Unit 1: Going Into Business For Yourself

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

2. Business cycle Demand Diminishing marginal utility Economics Entrepreneur Entrepreneurship Entrepreneurial Equilibrium Free enterprise system Factors of production Goods Gross Domestic Product Market structure Monopoly Need Oligopoly Profit Scarcity Services Supply Venture Want Key Terms To Know:

3. Key Concepts To Know • Small Business & Entrepreneurship • Economic Systems • Basic Economic Concepts • Economic Indicators & Business Cycles • What Entrepreneurs Contribute

4. Statistics • 1 in 3 households own their own family business • 90% of businesses are small business having less than 100 employees • 62% of small businesses are home-based

5. Going into business for yourself • Considered an entrepreneur • He/she accepts the risks & responsibilities of owning the business • He/she earns profits & gains personal satisfaction • Ventures are the new businesses being started • Entrepreneurs have the 3 I’s: initiative; innovation; imagination

6. Why Be An Entrepreneur? • Generates employment • Sees economic opportunities to satisfy our demands for G&S • Source of venture capital – getting money from private investors • Help give employees financial security • Changing society (internet, computers) • Catalysts to making economic progress happen

7. The Start-Up Process • Skilled Entrepreneurs! • Enterprise Zones – Communities give tax benefits/grants if you open up a business there • Start-Up Resources: • Capital • Skilled Labor • Management Expertise • Legal & Financial Advice • Facilities • Equipment • Customers! 

8. Basic Economic Concepts • Goods – tangible items purchased; sold by a merchandising business • Services – intangible (nonphysical) items; sold by a service business Goods & Services will be abbreviated: G&S

9. Basic Economic Concepts • Needs – food, shelter, clothing (basic) • Wants – would ‘like’ to have • Necessary wants – winter coat, snow boots • Optional wants – mink coat, UGG boots • Private wants – 1 person wants it • Public wants – “infrastructure” needs of society

10. Basic Economic Concepts • Values – things you prize or think are important • Goals – your aims or objectives

11. Basic Economic Concepts • Opportunity Costs– something given up because another choice is made; the 2nd option that wasn’t taken • Trade Off– cutting back on one option so that you can have some of another option • Choosing to box up some dinner so that you can save room for dessert

12. Why are these important when opening up a business?? • Now, think about what type of business you may want to open up . . . • Will it satisfy peoples’ wants? Or needs? • Will you provide a service? Or sell goods? • Base your business choice on what you value • Base your business choice on what goals you have

13. 4 Economic Questions Every Economic System Must Face: • What G&S will be produced? • What amount of G&S will be produced? • How will the G&S be produced? • Who will use/purchase the G&S?

14. Basic Economic Concepts Resources • Anything used to make or obtain needs or wants • Resources get pulled together to make a business “happen”

15. 4 Factors of Production • AKA: Resources; Inputs to Production • The resources needed/used to produce G&S • They are the basic elements used to produce G&S • Need these in order to start/run a business

16. 4 Factors of Production Are: • Land (Natural Resources) – Earthly things • Renewable Resources: can be re-grown • Nonrenewable Resources: can only be used once (not re-grown) • Labor (Human Resources) – employees; labor force (16 yrs old & over working or seeking work • Capital Resources – equipment, tools, buildings, cash; ‘owned’ property • Entrepreneurship – Management skill needed to start & operate a business; being able to manage all of these things! Review the 3 I’s of these risk takers

17. Economic Systems • Traditional Economic System – bartering • Pure Market System – little gov’t control • Command Economic System – total gov’t control • Mixed Economies(between market & command) – U.S. & European Union

18. The Free Enterprise System • Most democratic nations have this • People have rights to make decisions on: • What products they buy • Owning private property • Starting a business to compete with other businesses • Where voluntary exchange occurs • AKA: Capitalism; Market Economy

19. The Free Enterprise System • A Market Economy is when we have voluntary exchange • Markets are where the exchanges are happening

20. Profit Motive & Competition • Making money is the primary incentive of a market economy/free enterprise • Competition helps consumers: • Can get a better quality product • Can get lower prices • Can get a wide variety of products • Competition forces companies to improve quality & become more efficient

21. Supply & Demand • S&D help us understand prices of goods • S&D interact to determine how much of a product should be produced based on how much the consumer is demanding it

22. Laws • Law of Supply– sellers want to sell (or supply) products to consumers at the highest possible price • Law of Demand– consumers want to purchase products at the lowest price possible

23. Theories of Supply & Demand • If there is a heavy demand for a product but there is a short supply of it, prices will INCREASE. Thus, demand comes down, expanding supply • If there is a heavy supply for a product but there is a low demand for it, prices will DECREASE. Thus, demand starts to increase & lower supply • Prices tend to stabilize at the EQUILIBRIUM PRICE – where supply = demand

24. Scarcity • It’s a problem that all societies must face • Not enough products available for our demand for them (demand > supply) • Our resources are limited & our wants are unlimited • Must have OPPORTUNITY COSTS – give up 1 thing in order to get something else

25. 3 Market Structures • Perfect Competition – hardly exist; when identical products exist; prices aren’t affected by any particular buyer/seller • Monopoly – differentiated products; tries to dominate a small portion of the market; 1 seller of a particular commodity • Oligopoly – several large companies sell the same product/commodity

26. Economic Indicators • Gov’t looks at these to determine the overall health of our nation: • Employment Rate • Consumer Confidence • Gross Domestic Product (GDP) – the total market VALUES of G&S produced in a nation in a given year The Federal Reserve is involved in controlling the economy by regulating the money supply via interest rates!!

27. Business Cycles • Recession– a period of decline, spending falls, demand for products falls, production of G&S slows down, layoffs occur • Depression– the lowest point a cycle can reach, high unemployment, money spent on needs is limited, production almost stops, businesses close down • Recovery – people start to find jobs & spend money on G&S • Prosperity– low unemployment rats, demand for G&S is at it’s highest point

28. Business Cycles, cont. • INFLATION: • Occurs when people are spending money & are confident in the economy. • Suppliers raise prices on G&S • Prices are increasing faster than the increase in people’s paychecks! • Usually occurs during a recovery period

29. Facts About Business Failures • Business Failure– Hurts creditors as the company files Chapter 7 bankruptcy & shuts down • Discontinuance – Still is operating, but under a different name; doesn’t hurt creditors as they “reorganize” themselves; could be a Chapter 11 or 13 bankruptcy

30. Circular Flow • Copy the diagram provided by the teacher:

31. THE END!