly. If one business receives lower rates for the same quality and quantity of supplies than other businesses receive, it has an advantage. Such action may result in unfair competition.
A monopoly exists when a business has control of the market for a product or service. A public utility monopoly may benefit consumers by making sure they receive a needed service at a fair price. Other monopolies may not be good for the economy. If the same company owned all food stores in your city, consumers might not be treated fairly. This business could charge high prices and sell poor-quality products. When competition is present, consumers get the best values at the fairest prices.
One government action meant to promote competition and fairness and to avoid monopolies was the passage of antitrust laws . Antitrust laws prevent other unfair business practices such as false advertising, deceptive pricing, and misleading labeling. Each of these unfair practices hurts competition and reduces consumer choice.
Business activity in the United States is structured as a private enterprise or free market system. Private organizations own the factors of production. They choose efficient methods of production in order to earn a profit. Price and output decisions are made not by the government, but by businesses and consumers acting under varying economic conditions.
Government does get involved in some areas of business activities. These include regulating utilities and preventing unfair business practices.
Regulation of UtilitiesMost goods and services you use come from private businesses. These businesses are for the most part free of government regulation. A public utility is an organization that supplies a service or product vital to all people. These include companies that provide local telephone service, water, and electricity. A public utility is chosen to serve a community. If your city had six different electric companies, each might have its own utility poles, lines, and expensive equipment. The service you would get would be more expensive and less efficient. The extra poles and wires would create an unattractive environment.
While many utility companies are privately owned, usually government closely regulates them. The rates they can charge for things such as electricity, water, or natural gas have to be approved by government agencies. In recent years, there has been a trend toward deregulation of prices where competition can be introduced.
Prevent Unfair Business Practices
Most businesspeople are fair and honest. A few may try to take advantage of their customers or competitors. Government attempts to promote fair competition. If a company charges different prices to different people for the same product, it is treating its customers unfairly. If one business receives lower rates for the same quality and quantity of supplies than other businesses receive, it has an advantage. Such action may result in unfair competition.
A monopoly exists when a business has control of the market for a product or service. A public utility monopoly may benefit consumers by making sure they receive a needed service at a fair price. Other monopolies may not be good for the economy. If the same company owned all food stores in your city, consumers might not be treated fairly. This business could charge high prices and sell poor-quality products. When competition is present, consumers get the best values at the fairest prices.
One government action meant to promote competition and fairness and to avoid monopolies was the passage of antitrust laws . Antitrust laws prevent other unfair business practices such as false advertising, deceptive pricing, and misleading labeling. Each of these unfair practices hurts competition and reduces consumer choice.
GOVERNMENT ASSISTS BUSINESSGovernment helps businesses by collecting and reporting valuable information. Data gathered by the government can help with planning. Information about incomes, prices, worker availability, and business failures can help a businessperson make wiser choices. For example, census information can help a business decide where a majority of potential customers live. The Bureau of Labor Statistics, the Department of Agriculture, and the Department of Commerce are a few of the government agencies that provide information.
The federal government, through the Small Business Administration (SBA), helps new businesses get started by guaranteeing private bank loans. The new businesses must develop an acceptable business plan. Farmers and others may receive financial help in times of great hardship, such as during a drought, flooding, or other natural disasters. Destruction of home and property by a tornado may make a person eligible for a low-interest government loan. These programs are designed to promote the financial well-being of society.
Government Buys Goods and ServicesGovernment spends a great deal of money each day to buy an array of products and services. Total federal, state, and local government spending make up about 20 percent of all the goods and services produced in the United States.
Governments buy everything from file cabinets to buildings to military jet aircraft. In this role, government is a key economic force. Many businesses depend on government contracts for their survival. For instance, government pays businesses to construct highways and build schools.
Government Employs WorkersGovernment is the single largest employer in the U.S. economy. About 16 percent of workers are public employees. Most people think only of police officers, firefighters, and sanitation workers as government workers. Government also employs the same types of workers as private businesses. Administrative assistants, lawyers, teachers, meat inspectors, and data analysts are all employed by government. Although the number of employees has grown slowly in recent years, good employment opportunities in government continue—in spite of efforts to eliminate or reduce the size of some agencies.
The federal government, through the Small Business Administration (SBA), helps new businesses get started by guaranteeing private bank loans. The new businesses must develop an acceptable business plan. Farmers and others may receive financial help in times of great hardship, such as during a drought, flooding, or other natural disasters. Destruction of home and property by a tornado may make a person eligible for a low-interest government loan. These programs are designed to promote the financial well-being of society.
Government Buys Goods and ServicesGovernment spends a great deal of money each day to buy an array of products and services. Total federal, state, and local government spending make up about 20 percent of all the goods and services produced in the United States.
Governments buy everything from file cabinets to buildings to military jet aircraft. In this role, government is a key economic force. Many businesses depend on government contracts for their survival. For instance, government pays businesses to construct highways and build schools.
