Advanced Business Chapter 2: Entrepreneurs in Market Economy
Maslow's Heirarchy of needs
1. physiological needs 2. safety needs 3. love/belonging 4. esteem needs 5. self-actualization
Capital Investment and Job Creation
Business need money to start, create jobs, spur economy
Mixed Economy
Combines elements of command economies and market economies
What to Produce?
Depends on resources available to determine priorities.
Management
Develop, implement, evaluate plans
Traditional Economy
Goods and services produced the traditional way country not yet participating in global economy meet basic needs limited individual wealth, lack of advanced technology
How to Produce?
How to use resources to produce
Law of Diminishing Returns
If one factor of production is increased, others stay the same, the resulting increase(output/product) will level off and decline after some time : must increase multiple factors together.
Factors of Production
Land, labor, and capital; or Natural, Human, Capital the three groups of resources that are used to make all goods and services
US Economy
Market Economy - capitalism: private ownership of resources by individuals, not government. private property freedom of choice profit competition
Monopoly
Only 1 business selling product Consumes have no choice Business cannot easily enter ex: water or electricity company
Economic Decision Making
Process of Choosing which needs and wants will be satisfied
Command Economy
Resources owned and controlled by government Limited Personal choices Prone to corruption
Market Economy
Resources owned, controlled by the people (individuals and businesses) entrepreneurship thrives limited government involvement
3 Economic Questions each country must ask
What to Produce? How to Produce? Whose needs and wants to satisfy? What, How, for Who?
Equilibrium Price
Where supply and demand curve meet, where they equal
Services:
activities provided for the satisfaction of others that are consumed at the SAME TIME as they are PRODUCED. ex: haircut, manicure, lawn moing.
Wants
add to quality and pleasure in life. economic: Material goods/services non economic: exercise, fresh air, happiness
Marketing
attract many customers to boost product in market
Economic Wants
basic of economy: housing, clothing, cars, hair styling medical care.
Supply and Demand
businesses meet demands of consumers, provide supply
self actualization
come with sense of accomplishment, realization of potential.
Economies of Scale
cost ADVANTAGES OBTAINED DUE TO EXPANSION cost of production decreases as more units are produced - increased efficiency with increased production
Variable Costs:
costs go up and down depending on good or service produced expense of buying sugar, changes due to amt bought.
Fixed Costs
costs must be paid regardless of how much product is produced : SUNK Costs MONTHLY RENT SAME More fixed costs that must be paid regardless of sales= higher risks
Production
creates or obtains products for sale (Manufacturers)
Lots of supply: price _______
decreases (cuupplys)
Finance
determine amt of capital needed for business and how obtained
What Needs and Wants to Satisfy?
determine which needs and wants are most important and for whom to satisfy?
Profit
difference between revenues earned and costs of operating
Marginal Costs
disadvantages of producing one additional product or service
Needs are
essential, required to live ex: food clothing shelter
Physiological needs
food, sleep water, shelter air, basic needs
Private Property
free to own anything you want and what do do with it
Social
friends, love, belonging
Trade Off
give up something to have another
Natural disasters impact resources: price _______-
increases (natural)
Lack of Supply (scarcity): Price __________
increases (suppl)
Human Resources
labor, factory workers, manage business
All economic Resources have a _____________ supply
limited same resources used for multiple production competition exists for use or ownership of these resources
Freedom Of choice
make decisions independently
Perfect Competition
market with huge amt of similar business with similar products with MANY BUYERS consumer have more control of market business can easily enter ex: gasoline, agriculture
Monopolistic Competition
market with large amt of business selling diff but similar product "competitive market" business can easily enter all retail stores, food chains, restuarants
Oligopoly
market with small amt of business selling similar products, have majority of sales business CANNOT easily enter ex: airplanes, automobile
Marginal Benefit
measures advantages of producing one additional unit of a product
Capital Resources
money, land, buildings, tools and equipment.
Non Economic Wants
non material things: sunshine, fresh air,exercise, friendship, happiness
Scarcity
people NEEDS and WANTS are UNLIMITED, AND RESOURCES to produce PRODUCTS to meet needs and want are LIMITED
Change Agents
people/ products that change how we live Apple, Microsoft.
Market Structure
perfect competition, monopolistic competition, oligopoly, monopoly
Security
physical safety, economic security
Inelastic demand
price changes, demand does NOT change (minimal change) product is basic need straight line
Competition with similar products:____________ decreases
price decreases (compt)
Functions of Business
production marketing management finance all are dependent on one another
Demand
quantity of good or service a consumer is willing to buy likely to consume more products at lower prices.
Supply
quantity of good or service a producer is willing to produce likely that more supply at higher prices,
esteem
respect and recognition
competition
rivalry among business to sell goods forces business to improve products, keep costs low, provide good customer service,
Economic Resources
the means through which goods and services are produced.
Goods
things you can see and touch tangible
Needs and Wants are
unlimited
Opportunity Costs
value of the next best alternative, that you pass up
Natural Resources
water, land trees, animals, minerals
Demand Elasticity
when demand of product is affected by price curved line
