Section
2.1
Importance of
Entrepreneurship in the Economy
Section
2.2
Thinking Globally,
Acting Locally

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OBJECTIVES
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
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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 .
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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 its people and to cope with scarcity.
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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?
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Section 2.1: Importance of Entrepreneurship in the Economy

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
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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 .
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Supply is the quantity of goods and services a business is willing to sell at a specific price and a specific time
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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 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.
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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 is common in a market economy.
People are free to start and operate businesses that compete against each other.
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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 upward.
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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

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?
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 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?
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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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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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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.
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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

Someone who creates and runs a business is called an entrepreneur.
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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?

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.

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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?
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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
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Stephen Wozniak and
Steve Jobs
Russell Simmons
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Section 1.1: What Is an Entrepreneur?

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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 of

Self-assessment—evaluating your strengths and weaknesses— is an important part of becoming an entrepreneur.
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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

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.
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Business Skill
Communication Skill
Computer Skill
Decision-Making and
Problem-Solving Skills
Mathematical Skill
Organizational Skill
People Skills
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Section 1.2: Characteristics of an Entrepreneur