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ENTREpreneurs in a Market economy

ENTREpreneurs in a Market economy. Lesson 2.1 – Entrepreneurs Satisfy Needs & Wants Lesson 2.2 – How Economic Decisions Are Made Lesson 2.3 – What Affects Price?. Lesson 2.1 Entrepreneurs Satisfy Needs and Wants Is It a Need or a Want?

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ENTREpreneurs in a Market economy

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  1. ENTREpreneurs in a Market economy • Lesson 2.1 – Entrepreneurs Satisfy Needs & Wants • Lesson 2.2 – How Economic Decisions Are Made • Lesson 2.3 – What Affects Price?

  2. Lesson 2.1 Entrepreneurs Satisfy Needs and Wants Is It a Need or a Want? NEED – must have in order to survive… food, clothing, shelter • Abraham Maslow – Hierarchy of Needs (5 areas) • Self-Actualization • Esteem • Social • Security • Physiological – (most basic), must be satisfied first before WANT – things you think you must have to be satisfied, comfort • Economic – involve a desire for Material goods/services. • Basis of an economy; clothing, housing, cars, hair styling • Noneconomic – desire for Nonmaterial things • sunshine, fresh air, exercise, friendship, and happiness Needs and Wants are UNLIMITED…

  3. Economic Resources • Means through which G/S are produced Factors of Production – Economic Resourses • Natural Resources – raw materials supplied by nature • Human Resources – people who create the G/Svc • Capital Resources – assets invested in production of G/S LIMITED RESOURCES – all have a limited supply • Individuals, Businesses, & Countries compete for access to & ownership of

  4. ROLE of Entrepreneurs in the U.S. Economy… Entrepreneurs are the backbone of the U.S. economy. ROLES: • SUPPLY and DEMAND • CAPITAL INVESTMENT and JOB CREATION, • CHANGE AGENTS

  5. Lesson 2.2How economic decisions are made Economic Systems – all answer 3 basic questions: • What G/S will be produced? • How will the G/S be produced? • What N/W will be satisfied with the G/S produced? ECONOMIC SYSTEMS: • COMMAND Economy – gov’t • MARKET Economy – individuals/businesses • TRADITIONAL Economy – simple, tradition, less developed • MIXED Economy – Command & Market mixed.

  6. The U.S. ECONOMIC SYSTEM • Best described as a Market Economy Based on 4 Basic Principles: • PRIVATE PROPERTY • FREEDOM OF CHOICE • PROFIT • COMPETITION

  7. ECONOMIC CHOICES Economic Decision Making – process of choosing which N/W you will satisfy using resources you have. 2 Factors commonly enter into Econ. Decision Mkg • SCARCITY – occurs when N/W are unlimited & resources for G/S are limited. • Affects what’s Produced, & • How much it Costs • OPPORTUNITY COST – value of the next best alternative (the one you passed on)

  8. FUNCTIONS OF BUSINESS (Business Activities) Knowledge of these will help satisfy customers & make profit. • PRODUCTION – • creates and obtains p/s for sale • MARKETING – • marketing activities – Marketing Mix ,PPDP • MANAGEMENT – • develop, implement, evaluate, solve problems • FINANCE – • determine capital needed, how to obtain it, & • Involves planning & managing financial records

  9. Lesson 2.3What affects price? HOW MUCH IS ENOUGH? Consumers & producers determine quantities & prices of G/S produced SUPPLY and DEMAND Supply – Supply Curve Demand – Demand Curve: • Demand Elasticity – • Inelastic Demand – When Supply and Demand MEET… • Equilibrium Price and Quantity – SUPPLY = DEMAND

  10. Supply – Supply curve Supply – How much of a G/S a Producer/Supplier is willing to Produce/Supply at Different Prices. • As the Price INCREASES, Suppliers/Producers are willing to Provide MORE. $ Quantity

  11. Demand – demand curve Demand – individuals need/desire for a product/service at a given price. • As Price DECREASES, we Purchase MORE. $ Quantity Demand Elasticity – demand Is Affected by Price. Inelastic Demand – change in price creates Little change in demand.

  12. Equilibrium Price & Quantity When SUPPLY and DEMAND Meet. PRICE where SUPPLY = DEMAND, ideal price & quantity $ Equilibrium Price & Quantity Quantity • If priced Above EP&Q, Price is too high, • If priced Below EP&Q, Price is too low

  13. COSTS of Doing Business • FIXED Costs – costs that must be paid regardless of how much is produced… • VARIABLE Costs – costs that go Up/Down. Depends on quantity produced… Which is a Higher Risk? • Marginal BENEFIT – measures the Advantages of producing 1 additional unit of… • Marginal COST – measures the Disadvantages of producing 1 additional unit of… Is Benefit > Cost?

  14. MARKET STRUCTURE and PRICES Market structure is determined by the nature and degree of competitionamong businesses that operate in the same industry. Each market structure has an effect on the prices businesses can charge for their products or services. PERFECT – Large # of businesses, Identical products, Many buyers, Price is deciding Factor, Ex: Gas MONOPOLISTIC – Large # of Independent businesses, Products Somewhat Different, EX: Retail/Restaurant OLIGOPOLY – Small # of businesses, has Majority of total sales revenue, Ex: Auto, Airline MONOPOLY – Only 1 provider, charge whatever, Ex: water, electric, cable

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