PowerPoint Presentation  Section 1.1  Pages 3-11

1.1 Entrepreneurship and the Economy What you’ll learn  How small business and entrepreneurship contribute to the economy

1.1 Entrepreneurship and the Economy What you’ll learn  How the laws of supply and demand in the free enterprise system affect entrepreneurship

1.1 Entrepreneurship and the Economy What you’ll learn  The ways in which entrepreneurs contribute to a free enterprise system

1.1 Entrepreneurship and the Economy Why it’s important  Understanding how the economy works is essential to business survival.

1.1 Entrepreneurship and the Economy Why it’s important  The free market system allows entrepreneurs to compete and succeed.

1.1 Entrepreneurship and the Economy Key Terms entrepreneurventureentrepreneurshipentrepreneurialeconomics free enterprise system

1.1 Entrepreneurship and the Economy Key Terms (Cont.) profitservices factors of production scarcitydemandelastic

1.1 Entrepreneurship and the Economy Key Terms (Cont.) inelastic diminishing marginal utility equilibrium

1.1 Entrepreneurship and the Economy Presentation Outline I. THE ROLE OF SMALL BUSINESS AND ENTREPRENEURSHIP IN THE ECONOMY II. ENTREPRENEURSHIP TODAY

1.1 Entrepreneurship and the Economy Presentation Outline (Cont.) III. THE FREE ENTERPRISE SYSTEM A. THE PROFIT MOTIVE B. THE ROLE OF COMPETITION IV. ECONOMICS: MAKING CHOICES A. GOODS AND SERVICES B. FACTORS OF PRODUCTION C. SCARCITY

1.1 Entrepreneurship and the Economy Presentation Outline (Cont.) V. THE LAW OF SUPPLY AND DEMAND VI. DEMAND VII. SUPPLY

1.1 Entrepreneurship and the Economy Presentation Outline (Cont.) VIII. SURPLUS, SHORTAGE, AND EQUILIBRIUM VIV. WHAT ENTREPRENEURS CONTRIBUTE

1.1 Entrepreneurship and the Economy Presentation Outline (Cont.) X. SMALL BUSINESSES VERSUS ENTREPRENEURIAL VENTURES A. SMALL BUSINESSES B. ENTREPRENEURIAL VENTURES

1.1 Entrepreneurship and the Economy I. THE ROLE OF SMALL BUSINESS AND ENTREPRENEURSHIP IN THE ECONOMY A. An entrepreneur undertakes the creation, organization, and ownership of a business.

1.1 Entrepreneurship and the Economy B. Entrepreneurs accept many risks and responsibilities for the sake of profits and personal satisfaction.

1.1 Entrepreneurship and the Economy C. Creating and running a successful venture, a business undertaking involving risk, requires a variety of skills and knowledge.

1.1 Entrepreneurship and the Economy D. The process of getting into and operating one’s own business is called entrepreneurship.

1.1 Entrepreneurship and the Economy E. Entrepreneurial means of or having to do with an entrepreneur or entrepreneurs.

1.1 Entrepreneurship and the Economy II. ENTREPRENEURSHIP TODAY A. About one in three households is involved with a new or small business.

1.1 Entrepreneurship and the Economy B. More than 90 percent of all businesses are small businesses with fewer than 100 employees.

1.1 Entrepreneurship and the Economy C. The global market has resulted in new resources, markets, and ideas.

1.1 Entrepreneurship and the Economy D. There is great pressure for businesses to come up with better services and make more choices available to customers.

1.1 Entrepreneurship and the Economy E. Economics helps explain how entrepreneurs and customers interact in the economy. Economics is the study of the decisions or choices that go into making, distributing, and consuming products.

1.1 Entrepreneurship and the Economy Springboard What goods and services do you buy and what types of jobs would you like to have?

1.1 Entrepreneurship and the Economy III. THE FREE ENTERPRISE SYSTEM A. Most democratic nations have a free enterprise system.

1.1 Entrepreneurship and the Economy B. In a free enterprise system, everyone has the right to make economic choices. C. A free enterprise system is also called capitalism, or a market economy.

1.1 Entrepreneurship and the Economy A. THE PROFIT MOTIVE 1. A primary incentive of free enterprise is to make a profit, money that is left after all the expenses of running a business have been deducted from the income. 2. There is a risk of failure involved in making a profit.

1.1 Entrepreneurship and the Economy 3. The risk of failure serves a positive function in a free enterprise system.

1.1 Entrepreneurship and the Economy B. THE ROLE OF COMPETITION 1. Competition between similar businesses is a key element in a market economy.

1.1 Entrepreneurship and the Economy 2. Businesses compete on the basis of price and non-price factors. 3. In a mature industry, the focus is on lowering prices.

1.1 Entrepreneurship and the Economy 4. In newer industries, price factors are less important than non-price factors.

1.1 Entrepreneurship and the Economy 5. Non-price factors includes the following. a. Quality b. Service c. Reputation

1.1 Entrepreneurship and the Economy Discussion Starter What are some products that are direct competition with each other for customers?

