Unit 1 Going Into Business For Yourself Chapter

Unit 1: Going Into Business For Yourself Chapter 1: What is Entrepreneurship?

The Main Idea n Entrepreneurship is the primary catalyst for economic growth. To be successful requires an understanding of how the economy works.

Small Business and Entrepreneurship n n Entrepreneur: individual who undertakes the creation, organization and ownership of a business. He or she also accepts the risks and responsibilities Venture: A new business undertaking that involves risk Entrepreneurship: the process of recognizing an opportunity, testing it on the market, and gathering the necessary resources to go into business More than 90% of all businesses today are considered small businesses, with 62% being home-based.

Economic Systems n 4 Fundamental Questions: n What goods and services should be produced? What quantity of goods and services should be produced? How should goods and services be produced? For whom should goods and services be produced? n n n

Free Enterprise System n People have an important right to make economic choices ( the U. S) – People can choose what products to buy – People can choose to own private property – People are free to start a legal business and compete with other businesses – Also known as Capitalism or a Market Economy

The Profit Motive: making a profit is a primary incentive of free enterprise. Profit is money left over after all expenses have been paid.

Competition n Competition is good for consumers because it provides choices, forces improved quality and efficiency and leads to a surplus, which brings prices down.

Market Structures n Monopoly a market structure in which a product has only one seller who has total control over supply and most prices n Oligopoly – A market structure in which there are just a few competing firms

Basic Economic Concepts n Goods and Services: Goods are tangible while services are intangible n Scarcity: occurs when demand exceeds supply

Ownership is powerful n You can open any business you create n You can keep all the profits n It is your choice n You can sell “shares” n You can donate n

Supply and Demand “How Free Enterprise Works”

Laws of Supply and Demand generally determine the price of a product n n n Supply (S): quantities available to consumers at various prices If everything else remains the same, businesses will supply more at higher prices than at lower ones As P increases, QS increases n n n Demand (D): quantities that consumers would be willing to buy at various prices. If everything else remains the same, people will demand more at lower prices than higher ones As P increases, QD decreases

Supply graph example

Demand graph example

Market behavior What happens to the price of air conditioners in the summer? fall? n When are bathing suits most expensive? Why? n

Equilibrium Also known as Market Clearing Price. Occurs where the D and S curves meet

Competition n Keeps prices down and quality high The consumer benefits from competition. How? The opposite is called a monopoly

Summary Overall, use Supply and Demand as guides n If D decreases, the market may be telling you to change your product or lower Price n If Supply increases, prices may fall n