SECTION

Entrepreneurship
and the Economy

Small Business and Entrepreneurship

As an entrepreneur, you entrepreneur

entrepreneur
accept the risks and an
anindividual
individualwho
whoundertakes
undertakesthe
the
responsibilities of creation,
creation,organization,
organization,and
and
ownership of a business
ownership of a business
business ownership.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Small Business and Entrepreneurship

Creating and running a venture

venture
business venture requires aanew
newbusiness
businessundertaking
undertakingthat
that
a variety of skills. involves
involvesrisk
risk

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Small Business and Entrepreneurship

Starting a home-based entrepreneurship

entrepreneurial
entrepreneurship
entrepreneurial
business calls for acting like
the
acting likean
theprocess
process an entrepreneur
ofofrecognizing
recognizingan
entrepreneur oror
an
entrepreneurship on the having
having an
opportunity, entrepreneurial
testing it in
an entrepreneurial
opportunity, themind-
testing it in themind-
part of the owner. set
market,
market, and gatheringthe
set and gathering the
resources
resources necessary togo
necessary to gointo
into
About one in three business
business
households is involved in an
entrepreneurial enterprise.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Entrepreneurship Today

Knowledge of economics economics

economics
contributes to an the
thestudy
studyofofhow
howpeople
peopleallocate
allocate
understanding of how scarce
scarceresources
resourcestotofulfill
fulfilltheir
their
unlimited wants
unlimited wants
entrepreneurs and
customers interact.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Economic Systems

An economic system includes a set of laws, institutions, and

activities that guide economic decision making.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

Economic Systems

? ?
What goods and What quantity of
services should be goods and services
produced? should be produced?

All economic systems attempt

to answer four basic questions.

? ?
How should goods For whom should
and services be goods and services be
produced? produced?

6
SECTION
Entrepreneurship
and the Economy

The Free Enterprise System

Most democratic nations free

freeenterprise
enterprisesystem
system
have a free enterprise an
aneconomic
economicsystem
systemininwhich
which
system. people
people have important rights:toto
have important rights:
make
makeeconomic
economicchoices
choicesofofwhat
what
products to buy, to own private
products to buy, to own private
property,
property,and
andtotochoose
choosetotostart
startaa
business
businessandandcomplete
completewith
withother
other
businesses
businesses

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

The Free Enterprise System

Making a profit is a profit

profit
primary incentive of free money
moneythat
thatisisleft
leftover
overafter
afterall
all
enterprise. expenses of running a business
expenses of running a business
have
havebeen
beendeducted
deductedfrom fromthe
the
income
income

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

The Free Enterprise System

Perfect competition is a market

marketstructure
structure
market structure in which the
there are numerous buyers thenature
natureandanddegree
degreeofof
competition
competitionamong
amongbusinesses
businesses
and sellers and no single operating
buyer or seller can affect operating in the sameindustry;
in the same industry;
market
market structure affectsmarket
structure affects market
price. price
price

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

The Free Enterprise System

The government may monopoly

monopoly
grant a temporary aamarket
marketstructure
structureininwhich
whichaa
monopoly to an inventor. particular
particularcommodity
commodityhas hasonly
onlyone
one
seller
seller

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

The Free Enterprise System

Under antitrust laws, oligopoly

oligopoly
some forms of oligopoly aamarket
marketstructure
structureininwhich
whichthere
there
are illegal. are
arejust
justaafew
fewcompeting
competingfirms
firms

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

Basic Concepts

goods and services factors of production

Basic concepts of economics

supply and demand

scarcity
theory

12
SECTION
Entrepreneurship
and the Economy

Goods and Services

Goods and services are services

goods
services
goods
the products of our intangible
tangible
tangible(or
intangible (nonphysical)
physical) products
physical)products
(nonphysical)
(or ofof
products
products
economic system. that
our
thatsatisfy
satisfyconsumers’
oureconomic
economic system
consumers’ wants
systemthat and
satisfy
wants
that and
satisfy
needs
consumers’
needs wants and needs
consumers’ wants and needs

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Goods and Services

Entrepreneurs respond to need

want
want
need
consumers’ wants and something
a basic
basicrequirement
something
a that
thatyou
youdo
requirement for
do not
forsurvival
nothave
havetoto
survival
needs with goods and have
havefor
forsurvival,
survival,but
butwould
wouldlike
liketoto
have
have
services.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Factors of Production

There are four basic factors factors

factorsofofproduction
production
of production: the
theresources
resourcesbusinesses
businessesuse
usetoto
• land produce
producethe
thegoods
goodsand
andservices
services
that people want
• labor that people want
• entrepreneurship
• capital

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Scarcity

The principle of scarcity scarcity

scarcity
means giving up one the
thedifference
differencebetween
betweendemand
demand
thing in order to have and
andsupply;
supply;limited
limitedresources
resources
something else.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Supply and Demand Theory

In a free enterprise demand

demand
system, the price of a the
thequantity
quantityofofgoods
goodsororservices
services
product is determined by that
thatconsumers
consumersare arewilling
willingand
and
able to buy at various prices
able to buy at various prices
demand.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Supply and Demand Theory

The degree to which demand inelastic

elastic
elasticdemand
inelastic demand
demand
demand
for a product is affected by situations
situationsininwhich
whichaachange
changeinin
its price is either governed price
pricehas
creates
little
creates
has aor
littleachange
no
noeffect
orchange inindemand
effect on
onthe
demand
the
by elastic demand or demand for products
demand for products
inelastic demand.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Supply and Demand Theory

Due to the law of diminishing

diminishingmarginal
marginalutility
utility
diminishing marginal
the
theeffect
effectororlaw
lawthat
thatestablishes
utility, even when a that price alone does
establishes
not
product’s price is low, that price alone does not
determine
determinedemand,
demand,and andthat
that
people will not keep buying other factors, such as income,
other factors, such as income,
it indefinitely. taste,
taste,and
andthe
theamount
amountofofproduct
product
already
already owned, play a roleas
owned, play a role as
well
well

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Supply and Demand Theory

Supply is continually supply

supply
shifting in the the
theamount
amountofofgoods
goodsororservices
services
marketplace. that
thatproducers
producersare
arewilling
willingtoto
provide
provide

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Supply and Demand Theory

If something is in heavy demand, but in short supply, prices will

go up.
 
If something is in heavy supply, but in short demand, prices will
go down.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Supply and Demand Theory

Because supply and demand equilibrium

equilibrium
are continually shifting in the
thepoint
pointatatwhich
whichconsumers
consumersbuybuy
the marketplace, the change all
all of a product that is supplied;atat
of a product that is supplied;
creates surpluses, shortages, this
thispoint,
point,there
thereisisneither
neitheraa
and equilibrium. surplus
surplusnornoraashortage
shortage

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Economic Indicators and Business Cycles

The federal government gross

grossdomestic
domesticproduct
product
publishes statistics that help the
thetotal
totalmarket
marketvalue
valueofofthe
the
entrepreneurs understand goods
goods and services producedby
and services produced by
the economy and predict workers and capital within
workers and capital within a a
nation
nationduring
duringaagiven
givenperiod
possible changes. period

The Gross Domestic

Product is an example of
an economic indicator.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business

SECTION
Entrepreneurship
and the Economy

Economic Indicators and Business Cycles

There are four stages of business

businesscycle
cycle
the business cycle: the
thegeneral
generalpattern
patternofofexpansion
expansion
growth, recession, and
andcontraction
contractionthat
thatthe
theeconomy
economy
goes through
goes through
depression, and recovery.

What is Entrepreneurship?

Glencoe Entrepreneurship: Building a Business