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Entrepreneurs in a Market Economy

2. Entrepreneurs in a Market Economy. 2.1 Entrepreneurs Satisfy Needs and Wants 2.2 How Economic Decisions are Made 2.3 What Affects Price?. Lesson 2.1 Entrepreneurs Satisfy Needs and Wants. Goals Distinguish between needs and wants. Describe the types of economic resources.

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Entrepreneurs in a Market Economy

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  1. 2 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. • Describe the role of entrepreneurs in the U.S. economy. Chapter 2

  3. Terms • 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 business 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 psychological needs must be satisfied before they can focus on higher level needs. Chapter 2

  7. Chapter 2

  8. needs • vary from individual to individual • vary by situation Chapter 2

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

  10. Needs and Wants are Unlimited • Needs and wants are infinite. • Satisfying one need or want may trigger a new need or want. Chapter 2

  11. What is the difference between needs and wants? Chapter 2

  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. Factors of Production • natural resources • raw materials supplied by nature • human resources • the people who create goods and services • capital resources • the assets invested in the production of goods and services Chapter 2

  15. 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

  16. List the three types of economic resources and give an example of each. Chapter 2

  17. Role of Entrepreneurs in the U.S. Economy • Entrepreneurs are the backbone of the U.S. economy. • The development of small businesses helps to ensure a strong economic future. Chapter 2

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

  19. Capital Investment and Job Creation • Entrepreneurs contribute to their local communities through: • investment • job creation Chapter 2

  20. Change Agents • The creation of new products can: • change the way people live • alter the way people conduct business • As entrepreneurs create more goods and services, the needs and wants of consumers increase. Chapter 2

  21. What are some things entrepreneurs contribute to the U.S. economy? Chapter 2

  22. Lesson 2.2How Economic Decisions are Made Goals • Compare and contrast different types of economic systems. • Describe the characteristics of the U.S. economy. Chapter 2

  23. Explain how scarcity affects economic decisions. • Explain how business functions are used to satisfy consumers. Chapter 2

  24. Terms • capitalism • profit • economic decision making • scarcity • opportunity cost Chapter 2

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

  26. A variety of economic systems exist. • Command Economy • Production decisions are made by the government. • Few choices exist in the marketplace. • Market Economy • Production decisions are made by individuals and businesses. • Ample choices exist in the marketplace. • Entrepreneurship thrives in a market economy. Chapter 2

  27. Traditional Economy • Production occurs the way it has always occurred. • Most production is consumed. • Left over production is sold or traded. • Countries with traditional economies are not participating in the global economy. • Mixed Economy • These economies contain elements of command and market economies. • Sometimes these economies occur because a country is shifting from either a command or traditional economy toward a market economy. Chapter 2

  28. communism • a command economic system • government-led plans direct resources toward economic growth Chapter 2

  29. How does the type of economy affect the way the basic economic questions are answered? Chapter 2

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

  31. The U.S. economic system of capitalism is based on four economic 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

  32. Profit • the difference between the revenues taken in 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

  33. Describe the four basic principles of the U.S. economic system. Chapter 2

  34. 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

  35. 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. • Opportunity Cost • the value of the next-best alternative (the one you pass up) Chapter 2

  36. What factors affect economic choices? Chapter 2

  37. Functions of Business • Production • A profit is earned by selling products or services to consumers. • The production function creates or obtains products or services. Chapter 2

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

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

  40. Finance • Financial duties include: • determining capital requirements • determining capital resources • managing the financial aspects of the business Chapter 2

  41. What are the functions of business? Chapter 2

  42. Lesson 2.3What Affects Price? Goals • Explain 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

  43. Terms • supply • demand • equilibrium price and quantity • fixed costs • variable costs • marginal benefit • marginal cost Chapter 2

  44. How Much Is Enough? • supply • how much of a good or service a producer is willing to produce at different prices • demand • an individual’s need or desire for a product or service at a given price Chapter 2

  45. Chapter 2

  46. Chapter 2

  47. demand elasticity • when the demand of a product is affected by its price • elastic demand • when a change is price creates a change in demand • inelastic demand • when a change in price creates very little change in demand Chapter 2

  48. When Supply and Demand Meet • equilibrium price and quantity • the price at which supply equals demand Chapter 2

  49. Chapter 2

  50. What effect do supply and demand have on the price of a good or service? Chapter 2

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