Going Into Business for Yourself What is Entrepreneurship?

Entrepreneur is an individual who undertakes the creation, organization and ownership of a business. Entrepreneur is an individual who undertakes the creation, organization and ownership of a business. Venture - A business enterprise involving some risk in expectation of gain. Venture - A business enterprise involving some risk in expectation of gain.

What is Economics? Economics is the study of how people choose to allocate scarce resources to fulfill their unlimited wants. Economics has a great influence on entrepreneurship. Economics is the study of how people choose to allocate scarce resources to fulfill their unlimited wants. Economics has a great influence on entrepreneurship.

3 Fundamental Questions asked of the economic system What goods and services should be produced and how much in quantity should be produced? What goods and services should be produced and how much in quantity should be produced? How should goods and services be produced? How should goods and services be produced? For whom should goods and services be produced? For whom should goods and services be produced?

The Free Enterprise System In a free enterprise system (also called capitalism or a market economy), people choose what products to buy, what property to own, and can choose to start a business and compete with other businesses on their own. In a free enterprise system (also called capitalism or a market economy), people choose what products to buy, what property to own, and can choose to start a business and compete with other businesses on their own. The price of a product is determined by the marketplace. The price of a product is determined by the marketplace. Most Democratic nations have this type of enterprise system. Most Democratic nations have this type of enterprise system.

Profit Motive Profit - money that is left after all expenses of running a business have been deducted from the income. Profit - money that is left after all expenses of running a business have been deducted from the income.

Competition Provides consumers with choice Provides consumers with choice In a free enterprise system, competition forces companies to improve quality and become more efficient. In a free enterprise system, competition forces companies to improve quality and become more efficient. Leads to surplus, which leads to lower prices. Leads to surplus, which leads to lower prices. Risk of failure encourages the production of quality products that meet the needs of consumers Risk of failure encourages the production of quality products that meet the needs of consumers

Market Structures Perfect competition – the goods or service being sold is nearly identical. Perfect competition – the goods or service being sold is nearly identical. Numerous buyers and sellers with no single buyer or seller capable of affecting price.Numerous buyers and sellers with no single buyer or seller capable of affecting price. Monopolistic competition – many sellers produce similar but differentiated products. Monopolistic competition – many sellers produce similar but differentiated products. Retail stores, fast food, gas stationsRetail stores, fast food, gas stations

Monopoly and Oligopoly A Monopoly is when a business is the sole supplier of a particular good or service and they are given the total control over price. A Monopoly is when a business is the sole supplier of a particular good or service and they are given the total control over price. National Grid, AmtrakNational Grid, Amtrak Oligopoly is a market in which control over the supply of a commodity is in the hands of a small number of larger companies who have dominated the industry. Oligopoly is a market in which control over the supply of a commodity is in the hands of a small number of larger companies who have dominated the industry. Ex. Tobacco Industry, Automobile Industry, Softdrink industry, Basketball sneakersEx. Tobacco Industry, Automobile Industry, Softdrink industry, Basketball sneakers

Oligopolies Company US Brands Market Share Philip Morris Marlboro, Virginia Slims, Benson & Hedges, Merit, Parliament, Alpine, Cambridge 49.9% R.J. Reynolds Camel, Doral, Winston, Salem, Vantage, More, Monarch 22.9% BAT/Brown & Williams GPC, Kool, Viceroy, Raleigh, Barclay, Lucky Strike 10% Lorrillard Newport, Kent, True, Old Gold, Max, Style, Crowns 8.2% Liggett & Myers L&M, Lark, Chesterfield, Eve 2.3%

CompanyBasketballSuperstar Market Share Nike Michael Jordon (Now)LeBron James 60% Adidas Tracy McGrady 20% Reebok Allen Iverson 15%

What resources does it take for a business to produce a good and service? Factors of Production Factors of Production Land – geographic territory, air, trees, minerals and crude oilLand – geographic territory, air, trees, minerals and crude oil Labor – Human effortsLabor – Human efforts Capital – money, equipment, toolsCapital – money, equipment, tools Entrepreneurship – ideas and decisions of business ownerEntrepreneurship – ideas and decisions of business owner Scarcity occurs when demand exceeds supply Scarcity occurs when demand exceeds supply

Supply and Demand Demand – quantity of goods and services that consumers are willing and able to buy. Demand – quantity of goods and services that consumers are willing and able to buy. Supply – goods and services that producers are willing and able to provide. Supply – goods and services that producers are willing and able to provide. Equilibrium is the point at which consumers buy all of a product that is supplied. Equilibrium is the point at which consumers buy all of a product that is supplied.

Theory of Supply and Demand Heavy demand + Short Supply = price increase. Heavy demand + Short Supply = price increase. Heavy supply + Short Demand = Price decrease. Heavy supply + Short Demand = Price decrease. Prices tend to stabilize at the level where demand equals supply Prices tend to stabilize at the level where demand equals supply Equilibrium pointEquilibrium point

Supply/Demand Elastic demand – a change in price creates a change in demand Elastic demand – a change in price creates a change in demand ButterButter Inelastic demand – a change in price has little effect on demand for product. Inelastic demand – a change in price has little effect on demand for product. MilkMilk

ECONOMIC INDICATORS Employment rate Employment rate Consumer confidence Consumer confidence GDP ( Gross Domestic Product) – GDP ( Gross Domestic Product) – the total market value of goods and services produced by workers and capital within a country during a given period.the total market value of goods and services produced by workers and capital within a country during a given period.

Business Cycle Economy is growing rapidly = inflation Economy is growing rapidly = inflation Economy is slowing down = deflation. Economy is slowing down = deflation.

Start-Up Process – 5 Key Components Entrepreneur – driving force of start up process. Entrepreneur – driving force of start up process. Environment Environment Enterprise Zone – specially designated areas of a community that provide tax benefits to new businesses locating there.Enterprise Zone – specially designated areas of a community that provide tax benefits to new businesses locating there. Opportunity Opportunity Start-Up Resources Start-Up Resources New Venture Organizations New Venture Organizations

New Business Failure A business failure is a business that has stopped operating with a loss to creditors. A business failure is a business that has stopped operating with a loss to creditors. Discontinuance is when a business is operating under a new name Discontinuance is when a business is operating under a new name

Supply Curve Original Supply Quantity Price Increase in supply Shift to the right Decrease in supply Shift to the left

Demand Curve Original Demand Quantity Price Decrease in demand Shift to the left Increase in demand Shift to the right

How to read a graph! Apple Juice Market Original E. P. Original Demand Original Supply Price Quantity New E.P.