Turn to page 7 in your notebook and

Turn to page 7 in your notebook and answer the following questions 1. As trade with Europe and the colonies in America was established, what were some things that the wealthy entrepreneurs would need? 2. Where would they produce their items that they were trading? 3. What do you think existed between the end of the farm-centric era and the dawn of the age of factories?

Cottage Industry

Mercantilism • Who: European Countries • What: economic theory -- nation should export more than imports to maintain and increase wealth • How: – – import raw materials, export finished goods strictly regulate business (guild restrictions) limit amount of materials a worker could make in a day Tightly regulate when items could be bought and sold (Fish Friday) • When: 1600’s • Why: Kept control of $$ and resources in the hands of the wealthy few, the government, and the guilds • Problem: Greatly limited expansion and growth; producers were limited, consumers were limited, economy stagnated

• What: By 18 th century, guilds had lost their power, and as the wealthy became wealthier, demand for new products increased • Why: With new demand for finished goods, Merchants responded by recognizing that a supply of products that would be in demand would be profitable • Where: Primarily England (British Isles) • How: Merchants acted as coordinators between producers and consumers – Merchants would purchase large amounts of raw materials (like cotton or wool) – Supply these materials to rural carders* • Combed the fibers to prepare them for spinning – The combed fibers were then sent to rural spinners • Spun into thread and yarn – Merchants would take thread or yarn to rural weavers • Weave into cloth – Cloth taken to workers who would bleach or dye it – Merchants would take finished cloth and sell it to consumers Merchants used their profits to purchase more materials which allowed cycle to continue

On page 9 • Explain what an economy is and how it works • Describe an item that used to be in demand is no longer in demand • Describe what happened to the price on each occasion

Foldable • Take your sheet of paper and create a 2 -door foldable Capitali$m Effects of Cottage Industry • On the left door (outside) write “Capitali$m” • On right door (outside) write “Effects of Cottage Industry”

Capitalism • Economic System based on private ownership, free competition, and profit – Cottage Industry is an example of early capitalism – Famous 16 th century Scottish economist, Adam Smith, wrote “Wealth of Nations” in which he described an economy that was free to govern itself by the natural forces of supply and demand • Increase supply – prices go down • Increase in demand – prices go up – Called his philosophy ‘laisse-faire’ • meaning hands off

Key Characteristics of Capitalism • Private ownership: government, king, etc DO NOT OWN THE FACTORS OF PRODUCTION – The Factors of Production (land, labor and capital… machines and $$) are PRIVATELY OWNED BY PRIVATE CITIZENS, NOT THE GOVERNMENT (draw a quick sketch to show that) • Free Competition: there is little to no regulation, respond to laws of supply and demand (quick sketch) • Profit: goods/services are bought and sold to increase wealth. (quick sketch)

Effects of the Cottage Industry • Merchants benefitted from not needing to buy equipment • Merchant entrepreneurs received most of the profits • Workers could work in their homes, pace their work as they saw fit (based on the seasons, around church holidays in the village, etc. ) • Rural workers received benefits as well; helped families avoid starvation during bad crop harvests • Rural homes, tended to be small, crowded and poorly ventilated, thus working conditions were often unpleasant • Merchants were dependent upon separate locations to complete tasks to create finished product

Assignment • Tweet the answer to the question: “What is one thing that could be done to make the cottage industry better” use #indrev @Ms. Pemberton. WH