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Entrepreneurs and Their Role in an Economy • Provide an example of an entrepreneur. • What are problems faced by entrepreneurs? • How can an entrepreneur increase a country’s GDP? Entrepreneur Cause and Effect A country’s laws make it easier for the entrepreneur to start a business and have laws to protect their investments An entrepreneur believes their idea for a new product will earn a profit and want to risk their $ and resources to start a business If the business is successful, the entrepreneur will create new products and hire new workers (creates new jobs) GDP goes up. International trade increases. Taxes are collected to help the government earn money Three Economic Questions What to produce? How to produce? For whom to produce? How does each of the economic systems answer the three basic economic questions? TRADITIONAL ECONOMY Basic Economic Questions Answer: What to produce? How to produce? For whom to produce? What people need to survive Hunting, farming & gathering Make their own products Whatever was produced in the past Social roles determine who does what Whoever usually received products will receive them again COMMAND ECONOMY Basic Economic Questions What to produce? Government decides what will be produced Answer: How to produce? Government does the planning for production, factory locations (gov’t owns the means of production) Gov’t chooses people’s jobs and their salaries For whom to produce? Gov’t controls the distribution system for housing, transportation, and sets prices. Class reward system, waiting in line / rations MARKET ECONOMY Basic Economic Questions What to produce? Whatever consumers will buy Answer: Success of a good or service determines whether it will be produced How to produce? Business owners choose – own the means of production goal is the most efficient and profitable methods For whom to produce? Consumer’s income determines who receives which goods and services Whoever can buy it! MIXED ECONOMY (more market than command) Basic Economic Questions Answer: What to produce? Business owners/ leaders decide what to produce based on sales, but the government controls some of decision making How to produce? Business owners/ leaders decide how to produce items, but the government sets minimum safety requirements, minimum wage, and age to work for workers. Also set guidelines for products (safety) For whom to produce? Consumer’s income determines who receives which goods & services (whoever can buy it), but the government provides welfare benefits for the needy MIXED ECONOMY (more command than market) Basic Economic Questions Answer: What to produce? Government decide what to produce, but private ownership of business is allowed in limited amounts How to produce? Government controls most of the means of production, but business owners/ leaders make limited decision on how to produce items For whom to produce? Government determines who receives which goods & services; a few items available outside government control (black market)