entrepreneurship

in a free enterprise system, people have the right to make these 3 economic choices

1. choose what products to buy 2. choose to own private property 3. choose to start a business and compete with other businesses

5 key components of entrepreneurial start-up process

1. entrepreneur 2. environment 3. opportunity 4. start-up resources 5. new venture organization

in free enterprise system, there is also risk of failure. what are 3 types of risks?

1. market risk (lack of demand, changing customer needs) 2. product risk (loss of customer interest, warranty problems) 3. financial risk (lack of funding, rising costs)

4 categories of environmental variables that affect a new venture's ability to start and grow

1. nature of the environment (whether it's uncertain, fast-changing, stable, highly competitive) 2. availability of resources (skilled labor, start up capital) 3. ways to realize value (favorable taxes, good markets, supportive governmental policies) 4. incentives to create new businesses

demand tends to be inelastic in these 3 circumstances

1. no substitute available and customer needs the product 2. the price change is small relative to buyer income, so if the customer wants it, they buy it 3. the product is a necessity and the customer needs it

why is competition good for consumers?

1. provides choices 2. companies have to provide higher quality 3. lower prices due to surplus

some things the federal reserve does to control the economy

1. tells banks the % of money they can lend 2. controls interest rates 3. buys and sells government securities to increase or decrease the money supply

how do entrepreneurs contribute to the economy

1. turn demand into supply 2. create a market for venture capital 3. provide jobs 4. change society (ex. invention of Apple)

all economic systems attempt to answer what four fundamental questions

1. what goods and services should be produced 2. what quantity of goods and services should be produced 3. how should goods and services be produced 4. for whom should goods and services be produced

An idea that has commercial potential

Opportunity

2 examples of who has mixed economies

US & European Union

what is required to be a successful entrepreneur

an understanding of how the economy works

according to the principle of scarcity, resources...

are in limited supply. therefore, to have one thing, you may have to give up something else

the periodic random pattern of expansion and contraction that the economy goes through (sometimes the economy grows & sometimes it slows down)

business cycle

business that had stopped operating with a loss to creditors

business failure

what is free enterprise also called

capitalism or market economy

economic system run by strong centralized government (tend to focus on industrial goods rather than consumer goods)

command

what is one of the most basic characteristics of free enterprise systems

competition

quantity of goods or services that consumers are willing and able to buy

demand

the degree to which demand for a product is affected by its price

demand elasticity

when the gdp declines by more than 10%, its called what

depression

law that says price alone does not determine demand. other factors such as income, taste, amount of product already owned play a role as well

diminishing marginal utility

business that was purposely discontinued by an owner who wanted to start a new one. the business may operate under a new name

discontinuance

closing was planned with no loss to creditors

discontinuance

the federal government publishes statistics to help entrepreneurs understand the state of the economy and predict possible changes. the statistics are called

economic indicators

the study of how people choose to allocate scarce resources to fulfill their unlimited wants

economics

demand that refers to situations in which a change in price creates a change in demand

elastic demand

2 types of demand a product will have

elastic demand or inelastic demand

examples of economic indicators

employment rate, consumer confidence, gross domestic product

what do computers, cell phones, and other kinds of information technology do

enable people to communicate instantly, collaborate from a distance, and keep records more efficiently

specifically designed areas of a community that provide tax benefits to new businesses locating there and grants for new product development

enterprise zones

an individual who undertakes the creation, organization, and ownership of an innovative business with potential for growth

entrepreneur

the process of recognizing or creating opportunity, testing it in the market, and gathering the resources necessary to fo into business

entrepreneurship

what is the primary catalyst for economic growth

entrepreneurship

the point at which consumers buy all of a product that is supplied

equilibrium

resources businesses use to produce the goods and services people want

factors of production

government agency that controls the economy and regulates the nation money supply

federal reserve

people have an important right to make economic choices in what kind of system

free enterprise system

tangible or physical products

goods

the total market values of goods and services produced by a nation during a given period

gross domestic product

_____ + ______ = opportunity

idea + market = opportunity

basic tenets of supply and demand theory

if something is in heavy demand but short supply, prices rise- reduces demand and expands supply If something is plentiful but demand is lacking, prices decrease. the low price expands demand and contract supply when demand = supply, prices stabilize

start-up resources include what

include the capital, skilled labor, management expertise, legal and financial advice, facility, equipment, and customers needed to start a business

what does the Fed do in a recession

increase the supply of money by lowering interest rates to encourage people to borrow money and spend more

demand that refers to situations in which a change in price has very little effect on demand for products

inelastic demand

the unhealthy jump in prices that slows consumers and business spending

inflation

what may occur if the economy grows too rapidly

inflation

factors of production include

land, labor, capital, entrepreneurship

entrepreneurship- 80's to present

large companies were suffering. new, smaller companies responded to changing market. outsourcing of jobs. 80's known as Decade of Entrepreneurship. 90's- internet change md the way businesses operate

an economic system includes a set of

laws, institutions, and activities that guide economic decision making

this refers to the nature and degree of competition among businesses operating in the same industry

market structure

combine principles of market and command economies

mixed economy

a market structure in which a particular modity has only one seller who has control over supply and can exert nearly total control over prices

monoply

market structure in which many sellers produce similar but differentiated products

monopolistic competition

basic requirement for survival

need

the fifth component of the entrepreneurial start-up process is the execution of the new business concept through

new venture organization

market structure in which there are just a few competing firms

oligopoly

market structure in which there are numerous buyers and sellers and many products that are very similar so they can be substitutes for consumers (there is no difference in quality of the product)

perfect competition

4 types of market structures

perfect competition, monopolistic competition, oligopoly, monopoly

businesses compete on the basis of

price (only difference is the price) nonprice (factors such as quality, service & reputation)

money that is kept after all expenses of running a business have been deducted from the income

profit

one way of measuring success in a free enterprise system

profit

economic system based on supply and demand with little government control

pure market

if an economy contracts, or slows, too severely, it's called what

recession

when demand exceeds supply

scarcity

intangible or non-physical products

services

what is the difference between small businesses and entrepreneurial ventures

small businesses open to create jobs for themselves and create a satisfying lifestyle. entrepreneurial ventures are to innovate and grow the venture and expand

entrepreneurship- early years to 80's

small businesses supplied basic needs. industrial revolution brought growth of large companies in steel, railroads, and manufacturing. 60's- huge companies were common with no international competition. 70's- huge changes, high inflation slowed borrowing and spending, competition from countries with lower labor costs, introduction of computer brought the world into the Information Age.

do most new businesses succeed or fail?

succeed 66% survive the first two years 40% survive the first six years

the amount of a good or service that producers are willing to provide

supply

at the point of equilibrium, there is neither...

surplus nor shortage

what has made it possible for entrepreneurs to do business from anywhere and reach customers in cost effective and efficient ways anywhere in the world

technologies

what is the driving force in the entrepreneurial start-up process and why

the entrepreneur because the recognizes opportunity and pulls together resources to create a company

what constantly evaluates economic conditions

the federal reserve

economic system that relies on farming and simple barter trade

traditional

3 types of economic systems

traditional, command, market

what does a new business environment include

variables that affect the venture but are not controlled by the entrepreneur

new business undertaking that involves risk

venture

something that you do not have to have for survival but would like to have

want