Discuss the role of small business and entrepreneurship in the economy. Describe economic systems.

1. 1.1 • Discuss the role of small business and entrepreneurship in the economy. • Describe economic systems. • Explain how economics is about making choices. • Discuss the role of economic indicators and business cycles. • Describe what entrepreneurs contribute to the economy. Section 1.1 Entrepreneurship and the Economy

2. Small Business and Entrepreneurship As an entrepreneur, you accept the risks and responsibilities of business ownership. entrepreneuran individual who undertakes the creation, organization, and ownership of a business Section 1.1 Entrepreneurship and the Economy

3. Small Business and Entrepreneurship Creating and running a business venture requires a variety of skills. venture - a new business undertaking that involves risk Section 1.1 Entrepreneurship and the Economy

4. Small Business and Entrepreneurship Starting a home-based business calls for entrepreneurshipon the part of the owner. entrepreneurshipacting like an entrepreneur or having an entrepreneurial mind-set entrepreneurialthe process of recognizing an opportunity, testing it in the market, and gathering resources necessary to go into business Approximately one in three households is involved in an entrepreneurial enterprise. Section 1.1 Entrepreneurship and the Economy

5. Small Business and Entrepreneurship Knowledge of economicscontributes to an understanding of how entrepreneurs and customers interact. economicsthe study of how people allocate scarce resourcesto fulfill their unlimited wants An economic system includes a set of laws, institutions, and activities that guide economic decision making. Section 1.1 Entrepreneurship and the Economy

6. Economic Systems All economic systems attempt to answer four basic questions. ? ? What goods and services should be produced? What quantity of goods and services should be produced? ? ? Howshould goods and services be produced? For whom should goods and services be produced? Section 1.1 Entrepreneurship and the Economy 6

7. The Free Enterprise System & The Profit Motive Most democratic nations have a free enterprise system. • free enterprise system(also known as capitalism or market economy) an economic system in which people have the right to choose: • what products to buy • to own private property • to choose to start a business and compete with other businesses Making a profit is a primary incentive of free enterprise. profit - money that is left over after all expenses of running a business have been deducted from the income Section 1.1 Entrepreneurship and the Economy

8. Competition The role of competitionis a key element in a market economy. It helps to ensure lower prices, as well as higher quality, better service and reputation. Perfect competition is a market structure in which there are numerous buyers and sellers and no single buyer or seller can affect price. market structurethe nature and degree of competition among businesses operating in the same industry; market structure affects market price

9. The Free Enterprise System The government may grant a temporary monopoly to an inventor. monopolya market structure in which a particular commodity has only one seller Section 1.1 Entrepreneurship and the Economy

10. The Free Enterprise System Under antitrust laws, some forms of oligopoly areillegal. oligopolya market structure in which there are just a few competing firms Section 1.1 Entrepreneurship and the Economy

11. Think-Pair-Share Turn to a partner and discuss the following question: What role does the profit motive and competition play in the free enterprise system? What is it’s impact on business? Random groups will be asked to share their answers. 3 Minutes

12. Goods and Services Goods and services are the products of our economic system. goodstangible(or physical) products of our economic system that satisfy consumers’ wants and needs servicesintangible(nonphysical) products that satisfy consumers’ wants and needs goods services Section 1.1 Entrepreneurship and the Economy

13. Goods and Services Entrepreneurs respond to consumers’ wants and needs with goods and services. wantsomething that you do not have to have for survival, but would like to have needa basic requirement for survival Section 1.1 Entrepreneurship and the Economy

14. Scarcity The principle of scarcity means giving up one thing in order to have something else. scarcitythe difference between demand and supply; limited resources Section 1.1 Entrepreneurship and the Economy

15. Supply and Demand Theory In a free enterprise system, the price of a product is determined by demand. demandthe quantity of goods or services that consumer are willing and able to buy at various prices Section 1.1 Entrepreneurship and the Economy

16. Supply and Demand Theory The degree to which demand for a product is affected by its price is either governed by elastic demand or inelastic demand. elastic demand situations in which a change in price creates a changein demand inelastic demand situations in which a change in price has little or no effect on demand for products Section 1.1 Entrepreneurship and the Economy

