ENTREPRENEURS IN A MARKET ECONOMY Entrepreneurship 6/10/2018 Chapter 3 ENTREPRENEURS IN A MARKET ECONOMY 3.1 What Is an Economy? 3.2 The Concept of Cost 3.3 Government in a Market Economy Chapter 3

Lesson 3.1 WHAT IS AN ECONOMY? Entrepreneurship 6/10/2018 Chapter 3 Lesson 3.1 WHAT IS AN ECONOMY? GOALS Describe market and command economies. Define the concept of supply and demand. Explain the effects of market structure on price. Describe the functions of business in a market economy. Chapter 3

Market and Command Economies Chapter 3 Market and Command Economies Different countries have different economic systems These systems affect how an item is produced, how it is distributed, and the demand for an item An economic system even determines whether an item is available at all

Entrepreneurship 6/10/2018 Chapter 3 SCARCITY Scarcity occurs when people’s needs and wants are unlimited and the resources to produce the goods and services to meet those needs and wants are limited. Scarcity occurs in every economy. Chapter 3

Entrepreneurship 6/10/2018 Chapter 3 COMMAND ECONOMY In a command economy, the government determines what, how, and for whom products and services are produced. Very little choice for consumers Individuals not always able to obtain what they want Chapter 3

Entrepreneurship 6/10/2018 Chapter 3 MARKET ECONOMY In a market economy, individuals decide what, how, and for whom goods and services are produced. They are about personal choice If a good sells it will remain on the market If a good does not sell it will no longer be produced Chapter 3

Entrepreneurship 6/10/2018 Chapter 3 PRODUCTIVITY The level of output that an industry or company gets from each worker or each unit of input into its products and services is called productivity. In order for the productivity of a company to increase, a new product must be produced or a current product must be produced better or more cheaply than the competition Chapter 3

Entrepreneurship 6/10/2018 Chapter 3 SUPPLY Supply is how much of a good or service a producer is willing to produce at different prices. Suppliers are willing to supply more of a product or service at a higher price. Supply Curve $50 40 30 20 10 10 20 30 40 50 Price Quantity Chapter 3

Entrepreneurship 6/10/2018 Chapter 3 DEMAND Demand is an individual’s need or desire for a product or service at a given price. Individuals are willing to consume more of a product or service at a lower price. Demand Curve $50 40 30 20 10 10 20 30 40 50 Price Quantity Chapter 3

WHEN SUPPLY AND DEMAND MEET Entrepreneurship 6/10/2018 Chapter 3 WHEN SUPPLY AND DEMAND MEET Supply and Demand Curves The point at which the supply and demand curves meet is what is known as the equilibrium price and quantity. This is the price at which supply equals demand. Equilibrium Price $50 40 30 20 10 10 20 30 40 50 Price Quantity Chapter 3

MARKET STRUCTURE AND PRICES Entrepreneurship 6/10/2018 Chapter 3 MARKET STRUCTURE AND PRICES When a company controls all of a market, it has a monopoly. A company that has a monopoly is able to charge more than a company that has to compete with other businesses With a monopoly consumers have no where else to go, and they will continue to pay the high prices of the product or service that they need. Chapter 3

Entrepreneurship 6/10/2018 Chapter 3 Business Activities In a market economy, a business is free to produce and offer to consumer any legal product or service A knowledge of business activities will help entrepreneurs satisfy customers and make a profit Chapter 3

BUSINESS ACTIVITIES IN A MARKET ECONOMY Entrepreneurship 6/10/2018 Chapter 3 BUSINESS ACTIVITIES IN A MARKET ECONOMY Production Creating or obtaining products or services for sale Marketing Product Distribution Price Promotion Chapter 3

Business Activities Management Finance Entrepreneurship 6/10/2018 Chapter 3 Business Activities Management Setting goals, determining how goals can be met, and how to respond to the actions of competitors is the role of management Finance Planning and managing financial records and information related to a businesses’ finance. Chapter 3

Lesson 3.2 THE CONCEPT OF COST Entrepreneurship 6/10/2018 Chapter 3 Lesson 3.2 THE CONCEPT OF COST GOALS Identify various types of costs. Discover how different types of costs affect the prices entrepreneurs charge. Chapter 3

FIXED AND VARIABLE COSTS Entrepreneurship 6/10/2018 Chapter 3 FIXED AND VARIABLE COSTS Fixed costs are costs that must be paid regardless of how much of a good or service is produced. Fixed costs are also called sunk costs. Variable costs are costs that go up and down depending on the quantity of the good or service produced. Chapter 3

MARGINAL BENEFIT AND MARGINAL COST Entrepreneurship 6/10/2018 Chapter 3 MARGINAL BENEFIT AND MARGINAL COST Marginal benefit measures the advantages of producing one additional unit of a good or service. Marginal cost measures the disadvantages of producing one additional unit of a good or service. Chapter 3

Entrepreneurship 6/10/2018 Chapter 3 OPPORTUNITY COST Opportunity cost is the cost of choosing one opportunity or investment over another. Chapter 3

Lesson 3.3 GOVERNMENT IN A MARKET ECONOMY Entrepreneurship 6/10/2018 Chapter 3 Lesson 3.3 GOVERNMENT IN A MARKET ECONOMY GOALS Explain the government’s effect on what is produced. Recognize the different roles the government plays in a market economy. Chapter 3

GOVERNMENT’S EFFECT ON WHAT IS PRODUCED Entrepreneurship 6/10/2018 Chapter 3 GOVERNMENT’S EFFECT ON WHAT IS PRODUCED Purchases Taxes Subsidies Chapter 3

ROLES OF THE GOVERNMENT Entrepreneurship 6/10/2018 Chapter 3 ROLES OF THE GOVERNMENT Regulator Inspection Licenses Provider of public good Provider of social programs Redistributors of income Chapter 3