Businesses in Our Economy

GUIDE TO READING Main Idea

In a free enterprise economy, businesses have responsibilities as well as rights.

Key Terms transparency, discrimination, social responsibility

Reading Strategy Organizing Information As you read the section, complete a diagram like the one below by Identifying one or more responsibilities of businesses In each category.

I Consumers!"] | Owners;" I Responsibilities

I Employees!""] | CornrnunityT

Read to Learn

• What does social responsibility entail?

♦ What are the responsibilities of businesses to consumers, owners, employees, and their communities?

—Rocky Mountain News, October 4,2001

The Roles of Business

As the story about the Leeds's gift to the university reveals, busincsspcople can be very generous. This generosity comes not only from major corporate givers like the Leedses. Local businesses, too, make similar efforts. They donate money or supplies to school fund-raisers. They give money to support children's athletic teams. This community involvement is just one way that business plays a role in society.

Businesses play many different roles in our economy. Sometimes businesses act as consumers—they buy goods and services from other businesses. Manufacturers buy energy and raw materials like steel, plastic, and glass. Insurance companies buy office furniture and supplies like paper. Stores purchase computers and software to track sales.

Businesses are also employers. They provide jobs and pay wages—to millions of workers across the country.

Of course, businesses arc also producers. Businesses produce a wide variety of goods and services for people with many

v^ Jmaricans in Action

Equality for women, educational opportunities for the disenfranchised, and corporate responsibility [of business] are not new concepts for the family behind the largest gift ever to the University of Colorado at Boulder On Wednesday, university officials hailed the New York-based Gerry and Lila Leeds family for giving Colorado University a record $35 million gift, the sixth-largest to a business school nationwide and the largest ever for the Boulder campus Michael Leeds (the LeedsS son) graduated from CU in 1974- with a degree in business administration. His brother, Richard, graduated from CU with a degree in computer science the following year. "I am very grateful to my professors for giving me the educational background to help me drive a business forward into great success; Rlchard, 49, said. Leecis family rnernbers

Effects Many economic activities may create unintended effects.

Do you think the nearby railroad line had positive or negative effects on people living in this neighborhood? Why?

different tastes, levels of income, and locations. Businesses large and small produce the food, clothing, and shelter that meet people's basic needs.They also create the cars, movies, CDs, appliances, banking services, air conditioning, and amusement parks that make life more enjoyable and more comfortable.

Explaining How do businesses act as consumers?

The Responsibilities of Business

As they carry out these roles, businesses have different responsibilities. Sometimes laws spell out those responsibilities. If so, business managers may suffer serious consequences if they do not act responsibly.

Responsibilities to Consumers

One set of responsibilities is to consumers. Businesses have the responsibility of selling products that are safe. Products and services should also work as they are promised to work. A new video game should be undamaged and run without flaws. An auto mechanic should change a carls oil correctly. Businesses also have the responsibility of being truthful in their advertising. Finally, businesses should treat all customers fairly.

Of course, it is good business to meet these responsibilities. Doing so makes customers happy, and happy customers are more likely to come back to the business again. Still, the government is sometimes forced to step in when a business does not meet one of these responsibilities. It might require a manufacturer to remove a product from the market because the product is unsafe. It might prosecute a business for violating customers' rights.The.se cases are infrequent, however.

Responsibilities to Owners

Another responsibility is to the owners of the business. This is especially important in corporations, in which the managers and owners are different groups of people.

To protect stockholders, corporations are required to release important financial information regularly. As a result, shareholders get

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