Lecture 12

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CHAPTER
Entrepreneurship
& the Economy
Section 2.1 Importance of
Entrepreneurship
in the Economy
Section 2.2 Thinking Globally,
Acting Locally
SECTION
Importance of
Entrepreneurship
in the Economy
OBJECTIVES





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Describe an economic system
Identify different economic systems
Examine supply and demand relationships
Explore the role of competition in a market economy
Describe the profit motive
Learn about nonprofit organizations
Section 2.1: Importance of Entrepreneurship in the Economy
2
What Is an Economic System?
Economics is a social science concerned with how
people satisfy their demands for goods and services
(things people do for a fee) when the supply of those
goods and services is limited.
Economics is all about the flow of goods and
services between people.
 When there are not enough goods and services to
meet the demand, the result is a scarcity of those
goods and services.
 An economic system (or economy) is a method used
by a society to allocate goods and services among
3
its people and to cope with scarcity.

Fundamental Questions
of Economics




What goods and services are produced?
What quantity of goods and services are
produced?
How are goods and services produced?
For whom are goods and services
produced?
Section 2.1: Importance of Entrepreneurship in the Economy
4
Types of Economic Systems
Two very different types of economic systems
are often used to compare how societies deal with
the fundamental questions of economics. These
systems are the command economy and the market
economy.
In a command economy, the government owns or
manages the nation’s resources and businesses.
 In a market economy, suppliers produce whatever
goods and services they wish and set prices based
on what consumers are willing to pay.
 Another name for the market economy is the free
enterprise system.

5
Supply and Demand
Supply is the quantity of goods and services a
business is willing to sell at a specific price and a
specific time.
A supply curve on a
graph shows the quantity
of a product or service a
supplier is willing to sell
across a range of prices
over a specified period of
time.
Section 2.1: Importance of Entrepreneurship in the Economy
6
Demand Curve
Demand is the quantity of goods and services
consumers are willing to buy at a specific price and a
specific time.
A demand curve on a
graph shows the quantity
of a product or service
consumers are willing to
buy across a range of
prices over a specified
period of time.
7
Supply and Demand Curves
A supply and demand curve is a graph that includes both a
supply curve and a demand curve. It shows the relationship
between price and the quantity of a product or service that
is supplied and demanded.
Section 2.1: Importance of Entrepreneurship in the Economy
8
Competition in a
Market Economy
Competition is common in a market economy.
People are free to start and operate businesses
that compete against each other.
If a supplier lowers the price of a product or service,
consumers typically buy from that supplier rather
than from others.
 In a market economy, there is not only competition
between suppliers but also competition between
consumers. When consumers compete against
each other to buy a product, they push prices
9
upward.

Profit Motive
A business makes a profit when the amount of money
coming in from sales is greater than the business’s
expenses.


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Profit is a business’s reward for successfully providing
goods and services that satisfy consumers’ demands.
The profit motive is an incentive that encourages
entrepreneurs to take business risks in the hope of making a
profit.
Entrepreneurs who consistently make a profit over time can
build their own wealth and ensure financial independence.
Many entrepreneurs use profit to benefit their existing
businesses, start new ones, or invest in the enterprises of
others.
Section 2.1: Importance of Entrepreneurship in the Economy
10
Economics of One Unit
The economics of one unit is a calculation of the profit
(or loss) for each unit of sale made by a business.
Calculate the economics of one unit by subtracting the
expenses for the unit of sale from its selling price.
A unit of sale has a selling price to the consumer and an
expense for the entrepreneur. The economics of one unit
is the difference between the selling price and its
expense.
Selling Price – Expense = Profit (or Loss)
Section 2.1: Importance of Entrepreneurship in the Economy
11
Here are the expenses for your
T-shirt business: 5$ for each Tshirt and 3$ per T-shirt for ink,
other supplies, and the cost of
silk screening. You sell T-shirt
10$ each.
 Calculate the economics of one
unit of sale. What is the
percentage of profit based on
price?

12
Use the following data to draw a
Supply and Demand curve
 Circle the equilibrium point
 How many cakes should the
entrepreneur supply each week?
Why?

