Going Into Business for
Yourself
What is Entrepreneurship?
What is Entrepreneurship?


Entrepreneur is an individual who
undertakes the creation, organization
and ownership of a business.
Venture - A business enterprise
involving some risk in expectation of
gain.
What is Economics?

Economics is the study of how people
choose to allocate scarce resources
to fulfill their unlimited wants.
Economics has a great influence on
entrepreneurship.
3 Fundamental Questions asked of
the economic system



What goods and services should be
produced and how much in quantity
should be produced?
How should goods and services be
produced?
For whom should goods and
services be produced?
The Free Enterprise System

In a free enterprise system (also called
capitalism or a market economy), people
choose what products to buy, what
property to own, and can choose to start a
business and compete with other
businesses on their own.

The price of a product is determined by
the marketplace.

Most Democratic nations have this type of
enterprise system.
Profit Motive

Profit - money that is left after all
expenses of running a business have
been deducted from the income.
Competition




Provides consumers with choice
In a free enterprise system, competition forces
companies to improve quality and become more
efficient.
Leads to surplus, which leads to lower prices.
Risk of failure encourages the production of
quality products that meet the needs of
consumers
Market Structures

Perfect competition – the goods or
service being sold is nearly identical.
•

Numerous buyers and sellers with no single
buyer or seller capable of affecting price.
Monopolistic competition – many sellers
produce similar but differentiated
products.
•
Retail stores, fast food, gas stations
Monopoly and Oligopoly

A Monopoly is when a business is the sole
supplier of a particular good or service
and they are given the total control over
price.
• National Grid, Amtrak

Oligopoly is a market in which control over
the supply of a commodity is in the hands
of a small number of larger companies
who have dominated the industry.
• Ex. Tobacco Industry, Automobile Industry,
Softdrink industry, Basketball sneakers
Oligopolies
Company
US Brands
Market Share
Philip Morris
Marlboro, Virginia Slims,
Benson & Hedges, Merit,
Parliament, Alpine,
Cambridge
49.9%
R.J. Reynolds
Camel, Doral, Winston,
Salem, Vantage, More,
Monarch
22.9%
BAT/Brown &
Williams
GPC, Kool, Viceroy, Raleigh,
Barclay, Lucky Strike
10%
Lorrillard
Newport, Kent, True, Old
Gold, Max, Style, Crowns
8.2%
Liggett & Myers
L&M, Lark, Chesterfield, Eve
2.3%
Company
Basketball
Superstar
Market Share
Nike
Michael Jordon
(Now)LeBron James
60%
Adidas
Tracy McGrady
20%
Reebok
Allen Iverson
15%
What resources does it take for a business
to produce a good and service?

Factors of Production
• Land – geographic territory, air, trees, minerals
and crude oil
• Labor – Human efforts
• Capital – money, equipment, tools
• Entrepreneurship – ideas and decisions of
business owner

Scarcity occurs when demand exceeds
supply
Supply and Demand



Demand – quantity of goods and
services that consumers are willing
and able to buy.
Supply – goods and services that
producers are willing and able to
provide.
Equilibrium is the point at which
consumers buy all of a product that
is supplied.
Theory of Supply and Demand



Heavy demand + Short Supply =
price increase.
Heavy supply + Short Demand =
Price decrease.
Prices tend to stabilize at the level
where demand equals supply
• Equilibrium point
Supply/Demand

Elastic demand – a change in price
creates a change in demand
• Butter

Inelastic demand – a change in
price has little effect on demand for
product.
• Milk
ECONOMIC INDICATORS

Employment rate

Consumer confidence

GDP ( Gross Domestic Product) –
• the total market value of goods and
services produced by workers and
capital within a country during a given
period.
Business Cycle


Economy is growing rapidly =
inflation
Economy is slowing down =
deflation.
Start-Up Process – 5 Key
Components


Entrepreneur – driving force of start up
process.
Environment
• Enterprise Zone – specially designated areas of
a community that provide tax benefits to new
businesses locating there.



Opportunity
Start-Up Resources
New Venture Organizations
New Business Failure


A business failure is a business that
has stopped operating with a loss to
creditors.
Discontinuance is when a business is
operating under a new name
Supply Curve
Original Supply
Decrease in supply
Shift to the left
Price
Increase in supply
Shift to the right
Quantity
Demand Curve
Original Demand
Price
Decrease in demand
Shift to the left
Increase in demand
Shift to the right
Quantity
How to read a graph!
Apple Juice Market
Original Demand
Original Supply
10.00
9.00
8.00
New E.P.
7.00
6.00
Price
Original E. P.
5.00
4.00
3.00
2.00
1.00
1
2
3
4
Quantity
5
6
7