1 unit 1: going into business for yourself chapter 1 – what is entrepreneurship?
TRANSCRIPT
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Unit 1: Going Into Business For Yourself
Chapter 1 – What is Entrepreneurship?
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Key Terms To Know:
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
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Key Concepts To Know
Small Business & Entrepreneurship Economic Systems Basic Economic Concepts Economic Indicators & Business Cycles What Entrepreneurs Contribute
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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
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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
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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
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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!
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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
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Basic Economic Concepts
Needs – food, shelter, clothing (basic) Wants – would ‘like’ to have
Necessary wants – winter coat, snow bootsOptional wants – mink coat, UGG bootsPrivate wants – 1 person wants itPublic wants – “infrastructure” needs of
society
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Basic Economic Concepts
Values – things you prize or think are important
Goals – your aims or objectives
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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 optionChoosing to box up some dinner so that you
can save room for dessert
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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
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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?
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Basic Economic Concepts
Resources Anything used to make or obtain needs or
wants Resources get pulled together to make a
business “happen”
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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
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4 Factors of Production Are:
1. Land (Natural Resources) – Earthly things Renewable Resources: can be re-grown Nonrenewable Resources: can only be used once (not re-
grown)
2. Labor (Human Resources) – employees; labor force (16 yrs old & over working or seeking work
3. Capital Resources – equipment, tools, buildings, cash; ‘owned’ property
4. 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
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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
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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
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The Free Enterprise System
A Market Economy is when we have voluntary exchange
Markets are where the exchanges are happening
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Profit Motive & Competition
Making money is the primary incentive of a market economy/free enterprise
Competition helps consumers:Can get a better quality productCan get lower pricesCan get a wide variety of products
Competition forces companies to improve quality & become more efficient
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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
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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
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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
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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
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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
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Economic Indicators
Gov’t looks at these to determine the overall health of our nation:
1. Employment Rate2. Consumer Confidence3. 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!!
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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
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Business Cycles, cont.
INFLATION:Occurs when people are spending money &
are confident in the economy.Suppliers raise prices on G&SPrices are increasing faster than the increase
in people’s paychecks!Usually occurs during a recovery period
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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
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Circular Flow
Copy the diagram provided by the teacher:
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THE END!