ENTREPRENEURS IN A MARKET ECONOMY Entrepreneurship 11/22/2018 Chapter 3 ENTREPRENEURS IN A MARKET ECONOMY 3.1 What Is an Economy? 3.2 The Concept of Cost 3.3 Government in a Market Economy Chapter 3

Lesson 3.1 WHAT IS AN ECONOMY? Chapter 3 Lesson 3.1 WHAT IS AN ECONOMY? GOALS Describe market and command economies. Define the concept of supply and demand. Explain the effects of market structure on price. Describe the functions of business in a market economy.

Chapter 3 SCARCITY Scarcity occurs when people’s needs and wants are unlimited and the resources to produce the goods and services to meet those needs and wants are limited. Scarcity occurs in every economy.

Chapter 3 COMMAND ECONOMY In a command economy, the government determines what, how, and for whom products and services are produced.

Chapter 3 MARKET ECONOMY In a market economy, individuals decide what, how, and for whom goods and services are produced.

Chapter 3 PRODUCTIVITY The level of output that an industry or company gets from each worker or each unit of input into its products and services is called productivity.

Chapter 3 SUPPLY Supply is how much of a good or service a producer is willing to produce at different prices. Suppliers are willing to supply more of a product or service at a higher price. Supply Curve $50 40 30 20 10 10 20 30 40 50 Price Quantity

Chapter 3 DEMAND Demand is an individual’s need or desire for a product or service at a given price. Individuals are willing to consume more of a product or service at a lower price. Demand Curve $50 40 30 20 10 10 20 30 40 50 Price Quantity

WHEN SUPPLY AND DEMAND MEET Chapter 3 WHEN SUPPLY AND DEMAND MEET Supply and Demand Curves The point at which the supply and demand curves meet is what is known as the equilibrium price and quantity. This is the price at which supply equals demand. Equilibrium Price $50 40 30 20 10 10 20 30 40 50 Price Quantity

MARKET STRUCTURE AND PRICES Chapter 3 MARKET STRUCTURE AND PRICES When a company controls all of a market, it has a monopoly.

BUSINESS ACTIVITIES IN A MARKET ECONOMY Chapter 3 BUSINESS ACTIVITIES IN A MARKET ECONOMY Production Marketing Product Distribution Price Promotion Management Finance

Lesson 3.2 THE CONCEPT OF COST Chapter 3 Lesson 3.2 THE CONCEPT OF COST GOALS Identify various types of costs. Discover how different types of costs affect the prices entrepreneurs charge.

FIXED AND VARIABLE COSTS Chapter 3 FIXED AND VARIABLE COSTS Fixed costs are costs that must be paid regardless of how much of a good or service is produced. Fixed costs are also called sunk costs. Variable costs are costs that go up and down depending on the quantity of the good or service produced.

MARGINAL BENEFIT AND MARGINAL COST Chapter 3 MARGINAL BENEFIT AND MARGINAL COST 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 3 OPPORTUNITY COST Opportunity cost is the cost of choosing one opportunity or investment over another.

Lesson 3.3 GOVERNMENT IN A MARKET ECONOMY Chapter 3 Lesson 3.3 GOVERNMENT IN A MARKET ECONOMY GOALS Explain the government’s effect on what is produced. Recognize the different roles the government plays in a market economy.

GOVERNMENT’S EFFECT ON WHAT IS PRODUCED Chapter 3 GOVERNMENT’S EFFECT ON WHAT IS PRODUCED Purchases Taxes Subsidies

ROLES OF THE GOVERNMENT Chapter 3 ROLES OF THE GOVERNMENT Regulator Inspection Licenses Provider of public good Provider of social programs Redistributors of income