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Entrepreneurs in a market economy. What is Economy?. Different countries have different economic systems These systems affect how an item is produced How it is distributed And the demand for the item Or whether an item is even available

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what is economy
What is Economy?
  • Different countries have different economic systems
  • These systems affect how an item is produced
  • How it is distributed
  • And the demand for the item
  • Or whether an item is even available
  • You must always consider market structure, including supply, demand and price when starting a business
command economy
Command Economy
  • The Government determines what, how and for whom goods and services are produced
  • Very little choice for consumers
  • Usually, no more than 1 choice for an item
  • Cuba, China, North Korea, North Vietnam, Myanmar
market economy
Market Economy
  • Markets are FREE
  • Individuals decide what, how much and for whom they will produce their goods/services
  • Individual choice creates the market
  • Millions of people make the decisions
  • Acting as individuals
  • Many items available
  • Plenty of choice
  • Supply and Demand dictates the price
  • How much of a good or service a provider is willing to produce at different prices
  • Usually, as the price of a good increases, the supply would increase as well
  • Due to the simple fact that suppliers would be more willing to produce these goods if they see that consumers are willing to pay more for them and so suppliers would earn more profit
  • E.g. Cell phones
  • An individuals need or desire for a good or service at a given price
  • As the price of a good decreases, an individual is willing to buy more
  • As the price of a good increases, an individual is usually inclined to buy less
  • E.g. Pizza slice
equilibrium price and quantity
Equilibrium price and quantity
  • The forces of supply and demand work together in a market economy
  • These forces are FREE to work together
  • The point at which supply and demand curves meet, is the point of equilibrium price and quantity
  • This is the point where supply = demand
  • Above the equilibrium price, fewer consumers
  • Below the equilibrium price, fewer supply
economic problems scarcity
Economic Problems (Scarcity)
  • In every economy, there are limited resources
  • Individuals have unlimited needs and wants
  • Scarcity occurs when unlimited needs and wants well surpass limited resources to produce goods and services
  • Scarcity occurs in every economy
  • Not all needs and wants can always be met
  • That’s what makes every economy different
  • The level of output that a company gets from each worker and machine used to produce goods and services
  • In order for productivity to increase, either a new product has to be produced or an existing product has to be produced more efficiently
  • Efficiency: How quickly and how well a product is produced in a given period of time with as little resource and energy as possible
market structure and prices
Market Structure and Prices
  • In a Free Competitive Market, many suppliers compete for business
  • Buyers shop around for the best deal they can find.
  • Prices are determined due to competition
  • Not all markets are competitive
  • Think of the Railway
  • VIA Rail is really Canada’s only passenger railway company
  • Can they charge whatever they want?
  • This is called a Monopoly
  • Where a company controls the market because of little or weak competition
  • E.g. Microsoft (weak competition)
business activity in a market
Business Activity in a Market
  • In a market economy, a business is free to produce and offer to consumers any legal product or service.
  • A knowledge of business activities will help entrepreneurs satisfy customers and make profit
  • These activities are known as the FUNCTIONS OF BUSINESS
functions of business
Functions of Business
  • Production
  • Creates or obtains products or services for sale
  • The main reason of a business is to provide a product or service to make a profit

2. Marketing

All businesses need to conduct Market Research and Analysis in order to make decisions on what types of products or services to offer their customers

These activities make up the Marketing Mix

  • Product
  • Distribution
  • Price
  • Promotion

3. Management

Their role is to:

  • Solve Problems
  • Manage to work of employees
  • Evaluate the activities of the business
  • Fully understand the business
  • Develop and implement plans and activities
  • Setting goals
  • Determining how to meet these goals


  • Deal with financial records
  • Deal with financial information
  • Dealing with the understanding of CAPITAL and how much is needed in the future to grow the business