Chapter 02

Section 2.1 Importance of Entrepreneurship in the Economy Section 2.2 Thinking Globally, Acting Locally Steve Mariotti © 2010 Pearson Higher Education. Upper Saddle River. • All Rights Reserved. NJ 07458. 11th ed. 2 .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 Entrepreneurship: Owning Your Future.  NJ 07458.   Economics is all about the flow of goods and services between people. When there are not enough goods and services to meet the demand. 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. 11th ed. • All Rights Reserved. the result is a scarcity of those goods and services. 3 . Steve Mariotti © 2010 Pearson Higher Education. Upper Saddle River. Entrepreneurship: Owning Your Future.  11th ed. Upper Saddle River. • All Rights Reserved. 4 . Steve Mariotti © 2010 Pearson Higher Education.Entrepreneurship: Owning Your Future. NJ 07458. Upper Saddle River. NJ 07458. 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. In a market economy. the government owns or manages the nation’s resources and businesses. 5 . • All Rights Reserved.   In a command economy. 11th ed. Entrepreneurship: Owning Your Future. Steve Mariotti © 2010 Pearson Higher Education. Upper Saddle River. 6 . Steve Mariotti © 2010 Pearson Higher Education. 11th ed. Entrepreneurship: Owning Your Future.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. • All Rights Reserved. NJ 07458. Upper Saddle River. NJ 07458. 7 . Entrepreneurship: Owning Your Future.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. 11th ed. • All Rights Reserved. Steve Mariotti © 2010 Pearson Higher Education. Entrepreneurship: Owning Your Future. 11th ed. NJ 07458. Upper Saddle River. Steve Mariotti © 2010 Pearson Higher Education. 8 . • All Rights Reserved.  • All Rights Reserved. Upper Saddle River. consumers typically buy from that supplier rather than from others. 9 . there is not only competition between suppliers but also competition between consumers. NJ 07458. When consumers compete against each other to buy a product. they push prices upward.  If a supplier lowers the price of a product or service. In a market economy. Steve Mariotti © 2010 Pearson Higher Education. Entrepreneurship: Owning Your Future. 11th ed. Many entrepreneurs use profit to benefit their existing businesses. Steve Mariotti © 2010 Pearson Higher Education. or invest in the enterprises of others. 10 . Entrepreneurship: Owning Your Future. start new ones. Upper Saddle River. • All Rights Reserved. 11th ed. NJ 07458. 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.    Profit is a business’s reward for successfully providing goods and services that satisfy consumers’ demands.  11th ed. • All Rights Reserved. NJ 07458. 11 . The economics of one unit is the difference between the selling price and its expense. Upper Saddle River. Entrepreneurship: Owning Your Future.A unit of sale has a selling price to the consumer and an expense for the entrepreneur. Steve Mariotti © 2010 Pearson Higher Education. 12 . 11th ed. The formula per unit of sale is: Entrepreneurship: Owning Your Future.Another way to look at profit is as a percentage of the selling price. NJ 07458. This calculation tells an entrepreneur the profit percentage based on sales. Upper Saddle River. • All Rights Reserved. Steve Mariotti © 2010 Pearson Higher Education. Steve Mariotti © 2010 Pearson Higher Education. Because each backpack is different. • All Rights Reserved. the entrepreneur uses an average backpack as the unit of sale. stitching.An entrepreneur buys plain backpacks and decorates them at home with hand-drawn art. and stickers before reselling them at the flea market for $25 each. Upper Saddle River. 13 . 11th ed. Entrepreneurship: Owning Your Future. NJ 07458. buttons. be used to support the organization’s social mission. by law. government grants. Money comes into the nonprofit from donations. They operate much like for-profit businesses.  Any profit a nonprofit earns must. If the money coming in is greater than the money going out. Steve Mariotti © 2010 Pearson Higher Education.A nonprofit organization operates solely to serve the good of society. Nonprofit companies also have expenses.  Entrepreneurship: Owning Your Future. Nonprofits are not governmental organizations. NJ 07458. It cannot be used for the financial gain of the people running the nonprofit. 11th ed. or the sale of goods and services to consumers. • All Rights Reserved. Upper Saddle River. 14 . a nonprofit company will have a surplus (profit). 15 . • All Rights Reserved. NJ 07458.OBJECTIVES    Define the global economy Identify factors that affect entrepreneurs in international trade Describe relationships between the global economy and the local economy Entrepreneurship: Owning Your Future. Upper Saddle River. 11th ed. Steve Mariotti © 2010 Pearson Higher Education. The Internet. Upper Saddle River. in particular. has made international trade easier.   Exporting is the business activity in which goods or services are sent from a country and sold to foreign consumers. Steve Mariotti © 2010 Pearson Higher Education. 16 . Modern technology connects suppliers and consumers around the world. 11th ed. and more convenient than ever before. • All Rights Reserved. Importing is the business activity in which goods and services are brought into a country from foreign suppliers. faster. NJ 07458. Entrepreneurship: Owning Your Future. Steve Mariotti © 2010 Pearson Higher Education. and social conditions. The foreign exchange rate is the value of one currency unit in relation to another. NJ 07458. Upper Saddle River. 17 . environmental. Entrepreneurship: Owning Your Future.   A trade barrier is a governmental restriction on international trade. • All Rights Reserved. 11th ed. Fair trade policies ensure that small producers in developing nations earn sufficient profit on their exported goods to improve their working. Upper Saddle River. • All Rights Reserved. or civic organization that supports local economic development Paying local taxes that benefit schools and other public services Investing money in local businesses Donating money. 18 . credit union.Entrepreneurs can benefit their local economies by:        Purchasing materials and supplies from local merchants Opening an account at a local bank. NJ 07458. 11th ed. time. or goods to local charities and organizations Hiring local employees Supplying goods and services to local consumers Entrepreneurship: Owning Your Future. or other financial institution Joining a local business association. trade group. Steve Mariotti © 2010 Pearson Higher Education.