1. Entrepreneurship in a Market Economy

2. Needs and Wants  Needs: things you must have  Wants: things you think you must have

3. Economic Resources  Def: The means in which goods and services are produced  Good: something tangible  Service: something untanible  Factors of Production (3 Resources)  Natural: raw materials  Human: people  Capital: buildings, equipment, supplies

4. Law of Diminishing Return  All resources are limited  To make the most efficient use of resources business consider law of diminishing re tu rns  States that when one factor is increased while others stay the same, the resulting increase in output will level off at some time and then decline  McDonalds Game

5. Functions of a Business  Production  Marketing  Management  Finance

6. Supply and Demand  Supply: The quantity of a good/service a producer is willing to produce at different prices  Demand: The quantity of a good/service that consumers are willing to buy at a given price

7. Supply Curve

8. Demand Curve

9. Equilibrium

10. Demand Elasticity  Def: When demand for a product is affected by its price  Elastic Demand: When change in price creates change in demand  Inelastic Demand: When change in price creates very little change in demand

11. Reasons for Inelastic Demand  There are no acceptable substitutes for a product consumers need  The change in price is so small in relation to income of consumer  The product is a basic need (physiological) rather than a want

12. Costs of Doing Business  A company that prices its product based only on cost of materials involved in production will go out of business very quickly!  Fixed Cost  Variable Cost

13. Fixed Cost  These are costs that must be paid regardless of how much of a good or service is produced  Monthly rent  Insurance fees  Interest

14. Variable Costs  Costs that go up and down depending on quantity of good or service produced  Price of Flour  Price of Coffee  The more bagels a company sells, the more resources it must buy and visa-versa

15. Difference  A business with less fixed cost and more variable cost is at less risk because if sales are lower the business will not suffer as much with less revenue!

16. Marginal Benefit and Marginal Cost  Marginal Benefit measures the advantage of producing one additional unit  Marginal Cost measures the disadvantage of producing one additional unit  If Wicker decides that staying open an additional two hours and will make additional revenues of $100 (selling additional sandwiches and drinks) but that it will cost $125 (ingredients, overtime, electricity) to stay open in that time, they would opt against it.

17. Economies of Scale  Economies of scale are the cost advantages obtained due to expansion  Businesses can expand in the following ways:  Size of facility  Obtaining specialized machinery  Specialization of labor  Economies of scale represent an increase in efficiency of production

18. Continued  Since the number of goods increases a business that achieves economies of scale lowers the average cost per unit because the cost can be spread out over an increased number of units.  Lower costs per unit allow businesses to lower the price which may attract more customers.