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Name: ______________________________________ Date: _______ Period:_______ Entrepreneurship & Small Business Management Chapter 1 What is Entrepreneurship? Chapter 1.1 Objectives Discuss the role of small business and entrepreneurship in the economy. Describe economic systems. Explain how economics is about making choices. Discuss the role of economic indicators and business cycles. Describe what entrepreneurs contribute to the economy. Small Business and Entrepreneurship As an entrepreneur, you accept the risks and responsibilities of business ownership. entrepreneur- an individual who undertakes the _________________________, _______________________, and ____________________________ of a business Creating and running a business _____________________ requires a variety of skills. venture - a new business undertaking that involves ____________ Starting a home-based business calls for __________________________________ on the part of the owner. About one in three households is involved in an __________________________ enterprise. entrepreneurship - acting like an or having an entrepreneurial mind-set entrepreneurial - the process of recognizing an _______________________________, testing it in the market, and gathering resources necessary to go into business Knowledge of _______________________________ contributes to an understanding of how entrepreneurs and customers interact. economics - the study of how people allocate scarce ___________________________ to fulfill their unlimited wants All economic systems attempt to answer four basic questions. _____________________________ goods and services should be produced? _______________ ______________________ of goods and services should be produced? _________________________________ should goods and services be produced? ____________ _______________________ should goods and services be produced? The Free Enterprise System & The Profit Motive Most democratic nations have a free enterprise system. Making a ________________ is a primary incentive of free enterprise. profit - money that is __________________ ______________ after all expenses of running a business have been deducted from the income free enterprise system - an economic system in which people have the right to choose: 1. what products to ______________________ 2. to own private property 3. to choose to _________ a business and _______________with other businesses Competition The _______ ___ _____________________ is a key element in a market economy. It helps to ensure lower prices, as well as higher quality, better service and reputation. Perfect competition is a market structure in which there are numerous buyers and sellers and ___ ____________ ___________ ___ ____________ can affect price. market structure - the nature and ________________________ of competition among businesses operating in the same industry; market structure affects market price The Free Enterprise System The government may grant a temporary _________________________ to an inventor. monopoly - a market structure in which a particular commodity has only ___ ____________. Under antitrust laws, some forms of oligopoly are _____________________________ oligopoly - a market structure in which there are just a __________ competing firms Think – Pair – Share! Goods and Services Goods and services are the products of our economic system. goods - _______________________ (or physical) products of our economic system that satisfy consumers’ wants and needs services -_______________________ (nonphysical) products that satisfy consumers’ wants and needs Entrepreneurs respond to consumers’ __________________________ and __________________________ with goods and services. want - something that you do not have to have for survival, but would _________ to have need - a basic requirement for ____________ Factors of Production There are four basic factors of production: _____________________________ factors of production - the _____________________________ __________________ businesses use _____________________________ to produce the goods and services that _____________________________ people want Scarcity The principle of scarcity means _____________ ____ one thing in order to have something else. scarcity - the difference between demand and supply; limited resources Supply and Demand Theory In a free enterprise system, the price of a product is determined by ________________. demand- the quantity of goods or services that consumer are ____________________ and able to buy at various prices The _______________________ to which demand for a product is affected by its _________ is either governed by _______________ demand or _________________ demand. elastic demand - situations in which a change in price creates a ______________ in demand inelastic demand - situations in which a change in price has little or ______ ________________________ on demand for products Due to the law of diminishing marginal utility, even when a product’s price is low, people will not keep buying it indefinitely. diminishing marginal utility - the effect or law that establishes that _______________ ______________________ does not determine demand, and other factors, such as income, taste, and the amount of product already owned, play a role as well Supply is continually shifting in the marketplace. supply - the __________________of goods or services that producers are willing to provide. Because supply and demand are continually shifting in the marketplace, the change creates surpluses, shortages, and equilibrium. equilibrium - the point at which consumers buy all of a product that is supplied; at this point, there is neither a ______________________ nor a _____________________. Economic Indicators and Business Cycles There are four stages of the business cycle: __________________, _______________________, _____________________, and ___________________.