1.1 Entrepreneurship and the Economy IV. ECONOMICS: MAKING CHOICES A. Economics is the study of the decisions that go into making, distributing, and consuming products.

1.1 Entrepreneurship and the Economy B. Many economic concepts are already familiar to you in your everyday role as a consumer.

1.1 Entrepreneurship and the Economy VII. GOODS AND SERVICES A. Goods and services are products that our economic system produces to satisfy our wants.

1.1 Entrepreneurship and the Economy B. Goods are tangible (or physical) products. C. Services are intangible (or conceptual) products.

1.1 Entrepreneurship and the Economy Critical Thinking Make a list of purchases in which quality or service is more important than price.

1.1 Entrepreneurship and the Economy B. FACTORS OF PRODUCTION 1. Factors of production are the resources that businesses use to produce the goods and services people want.

1.1 Entrepreneurship and the Economy B. There are four main factors of production. 1. Land 2. Labor 3. Entrepreneurship 4. Capital

1.1 Entrepreneurship and the Economy C. SCARCITY 1. When wants are greater than resources, the condition is called scarcity.

1.1 Entrepreneurship and the Economy 2. Items that are scarce include the following. a. Land b. Labor c. Capital

1.1 Entrepreneurship and the Economy Discussion Starter Name some businesses that use each of the four factors of production. Support your answers with examples of how.

1.1 Entrepreneurship and the Economy V. THE LAWS OF SUPPLY AND DEMAND A. In a free enterprise system, prices are determined in the marketplace.

1.1 Entrepreneurship and the Economy B. Consumers and producers interact in response to the laws of supply and demand.

1.1 Entrepreneurship and the Economy VI. DEMAND A. Demand is the amount or quantity of goods or services that consumers are willing and able to buy.

1.1 Entrepreneurship and the Economy B. According to the law of demand, price is inversely related to demand.

1.1 Entrepreneurship and the Economy C. If a change in price has a significant effect on the quantity demanded, demand for the item is elastic.

1.1 Entrepreneurship and the Economy D. If a change in price has little or no effect on the quantity demanded, demand for the item is inelastic. Demand is inelastic when: 1. No acceptable substitutes available 2. The price change is small relative to buyer income. 3. The product is a necessity.

1.1 Entrepreneurship and the Economy E. The diminishing marginal utility establishes that price alone does not determine demand. F. Other factors that play a role in determining demand are: 1. Income 2. Taste 3. The amount of product already owned

1.1 Entrepreneurship and the Economy Demand Curve for CDs Demand Curve for CDs Fewer items will be purchased at higher prices than at lower ones.

1.1 Entrepreneurship and the Economy Math Problem If the CD sells for $15, what will the price be when the record store drops the price by 20%?

1.1 Entrepreneurship and the Economy VII. SUPPLY A. The amount of a good or service that producers are willing to provide is called supply.

1.1 Entrepreneurship and the Economy B. Producers supply greater amounts when prices are high, and less when prices are low.

1.1 Entrepreneurship and the Economy Supply Curve for CDs Supply Curve for CDs There is a direct relationship between price and the number of items produced.

1.1 Entrepreneurship and the Economy VIII. SURPLUS, SHORTAGE, AND EQUILIBRIUM A. Supply and demand are continually shifting in the marketplace.

1.1 Entrepreneurship and the Economy B. Equilibrium is the point at which consumers buy all of a product that is supplied, leaving neither a surplus nor a shortage.

1.1 Entrepreneurship and the Economy Demand and Supply Curve for CDs Demand and Supply Curve for CDs Merging the supply and demand curves into a single graph locates the equilibrium point of price.

1.1 Entrepreneurship and the Economy VIV. WHAT ENTREPRENEURS CONTRIBUTE A. They are the mechanism by which a free market economy turns demand into supply.

1.1 Entrepreneurship and the Economy B. They are a principle source of venture capital. C. They provide jobs. D. The most successful entrepreneurs change society.

1.1 Entrepreneurship and the Economy X. SMALL BUSINESSES VERSUS ENTREPRENEURIAL VENTURES A. While most businesses start small, not all businesses stay small.

1.1 Entrepreneurship and the Economy B. Whether or not a business stays small often depends on the intentions, motives, and goals of its founders.

1.1 Entrepreneurship and the Economy A. SMALL BUSINESSES 1. Small business owners start what are sometimes referred to as “mom and pop” businesses.

1.1 Entrepreneurship and the Economy 2. “Mom and pop” businesses are generally started for one of two reasons. a. Create jobs for the owners b. Provide satisfying lifestyles

1.1 Entrepreneurship and the Economy B. ENTREPRENEURIAL VENTURE 1. Founders of entrepreneurial ventures have different motives from founders of small businesses.

1.1 Entrepreneurship and the Economy 2. Entrepreneurial ventures are started with three principle goals. a. Innovate b. Grow the venture c. Create value that can be harvested when the owners leave the business

1.1 Entrepreneurship and the Economy PowerPoint Presentation End of Section 1.1