Download Unit 1: Going Into Business For Yourself

Unit 1: Going Into
Business For Yourself
Chapter 1 – What is
Entrepreneurship?
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Key Terms To Know:
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Business cycle
Demand
Diminishing marginal utility
Economics
Entrepreneur
Entrepreneurship
Entrepreneurial
Equilibrium
Free enterprise system
Factors of production
Goods
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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
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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?
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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
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Skilled Entrepreneurs!
Enterprise Zones – Communities give tax benefits/grants if you
open up a business there
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Start-Up Resources:
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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
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wants – winter coat, snow boots
 Optional wants – mink coat, UGG boots
 Private wants – 1 person wants it
 Public wants – “infrastructure” needs of
society
 Necessary
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 option
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 Choosing
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??
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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
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”
4 Factors of Production
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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:
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Land (Natural Resources) – Earthly things
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Renewable Resources: can be re-grown
Nonrenewable Resources: can only be used once (not regrown)
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Labor (Human Resources) – employees; labor force
(16 yrs old & over working or seeking work
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Capital Resources – equipment, tools, buildings, cash;
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‘owned’ property
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
Economic Systems
Traditional Economic System – bartering
 Pure Market System – little gov’t control
 Command Economic System – total gov’t
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control
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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:
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 What
products they buy
 Owning private property
 Starting a business to compete with other
businesses
 Where voluntary exchange occurs
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AKA: Capitalism; Market Economy
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The Free Enterprise System
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A Market Economy is when we have
voluntary exchange
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Markets are where the exchanges are
happening
Profit Motive & Competition
Making money is the primary incentive of a
market economy/free enterprise
 Competition helps consumers:
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 Can
get a better quality product
 Can get lower prices
 Can get a wide variety of products
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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
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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
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Gov’t looks at these to determine the overall health of
our nation:
Employment Rate
Consumer Confidence
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
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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.
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INFLATION:
 Occurs
when people are spending money &
are confident in the economy.
 Suppliers raise prices on G&S
 Prices 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
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Copy the diagram provided by the teacher:
THE END!