13
Economics of One Unit
If the equation on the previous slide results in a positive
number, you’ve made a profit. If it’s negative, you have a
loss. A business that cannot make a profit from one unit of
sale will not ever make a profit, no matter how many units
it sells.
Another way to look at profit is as a percentage of the selling
price. This calculation tells an entrepreneur the profit
percentage based on sales. The formula per unit of sale is:
(Profit/Selling Price) x 100 = Profit %
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Economics of One Unit
An entrepreneur buys plain backpacks and decorates them at home
with hand-drawn art, stitching, buttons, and stickers before reselling
them at the flea market for $25 each.
Because each backpack is different, the entrepreneur uses an
average backpack as the unit of sale.
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Nonprofit Organizations
A nonprofit organization operates solely to serve the
good of society. Nonprofits are not governmental
organizations. They operate much like for-profit
businesses. Money comes into the nonprofit from
donations, government grants, or the sale of goods and
services to consumers.


Nonprofit companies also have expenses. If the money
coming in is greater than the money going out, a nonprofit
company will have a surplus (profit).
Any profit a nonprofit earns must, by law, be used to
support the organization’s social mission. It cannot be used
for the financial gain of the people running the nonprofit.
Section 2.1: Importance of Entrepreneurship in the Economy
16
What Is an Entrepreneur?
Someone who creates and runs a business is called
an entrepreneur.
When an entrepreneur starts a new business, risk is
involved. Risk is the chance of losing something.
 Because employees work for someone else and
entrepreneurs work for themselves, entrepreneurs
risk more than employees.
 One way you can gain a sense of what business is
like is by investigating an internship.

Section 1.1: What Is an Entrepreneur?
Why Be an Entrepreneur?
The biggest reward of becoming an entrepreneur is
the personal satisfaction that comes from having
the freedom to make your own business decisions
and then act on them.
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Making Your Own Rules. When you own a business,
you get to be your own boss.
Doing Work You Enjoy. Since the majority of most
peoples’ lives is spent working, why not spend that time
doing something you enjoy?
Creating Greater Wealth. There’s no limit to what an
entrepreneur can make.
Helping Your Community. Being an entrepreneur lets
you make your community and world a better place.
Risks of Being an Entrepreneur
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Potential Business Failure. Being fully responsible
means the success or failure of your business rests on
you.
Unexpected Obstacles. Problems can happen that
you don’t expect.
Financial Insecurity. Many new businesses don’t
make much money in the beginning, so you may not
always be able to pay yourself.
Long Hours and Hard Work. It’s not unusual for
entrepreneurs to work a lot of extra hours to make their
businesses successful. This is especially true during
the initial start-up process.
Section 1.1: What Is an Entrepreneur?
19
Entrepreneurship in History
Here are some well-known entrepreneurs who changed the
world. For what is each entrepreneur most famous?


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Thomas Edison
Wlliam Harley & Arthur
Davidson
Maggie Lena Walker


Stephen Wozniak and
Steve Jobs
Russell Simmons
Section 1.1: What Is an Entrepreneur?
20
SECTION
Characteristics of
an Entrepreneur
OBJECTIVES




Describe who becomes an entrepreneur
List the key characteristics of an entrepreneur
Explore ways to build your business potential
Explain the value of learning about entrepreneurship
Sect
ion
1.2:
Cha
ract
erist
ics
Characteristics of Successful
Entrepreneurs
Self-assessment—evaluating your strengths and weaknesses—
is an important part of becoming an entrepreneur.


An aptitude is a natural ability to do a particular type of
work or activity well.
An attitude is a way of viewing or thinking about
something that affects how you feel about it.
Entrepreneurs tend to be people with positive attitudes.
Section 1.2: Characteristics of an Entrepreneur
Characteristics of Successful
Entrepreneurs
Personal Characterisitics
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Courage
Creativity
Curiosity
Determination
Discipline
Empathy
Enthusiasm
Flexibility
Honesty
Patience
Responsibility
Skills
A skill is an ability that’s learned
through training and practice.

Business Skill

Communication Skill

Computer Skill

Decision-Making and
Problem-Solving Skills

Mathematical Skill

Organizational Skill

People Skills
Section 1.2: Characteristics of an Entrepreneur
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