Entrepreneurs in a Market Economy

1. Entrepreneurs in a Market Economy 2.1 Entrepreneurs Satisfy Needs and Wants 2.2 How Economic Decisions are Made 2.3 What Affects Price?

2. Lesson 2.1Entrepreneurs Satisfy Needs and Wants Goals • Distinguish between needs and wants. • Describe the types of economic resources. • Explain the role of entrepreneurs in the U.S. economy. Chapter 2

3. Vocabulary • needs • wants • economic resources Chapter 2

4. Is It a Need or a Want? • needs • things that are necessary for survival • wants • things you think you must have in order to be satisfied • add comfort and pleasure to your life Chapter 2

5. The role of businesses is to produce and distribute goods and services that people need and want. Chapter 2

6. Needs • Maslow’s hierarchy of needs states that: • People’s basic physiological needs must be satisfied before they can focus on higher level needs. Chapter 2

7. Chapter 2

8. needs • are different for each person • vary by situation Chapter 2

9. Wants • economic wants • a desire for material goods and services • are the basis of an economy • clothing • housing • cars • noneconomic wants • nonmaterial things • sunshine • fresh air • Happiness • friendship Chapter 2

10. Needs and Wants are Unlimited • Needs and wants never end. • One purchase often leads to another. Chapter 2

11. What is the difference between a need and a want? Chapter 1

12. 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 Chapter 2

13. Entrepreneurs use economic resources to create the goods and services consumers use. Chapter 2

14. 3 Factors of Production • natural resources • raw materials supplied by nature • human resources • the people who create goods and services Chapter 2

15. specialization • when individual workers focus on single tasks • each worker becomes more efficient and productive • division of labor • divides the production process into separate tasks • workers specialize in specific tasks • the group as a whole becomes more productive Chapter 1

16. capital resources • the assets used in the production of goods and services Chapter 1

17. Limited Resources • Economic resources are limited. • Individuals, businesses, and countries compete for resources. • High demand for a limited resource drives up the price for the resource. Chapter 2

18. Law of Diminishing Returns • If one factor of production is increased while others stay the same, the resulting increase in output (product produced) will level off after some time and then will decline. Chapter 1

19. List the three types of economic resources and give an example of each. Chapter 1

20. Role of Entrepreneurs in the U.S. Economy • Entrepreneurs play an important role in the U.S. economy. • The development of small businesses helps to ensure a strong economic future. Chapter 2

21. Supply and Demand • Entrepreneurs look for unmet needs to satisfy consumer needs and wants. Chapter 2

22. Capital Investment and Job Creation • Entrepreneurs invest in their communities by • contributing to the local economy • providing jobs Chapter 2

23. Change Agents • The creation of new products can: • change the way people live • alter the way people conduct business Chapter 2

24. What are some things entrepreneurs contribute to the U.S. economy? Chapter 1

25. Lesson 2.2How Economic Decisions are Made Goals • Compare and contrast different types of economic systems. • Describe the characteristics of the U.S. economy. • Explain how scarcity affects economic decisions. • Explain how business functions are used to satisfy consumers. Chapter 2

26. Vocabulary • capitalism • profit • economic decision making • scarcity • opportunity cost Chapter 2

27. Economic Systems • Each economy must answer three basic questions regarding goods and services: • Which ones will be produced? • How will they be produced? • Whose needs and wants will they satisfy? Chapter 2

28. Command Economy • Production decisions are made by the government. • Few choices exist in the marketplace. Chapter 1

29. Market Economy • Production decisions are made by individuals and businesses. • Entrepreneurship thrives in a market economy. • Many choices exist in the marketplace. Chapter 1

30. Traditional Economy • Production occurs the way it has always occurred. • Most production is consumed. • Left over production is sold or traded. Chapter 1

31. Mixed Economy • These economies contain elements of command and market economies. • The government is still involved in the marketplace. Chapter 1

32. communism • a command economic system • the government controls most of the resources and decisions Chapter 2

33. How does the type of economy affect the way the basic economic questions are answered? Chapter 1

34. The U.S. Economic System • capitalism • the private ownership of resources by individuals rather than by the government • individual businesses and consumers make production decisions • also called free enterprise Chapter 2

35. The U.S. economic system of capitalism is based on four basic principles. • Private Property • You may own whatever you want as long as you operate within the law. • Freedom of Choice • Government intervention occurs only when individual decisions will bring harm to others. Chapter 2

36. Profit • the difference between the revenues earned by a business and the costs of operating the business • The opportunity to earn a profit is at the heart of the free-enterprise system. • Competition • the rivalry among businesses to sell their goods and services Chapter 2

37. Describe the four basic principles of the U.S. economic system. Chapter 1

38. Economic Choices • economic decision making • the process of choosing which needs and wants, among several, you will satisfy using the resources you have Chapter 2

39. Scarcity • scarcity • occurs when there are limited resources available to meet the unlimited needs and wants of consumers • Scarcity forces you to make decisions about tradeoffs. Chapter 1

40. Opportunity Cost • opportunity cost • the value of the next-best alternative (the one you pass up) Chapter 1

41. What factors affect economic choices? Chapter 1

42. Functions of Business • Production • The production function creates or obtains products or services for sale. Chapter 2

43. Marketing • The goal of marketing is to attract as many consumers as possible. • The marketing mix includes: • product • distribution • price • promotion Chapter 2

44. Management • The duties of management include: • setting goals • deciding on responses to competition • solving problems • overseeing employees • evaluating business activities Chapter 2

45. Finance • Financial duties include: • determining the amount of capital needed • determining how capital will be obtained • managing the financial records of the business Chapter 2

46. What are the functions of business? Chapter 1

47. Lesson 2.3What Affects Price? Goals • Recognize how supply and demand interact to determine price. • Describe how costs of doing business affect the price of a good or service. • Explain the effect of different market structures on price. Chapter 2

48. Vocabulary • supply • demand • equilibrium price and quantity • fixed costs • variable costs • marginal benefit • marginal cost • economies of scale Chapter 2

49. How Much Is Enough? • supply • how much of a good or service a producer is willing to produce at different prices • demand • the quantity of a good or service that consumers are willing to buy at a given price Chapter 2

50. Chapter 2