Entrepreneurs in a Market Economy Ch 2.1

Ideas in Action pg What type of interest do you think Scott had that helped him to find success in this business? 2.Which of the lessons that Scott has learned do you think is most important? 3.Why do you think it is important to find balance between work and play?

Do you want it or need it? Needs – are things you must have in order to survive. Wants – those things that you think you must have in order to be satisfied. What do you need? What do you want? Maslow’s Hierarchy of Needs Pyramid

Economic Resources Economic Resources – the means through which goods and services are produced. Goods – products you can see and touch. Services – activities that are consumed as they are produced.

Factors of Production Natural Resources – raw materials supplied by nature. Human Resources – people who create goods and services. Capital Resources – assets invested in the production of goods and services.

Role of Entrepreneurship in the U.S. Economy Supply and Demand (pg 40) Capital Investment and Job Creation Change Agents What roles do needs and wants play in determining what is produced in an economy? Think of something you would describe as a “need” but your parents would describe as a “want.” How does the availability of economic resources affect decisions the entrepreneurs make?

How Economic Decisions Are Made Focus on Economics (pg. 42) Economic Systems – must answer 3 questions: 1.What goods and services will be produced? 2.How will the goods and services be produced? 3.What needs and wants will be satisfied with the goods and services produced?

Economic Decisions Command Economy – the government determines what, how and for whom products and services are produced. Market Economy – individuals and businesses decide what, how, and for whom goods and services are produced. Traditional Economy – goods and services are produced the way they have always been produced. Mixed Economy – elements of the command and market economics are combined.

The U.S. Economic System What type of economic system do you think the United States has? Capitalist – the private ownership of resources by individuals rather by the government, is another name for the economic system in the U.S.

U.S. Based on 4 Basic Principals Private Property – you can own, use, or dispose of things of value. Freedom of Choice – you can make decisions independently and must accept the consequences of those decisions. Profit – the differences between the revenues taken in by a business and the costs of operating the business. Competition – the rivalry among businesses to sell their goods and services.

Economic Choices Economic Decisions Making – the process of choosing which needs and wants, among several, you will satisfy using the resources you have. Scarcity – occurs when people’s needs and wants are unlimited and the resources are limited. Opportunity Cost – the value of the next-best alternative—the one you pass up.

Functions of the Business (pg. 47) Production – provides products/services Marketing – product, distribution, price, and promotion Management – developing, implementing, and evaluating plans. Finance – the amount of capital needed to start the business and how the capital will be obtained.

What Affects Price? Supply – is how much of a good or service a producer is willing to produce at different prices. Demand – is an individual’s need or desire for a product or service at a given price. Equilibrium Price and Quantity – point at which the supply and demand curves meet.

Cost of Doing Business Fixed Costs – costs that must be paid regardless of how much of a good or service is produced. Variable Costs – that go up and down depending on the quantity of the goods and services produced. 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.

Market Structures and Prices Perfect Competition – very large number of businesses producing nearly identical products and has many buyers. Monopolistic Competition – large number of independent businesses that produce goods and services that are somewhat different. Oligopoly – a market is dominated by a small number of businesses that gain the majority of total sales revenue. Monopoly – there is only one provider of a product or service.