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. Explain the role of entrepreneurs in the U.S. economy. Chapter 2

Vocabulary needs wants economic resources Chapter 2

Is It a Need or a Want? needs wants 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

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

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

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needs are different for each person vary by situation Chapter 2

Wants economic wants noneconomic 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

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

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

Economic Resources economic resources goods services 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

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

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

specialization division of labor 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

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

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

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

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

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

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

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

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

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

Lesson 2.2 How 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

Vocabulary capitalism profit economic decision making scarcity opportunity cost Chapter 2

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What factors affect economic choices? Chapter 1

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

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

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

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

What are the functions of business? Chapter 1

Lesson 2.3 What 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

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

How Much Is Enough? supply demand 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

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Chapter 2

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

When Supply and Demand Meet equilibrium price and quantity the point at which the supply and demand curves meet Chapter 2

Chapter 2

What effect do supply and demand have price? Chapter 1

Costs of Doing Business fixed costs costs that must be paid regardless of how much of a good or service is produced variable costs costs that fluctuate depending on the quantity of the good or service produced Chapter 2

Fixed costs will be incurred regardless of the level of sales. marginal benefit measures the advantages of producing one additional unit of a good or service marginal cost measures the disadvantages of producing one additional unit of a good or service Chapter 2

economies of scale the cost advantages obtained due to expansion A lower average cost per unit is achieved through increased production because costs can be spread over an increased number of units. Chapter 2

How do the costs of doing business affect prices? Chapter 1

Market Structure and Prices Perfect Competition Characteristics of perfect competition include: a very large number of businesses nearly identical products many well-informed buyers difficult to raise prices consumers have more control over the market businesses can leave or enter the market easily Chapter 2

Monopolistic Competition Characteristics of monopolistic competition include: a large number of independent businesses goods and services that are somewhat different each business has a small share of the market prices are determined competitively differentiating products is important businesses can easily enter or leave the market Chapter 2

Oligopoly Characteristics of an oligopoly include: a small number of businesses that gain the majority of total sales revenues the goods are similar and are close substitutes businesses can influence prices it is hard to enter the market Chapter 2

Monopoly where there is only one provider of a good or service Because of a lack of competition, companies can charge whatever price they like. Barriers that make it difficult for new businesses to enter a market is a primary reason that monopolies exist. Chapter 2

How does the market structure affect the price of a good or service? Chapter 1

PERFORMANCE COMPENTENCIES An understanding of the topic must be evident The topic should be presented in a logical manner All team members must contribute to the presentation Arguments should be persuasive and relevant to the topic Questions must be answered effectively Chapter 2

GIVE IT A TRY Working with team members, research the topic and prepare to present either an affirmative or negative argument. Draw to determine whether you will present an affirmative or negative argument. Finalize your preparations in five minutes. Chapter 2

You may use prepared notes during the preparation and presentation You may use prepared notes during the preparation and presentation. In addition, each team member will be given two blank note cards for recording notes that can be used during the preparation and performance of the presentation. Information may be written on both sides of the note cards. Chapter 2

No reference materials, visual aids, or electronic devices may be brought to or used during the preparation or presentation. Chapter 2

Be prepared to answer questions after your presentation. Make the presentation to your class. The presentation should last no longer than five minutes. Be prepared to answer questions after your presentation. Chapter 2