Unit 1: Going Into Business For Unit 1: Going Into Business For YourselfYourself

Chapter 1: What is Chapter 1: What is Entrepreneurship?Entrepreneurship?

The Main IdeaThe Main Idea

Entrepreneurship is Entrepreneurship is the primary catalyst the primary catalyst for economic growth. for economic growth. To be successful To be successful requires an requires an understanding of how understanding of how the economy works.the economy works.

Small Business and Small Business and EntrepreneurshipEntrepreneurship

Entrepreneur:Entrepreneur: individual who undertakes the creation, individual who undertakes the creation, organization and ownership of a business. He or she also organization and ownership of a business. He or she also accepts the risks and responsibilitiesaccepts the risks and responsibilities

Venture:Venture: A new business undertaking that involves risk A new business undertaking that involves risk Entrepreneurship: Entrepreneurship: the process of recognizing an the process of recognizing an

opportunity, testing it on the market, and gathering the opportunity, testing it on the market, and gathering the necessary resources to go into businessnecessary resources to go into business

More than 90% of all businesses today are considered More than 90% of all businesses today are considered small businesses, with 62% being home-based.small businesses, with 62% being home-based.

Economic SystemsEconomic Systems

4 Fundamental 4 Fundamental Questions:Questions:

What goods and services What goods and services should be produced?should be produced?

What quantity of goods What quantity of goods and services should be and services should be produced?produced?

How should goods and How should goods and services be produced?services be produced?

For whom should goods For whom should goods and services be produced?and services be produced?

Free Enterprise SystemFree Enterprise System

People have an important People have an important right to make economic right to make economic choices ( the U.S)choices ( the U.S)– People can choose what People can choose what

products to buyproducts to buy

– People can choose to own People can choose to own private propertyprivate property

– People are free to start a People are free to start a legal business and compete legal business and compete with other businesseswith other businesses

– Also known as Also known as Capitalism Capitalism or a or a Market EconomyMarket Economy

The Profit Motive: making a profit is a The Profit Motive: making a profit is a primary incentive of free enterprise.primary incentive of free enterprise.

Profit is money left over after all expenses Profit is money left over after all expenses

have been paidhave been paid. .

CompetitionCompetition

Competition is good Competition is good for consumers because for consumers because it provides choices, it provides choices, forces improved forces improved quality and efficiency quality and efficiency and leads to a surplus, and leads to a surplus, which brings prices which brings prices down.down.

Market StructuresMarket Structures

MonopolyMonopoly

a market structure in a market structure in which a product has which a product has only one seller who only one seller who has total control over has total control over supply and most pricessupply and most prices

OligopolyOligopoly– A market structure in A market structure in

which there are just a which there are just a few competing firmsfew competing firms

Basic Economic ConceptsBasic Economic Concepts

Goods and Services: Goods are tangible Goods and Services: Goods are tangible while services are intangiblewhile services are intangible

Scarcity: occurs when demand exceeds Scarcity: occurs when demand exceeds supplysupply

OwnershipOwnership

Ownership is powerfulOwnership is powerful You can open any business you createYou can open any business you create You can keep all the profitsYou can keep all the profits It is your choiceIt is your choice You can sell “shares”You can sell “shares” You can donateYou can donate

Supply and DemandSupply and Demand“How Free Enterprise Works”“How Free Enterprise Works”

Laws of Supply and DemandLaws of Supply and Demandgenerally determine the price of a productgenerally determine the price of a product

Supply (S): quantities Supply (S): quantities available to consumers available to consumers at various pricesat various prices

If everything else If everything else remains the same, remains the same, businesses will supply businesses will supply more at higher prices more at higher prices than at lower onesthan at lower ones

As P increases, QS As P increases, QS increasesincreases

Demand (D):quantities Demand (D):quantities that consumers would be that consumers would be willing to buy at various willing to buy at various prices.prices.

If everything else remains If everything else remains the same, people will the same, people will demand more at lower demand more at lower prices than higher onesprices than higher ones

As P increases, QD As P increases, QD decreasesdecreases

Supply graph exampleSupply graph example

Demand graph exampleDemand graph example

Market behaviorMarket behavior

What happens to the price of air What happens to the price of air conditioners in the summer? fall?conditioners in the summer? fall?

When are bathing suits most expensive? When are bathing suits most expensive? Why?Why?

EquilibriumEquilibriumAlso known as Market Clearing Price.Also known as Market Clearing Price.Occurs where the D and S curves meetOccurs where the D and S curves meet

CompetitionCompetition

Keeps prices down Keeps prices down and quality highand quality high

The consumer benefits The consumer benefits from competition. from competition. How?How?

The opposite is called The opposite is called a monopolya monopoly

SummarySummary

Overall, use Supply and Demand as guidesOverall, use Supply and Demand as guides If D decreases, the market may be telling If D decreases, the market may be telling

you to change your product or lower Priceyou to change your product or lower Price If Supply increases, prices may fallIf Supply increases, prices may fall