17. Supply and Demand Theory Due to the law of diminishing marginal utility, even when a product’s price is low, people will not keep buying it indefinitely. diminishing marginal utilitythe effect or law that establishes that pricealonedoes not determine demand, and other factors, such as income, taste, and the amount of product already owned, play a role as well Section 1.1 Entrepreneurship and the Economy

18. Supply and Demand Theory supplythe amount of goods or services that producers are willing to provide Supply is continually shifting in the marketplace. Supply and Demand Theory high demand + short supply = prices go up. heavy supply + short demand = prices go down. Section 1.1 Entrepreneurship and the Economy

19. Supply and Demand Theory Because supply and demand are continually shifting in the marketplace, the change creates surpluses, shortages, and equilibrium. equilibrium the point at which consumers buy all of a product that is supplied; at this point, there is neither a surplus nor a shortage Section 1.1 Entrepreneurship and the Economy

20. Economic Indicators and Business Cycles There are four stages of the business cycle: growth, recession, depression, and recovery. business cycle the general pattern of expansion and contraction that the economy goes through Section 1.1 Entrepreneurship and the Economy

21. Check Your Understanding 1. What are some ways that entrepreneurs affect the economy? 2. What are some examples of elastic and inelastic goods and how do they differ? 3. Explain the relationship between cost and profit and supply and demand Section 1.1 Entrepreneurship and the Economy

22. DECA Role Play Practice • Pick a partner. • Read the Role Play found on page 16. • Work as a team to create a presentation (focusing on the performance indicators). • Record your notes to be used in the presentation; will be collected for points. • Random group(s) will be called on to present.

23. 1.2 • Discuss the five components of the entrepreneurial start-up process. • Explain how to achieve business success. Section 1.2 The Entrepreneurial Process

24. An idea plus a market equals an opportunity. 1.2 The entrepreneurial start-up process includes: • the entrepreneur • the environment • the opportunity • start-up resources • the organization Section 1.2 The Entrepreneurial Process

25. The Entrepreneur The five components of the entrepreneurial start-up process work together to create a new business. The entrepreneur is the driving force of the start-up process. Entrepreneurs recognize opportunities and pull together the resources to exploit opportunities. Section 1.2 The Entrepreneurial Process

26. The nature of the environment The availability of resources Ways to realize value Incentives to create new businesses The Environment Four Categories of Environmental Variables Section 1.2 The Entrepreneurial Process 26

27. The Environment New businesses seek enterprise zones that provide incentives. enterprise zones specially designated areas of a community that provide tax benefits to new businesses locating there; communities may also provide grants for new product development Section 1.2 The Entrepreneurial Process

28. Start-Up Resources start-up resources the capital, skilled labor, management expertise, legal and financial advice, facilities, equipment, and customers needed to start a business When entrepreneurs are ready to start up a new business, they must use creative talent to put together the necessary start-up resources. A good opportunity can be turned into a business. opportunity an idea that has commercial value Section 1.2 The Entrepreneurial Process

29. The Organization The fifth component of the start-up process is the execution of the new venture organization. new venture organization the infrastructure or foundation that supports all the products, processes, and services of a new business Section 1.2 The Entrepreneurial Process

30. The Facts About Business Failure Most new businesses fail - MYTH!! The truth is more will succeed than fail.66% survive the first 2 years. A business failure files Chapter 7 bankruptcy. business failure a business that has stopped operating, with a loss to creditors, and one that no longer appears on the tax rolls discontinuance a business that disappears from the tax rolls because it may be operating under a new name or because the owner has purposely discontinued in order to start a new business A business that disappears from the tax rolls may be a failure or a discontinuance. Section 1.2 The Entrepreneurial Process

31. How Entrepreneurs Can Succeed • Plan and manage effectively • Assemble an expert team to execute the business concept • Test the opportunity in the marketplace • Recognize opportunity Section 1.2 The Entrepreneurial Process 31

32. Check Your Understanding Ch 1.2 1. What are the five components of the process of new venture creation? 2. How does an enterprise zone encourage new business? 3. Why shouldn’t discontinuances be counted as business failure? Section 1.1 Entrepreneurship and the Economy