FORMS

OF
BUSINES
S
ORGANI
ZATION
 The Role of Business in the Economy

1. Market
A market is a social arrangement that allows buyers and sellers to discover information and complete
voluntary exchanges of goods and services. It allows you as a consumer to purchase the goods and
services that you want. Through markets, information is transmitted between buyers and sellers
about:
a. The goods and services desired by consumers, and
b. The price of those goods and services.
2. Coordinating Trade and Commerce
Commerce is an act of trading something of economic value such as good, service, information, or
money between two entities.
Trade is what increases our standard of living. Instead of having to produce everything that you
consume on your own, you can trade with others and obtain a higher quality of life.
3. Product or Service Specialization
Business bring specialized people, equipment, and other resources together and coordinate the
production of goods and services.
4. Economies of Scale
When more units of goods or services can be produced on a larger scale, yet with (on average) less
cost input cost, economies of scale are achieved. This means that as business grows and production
units increases, a business will have a better chance to decrease its cost.
5. Positive and Negative Externalities
An externality is defined as a benefit or cost that is imposed on a third party, such as society, other
than the producer or consumer of a good or service or more simply an economic side effect.