Government Employs WorkersGovernment is the single largest employer in the U.S. economy. About 16 percent of workers are public employees. Most people think only of police officers, firefighters, and sanitation workers as government workers. Government also employs the same types of workers as private businesses. Administrative assistants, lawyers, teachers, meat inspectors, and data analysts are all employed by government. Although the number of employees has grown slowly in recent years, good employment opportunities in government continue—in spite of efforts to eliminate or reduce the size of some agencies.
GOVERNMENT RAISES MONEY
Government must have a way to raise money to fund operations and pay wages to workers. Government income is called revenue. Governments can obtain revenue through taxes and borrowing. In addition, governments can raise revenue in other ways. Fines for traffic violations and other violations of the law provide revenue for government. Fees and licenses are a source of income. Certain types of ventures require a business license. For example, insurance and real estate agents pay a fee for the privilege of running a business. Governments also charge fees for such things as driver's licenses and fishing privileges.
TaxesA government creates tax policies to pay for the services it provides. Taxes are levied on earnings, the value of property, and on the sale price of goods and services. Your earnings as an individual are subject to an income tax. Income taxes are levied on the income of individuals. The individual income tax is the largest source of revenue for the federal government. Corporate income taxes also provide government revenue. The corporate income tax is based on business profits.
A major source of revenue for local governments is the real estate property tax . This tax is based on the value of land and buildings. Most property tax revenue is used to pay for schools and
other local government services, such as police protection and community parks. Businesses also pay a property tax.
The cost of buying things is increased by a sales tax. A sales tax is a state or local tax on goods and services that is collected by the seller. If you buy a can of paint for $15.00 and the state sales tax is 6 percent, the seller collects $15.90 from you. The seller then will pay 90 cents to the state. You were the one who provided the money for the tax.
Paying taxes is a duty of citizens and businesses. You should pay your taxes, but not more than your share. Tax laws and policies are set to help make the paying of taxes fair. Whether a particular tax or tax policy is fair is always subject to debate. Businesses, in spite of public misconceptions, pay a lot of taxes to all levels of government.
BorrowingGovernment income from taxes and other sources may not always be enough to cover the costs of providing services. Borrowing is another activity of government. When a government wants to construct a building, such as a new courthouse or convention center, the funds needed are often raised through borrowing.
Government borrows money by selling bonds. When you buy a government bond, you are helping to fund the services provided by government. Banks, insurance companies, and other financial institutions help finance governments by purchasing bonds in large numbers.
By borrowing money, the government becomes a debtor and must pay interest on its debt. Bonds issued by the U.S. government are backed by the “full faith and credit” of the federal government. Bonds issued by the federal government are considered the least risky of all debt.
Government must have a way to raise money to fund operations and pay wages to workers. Government income is called revenue. Governments can obtain revenue through taxes and borrowing. In addition, governments can raise revenue in other ways. Fines for traffic violations and other violations of the law provide revenue for government. Fees and licenses are a source of income. Certain types of ventures require a business license. For example, insurance and real estate agents pay a fee for the privilege of running a business. Governments also charge fees for such things as driver's licenses and fishing privileges.
TaxesA government creates tax policies to pay for the services it provides. Taxes are levied on earnings, the value of property, and on the sale price of goods and services. Your earnings as an individual are subject to an income tax. Income taxes are levied on the income of individuals. The individual income tax is the largest source of revenue for the federal government. Corporate income taxes also provide government revenue. The corporate income tax is based on business profits.
A major source of revenue for local governments is the real estate property tax . This tax is based on the value of land and buildings. Most property tax revenue is used to pay for schools and
other local government services, such as police protection and community parks. Businesses also pay a property tax.
The cost of buying things is increased by a sales tax. A sales tax is a state or local tax on goods and services that is collected by the seller. If you buy a can of paint for $15.00 and the state sales tax is 6 percent, the seller collects $15.90 from you. The seller then will pay 90 cents to the state. You were the one who provided the money for the tax.
Paying taxes is a duty of citizens and businesses. You should pay your taxes, but not more than your share. Tax laws and policies are set to help make the paying of taxes fair. Whether a particular tax or tax policy is fair is always subject to debate. Businesses, in spite of public misconceptions, pay a lot of taxes to all levels of government.
BorrowingGovernment income from taxes and other sources may not always be enough to cover the costs of providing services. Borrowing is another activity of government. When a government wants to construct a building, such as a new courthouse or convention center, the funds needed are often raised through borrowing.
Government borrows money by selling bonds. When you buy a government bond, you are helping to fund the services provided by government. Banks, insurance companies, and other financial institutions help finance governments by purchasing bonds in large numbers.
By borrowing money, the government becomes a debtor and must pay interest on its debt. Bonds issued by the U.S. government are backed by the “full faith and credit” of the federal government. Bonds issued by the federal government are considered the least risky of all debt.