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Entrepreneurship Entrepreneurs in a Market Economy 2.1 Entrepreneurs Satisfy Needs and Wants Goals Distinguish between __________ and ____________. Describe the types of economic resources. Explain the role of entrepreneurs in the U.S. ____________________. Vocabulary needs wants economic _______________ Is It a Need or a Want? Needs* things that are _____________________ for survival wants* things you _____________ you must have in order to be _________________ add comfort and pleasure to your life The role of businesses is to _________________ and distribute goods and services that people _______________ and _________________. Needs Maslow’s hierarchy of needs states that: People’s basic psychological ___________ must be satisfied before they can focus on higher level ________________. Needs are ______________ for each person vary by ____________________ Wants economic wants a ________________ for material goods and services are the basis of an _______________ clothing housing noneconomic wants ________________ things sunshine fresh air cars happiness 1 Entrepreneurship Needs and Wants are ________________ Needs and wants _____________ end. One purchase often leads to ___________________. What is the difference between a need and a want? Economic Resources economic resources the means through which goods and services are _____________________ goods _______________ you can see and touch services activities that are consumed as they are __________________ Entrepreneurs use economic _______________ to create the goods and services consumers use Factors of Production natural resources ____________ materials supplied by nature human resources the people who __________________ goods and services specialization when individual workers focus on _____________ tasks each worker becomes more ___________________ and productive division of labor divides the _____________________ process into separate tasks workers specialize in specific tasks the group as a whole becomes more ______________________ the assets used in the ______________________ of goods and services Limited Resources Economic resources are limited. Individuals, businesses, and countries compete for __________________. High demand for a limited resource drives up the price for the _________________. Law of Diminishing Returns If one factor of ______________ is increased while others stay the same, the resulting increase in output (product produced) will level off after some time and then will __________________. List the three types of economic resources and give an example of each. 2 Entrepreneurship Role of Entrepreneurs in the U.S. Economy Entrepreneurs play an important role in the U.S. _________________. The development of small businesses helps to ensure a strong ________________ future. Supply and Demand Entrepreneurs look for unmet needs to satisfy consumer __________ and _____________. Capital Investment and Job Creation Entrepreneurs invest in their communities by contributing to the local ____________ providing ____________ Change Agents The creation of new products can: change the way people _____________ alter the way people conduct _________________ 3 Entrepreneurship Lesson 2.2 How Economic Decisions are Made Goals Compare and contrast different types of _______________ systems. Describe the characteristics of the U.S. _______________. Explain how scarcity affects economic decisions. Explain how business functions are used to satisfy _________________. Vocabulary capitalism profit economic decision making scarcity opportunity cost Economic Systems Each economy must answer three basic questions regarding goods and services: Which ones will be _______________? How will they be ________________? Whose needs and wants will they satisfy? Command Economy __________________ decisions are made by the government. Few choices exist in the _________________________. Market Economy _____________________ decisions are made by individuals and businesses. Entrepreneurship thrives in a market __________________. Many choices exist in the ______________________. Traditional Economy __________________ occurs the way it has always occurred. Most ____________________ is consumed. Left over __________________ is sold or traded. Mixed Economy These ______________ contain elements of command and market economies. The government is still ______________ in the marketplace. Communism a ________________ economic system the ________________________ controls most of the resources and decisions The U.S. Economic System capitalism the ___________ ownership of resources by individuals rather than by the government individual businesses and consumers make _________________ decisions also called free ____________________ 4 Entrepreneurship The U.S. economic system of capitalism is based on four basic principles. Private Property You may _________ whatever you want as long as you operate within the law. Freedom of Choice Government intervention occurs only when individual decisions will bring ____________ to others. Profit the difference between the _____________ earned by a business and the _______________ of operating the business The opportunity to earn a profit is at the heart of the free-enterprise system. Competition the ____________ among businesses to sell their goods and services Economic Choices economic decision making the process of _______________ which needs and wants, among several, you will satisfy using the resources you have Scarcity scarcity occurs when there are _______________ resources available to meet the unlimited needs and wants of consumers Scarcity ________________ you to make decisions about tradeoffs. Opportunity Cost opportunity cost the value of the next-best _________________ (the one you pass up) What factors affect economic choices? Functions of Business Production The ___________________ function creates or obtains products or services for sale. Marketing The goal of marketing is to attract as many consumers as possible. The marketing mix includes: product ________________ price promotion 5 Entrepreneurship Management The duties of management include: setting goals __________________ on responses to competition solving problems _________________ employees evaluating business activities Finance Financial duties include: ______________ the amount of capital needed ______________ how capital will be obtained managing the financial records of the business What are the functions of business? 6 Entrepreneurship Lesson 2.3 What Affects Price? Goals Recognize how supply and demand ______________ to determine price. Describe how costs of doing business affect the _____________ of a good or service. Explain the _________________ of different market structures on price. Vocabulary supply demand equilibrium price and quantity fixed costs variable costs marginal benefit marginal cost economies of scale How Much Is Enough? supply how much of a good or service a producer is willing to ____________ at different prices demand the quantity of a good or service that consumers are willing to ________ at a given price when the demand of a product is affected by its price Demand Elasticity When the demand of a product is _________________ by its price elastic demand when a change is price ________________ a change in demand inelastic demand when a change in price _______________ very little change in demand When Supply and Demand Meet equilibrium price and quantity the point at which the supply and demand curves ________________ 7 Entrepreneurship Costs of Doing Business fixed costs costs that must be paid _______________ of how much of a good or service is produced variable costs costs that _______________ depending on the quantity of the good or service produced Fixed costs will be incurred regardless of the level of sales marginal benefit _______________ the advantages of producing one additional unit of a good or service marginal cost _____________ the disadvantages of producing one additional unit of a good or service Economies of scale the cost advantages obtained due to ______________________ A lower average cost per unit is _________________ through increased production because costs can be spread over an increased number of units. How do the costs of doing business affect prices? Market Structure and Prices Perfect Competition Characteristics of perfect competition include: a very ___________ number of businesses nearly identical products many well-informed ____________ difficult to raise prices ___________________ have more control over the market businesses can leave or enter the market easily Monopolistic Characteristics of monopolistic competition include: a large number of _______________________ businesses goods and services that are somewhat different each business has a ______________ share of the market prices are determined competitively differentiating ______________________ is important businesses can easily enter or leave the market Oligopoly Characteristics of an oligopoly include: a _________ number of businesses that gain the majority of total sales revenues the goods are similar and are close substitutes businesses can ______________ prices it is hard to enter the _________________ 8 Entrepreneurship Monopoly where there is only _____________ provider of a good or service Because of a lack of competition, companies can charge _________________ price they like. Barriers that make it difficult for new businesses to enter a _________________ is a primary reason that monopolies exist. How does the market structure affect the price of a good or service? 9