1. 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 2.1 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.
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3. Vocabulary
needs
wants
economic resources
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4. 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
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5. The role of businesses is to produce and distribute goods and services that people need and want.
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6. Needs Maslow’s hierarchy of needs states that:
People’s basic physiological needs must be satisfied before they can focus on higher level needs.
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7. Chapter 2

8. needs
are different for each person
vary by situation
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9. 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
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10. Needs and Wants are Unlimited
Needs and wants never end.
One purchase often leads to another.
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11. What is the difference between a need and a want?
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12. 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
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13. Entrepreneurs use economic resources to create the goods and services consumers use.
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14. 3 Factors of Production natural resources human resources
raw materials supplied by nature
human resources
the people who create goods and services
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15. 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
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16. the assets used in the production of goods and services
capital resources
the assets used in the production of goods and services
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17. 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.
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18. 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.
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19. List the three types of economic resources and give an example of each.
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20. 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.
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21. Supply and Demand
Entrepreneurs look for unmet needs to satisfy consumer needs and wants.
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22. Capital Investment and Job Creation
Entrepreneurs invest in their communities by
contributing to the local economy
providing jobs
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23. Change Agents The creation of new products can:
change the way people live
alter the way people conduct business
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24. What are some things entrepreneurs contribute to the U.S. economy?
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25. 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.
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26. Vocabulary capitalism profit economic decision making scarcity
opportunity cost
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27. 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?
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28. Command Economy Production decisions are made by the government.
Few choices exist in the marketplace.
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29. Market Economy
Production decisions are made by individuals and businesses.
Entrepreneurship thrives in a market economy.
Many choices exist in the marketplace.
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30. Traditional Economy Production occurs the way it has always occurred.
Most production is consumed.
Left over production is sold or traded.
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31. Mixed Economy
These economies contain elements of command and market economies.
The government is still involved in the marketplace.
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32. a command economic system
communism
a command economic system
the government controls most of the resources and decisions
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33. How does the type of economy affect the way the basic economic questions are answered?
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34. 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
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35. 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.
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36. 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
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37. Describe the four basic principles of the U.S. economic system.
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38. Economic Choices economic decision making
the process of choosing which needs and wants, among several, you will satisfy using the resources you have
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39. 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.
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40. Opportunity Cost opportunity cost
the value of the next-best alternative (the one you pass up)
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41. What factors affect economic choices?
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42. Functions of Business Production
The production function creates or obtains products or services for sale.
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43. Marketing
The goal of marketing is to attract as many consumers as possible.
The marketing mix includes:
product
distribution
price
promotion
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44. Management The duties of management include: setting goals
deciding on responses to competition
solving problems
overseeing employees
evaluating business activities
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45. Finance Financial duties include:
determining the amount of capital needed
determining how capital will be obtained
managing the financial records of the business
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46. What are the functions of business?
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47. 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.
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48. Vocabulary supply demand equilibrium price and quantity fixed costs
variable costs
marginal benefit
marginal cost
economies of scale
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49. 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
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50. Chapter 2

51. Chapter 2

52. 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
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53. When Supply and Demand Meet
equilibrium price and quantity
the point at which the supply and demand curves meet
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54. Chapter 2

55. What effect do supply and demand have price?
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56. 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
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57. 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
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58. 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.
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59. How do the costs of doing business affect prices?
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60. 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
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61. 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
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62. 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
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63. 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.
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64. How does the market structure affect the price of a good or service?
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65. 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
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66. 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.
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67. 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.
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68. No reference materials, visual aids, or electronic devices may be brought to or used during the preparation or presentation.
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69. 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.
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