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Entrepreneurship 1.1 - Basic Economic Concepts

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by Stewart Hudnall on 17 January 2013

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Transcript of Entrepreneurship 1.1 - Basic Economic Concepts

Unit 1.1:
Understanding basic economic concepts related to business ownership Entrepreneurship Entrepreneurship: The process of getting into and operating one’s own business Profit: Money left after all the expenses of a business have been deducted from the income

Making a profit is a primary incentive of the free enterprise system. It is one way of measuring success in a free enterprise system. Profit Motive The more money that can be charged for each item . . . the more units the supplier is willing to produce. Supply: The amount of a good or service that producers are willing to produce Effects of Supply on Businesses As the price continues to rise . . . the less units the consumer is willing to buy. Demand: The amount or quantity of goods or services that consumers are willing and able to buy Effects of Demand on Businesses Scarcity: When wants are greater than resources Effects of Scarcity on Businesses Equilibrium Equilibrium: Point at which consumers buy all of a product that is supplied, leaving neither a surplus nor a shortage Concept of Equilibrium What is Equilibrium ? Provide jobs
Turn demand into supply
Principal source of venture capital
Change society
Fill unmet needs
Contribute to the overall good of the nation
Make life more pleasant to consumers
Technological change
Increased productivity Contributions by Small Business Owners and Entrepreneurs Competition: Businesses striving for the same customer or market

 Competition between similar businesses is a key element in a market economy. It forces companies to become more efficient. It also keeps prices down and quality up.

 Not all markets are competitive The Role of Competition and How It Affects Price Microsoft’s Bill Gates
In 1998, the US Dept of Justice filed an anti-trust lawsuit against Microsoft.
See Wikipedia for more information. Monopoly: When a company controls all of a market. There is no competition.

 A company that has a monopoly is able to charge more than a company that has to compete with other companies.

 Consumers have nowhere else to go. They will continue to buy a product or service, even if the producer raises prices. How “Market Structure” Affects Price
(i.e., monopolies) The government has an effect on what is produced by:

Purchases: Government purchases huge amounts of goods and services

Taxes: Government taxes certain goods and services
Sales tax on retail
Extra charge on cigarettes, gasoline, and alcoholic beverages

Subsidies: Payment to producers of certain kinds of goods
Agricultural products, businesses that locate their businesses in certain inner-city neighborhoods Government’s Role in Business  Inspection:

USDA-inspects meat and poultry plants to ensure appropriate hygienic measures are being observed

OSHA-inspects factories to ensure that conditions are safe for workers

Licenses: Government regulates by requiring some businesses to obtain licenses (i.e.Barber and Beauticians, Real Estate, and more…)

To obtain a license, professionals must pass examinations and pay licensing fees before they can start their business Government Programs and Laws
to Protect Consumers
Occupational Safety & Health Act (OSHA)
Ensuring safe and healthy working conditions for employees

Price Discrimination (Clayton Act of 1914 & Robinson-Patman Act of 1936)
When a business cannot sell the same product to different people at different prices

Food and Drug Administration (FDA)
Monitoring product safety Laws Enacted by the Government
to Protect the Consumer (cont’d.)
Equal Employment Opportunity Commission (EEOC)
Charged with protecting the rights of employees age, race, color or national origin, religion, gender or physical challenge

Equal Pay Act of 1963
All employers must pay men and women the same wage for the same work

Fair Labor Standards Act of 1938
Minimum wage and maximum working hours are identified. Children under 16 years of age could not be employed full-time except by their parents. Laws Enacted by the Government
to Protect the Consumer
Occupational Safety & Health Act (OSHA)
Ensuring safe and healthy working conditions for employees

Price Discrimination (Clayton Act of 1914 & Robinson-Patman Act of 1936)
When a business cannot sell the same product to different people at different prices

Food and Drug Administration (FDA)
Monitoring product safety Laws Enacted by the Government
to Protect the Consumer (cont’d.)
Consumer Product Safety Commission (CPSC)
Watchdog for consumers over products that may be hazardous

Fair Packaging and Labeling Act
Requires that manufacturers labels truthfully list all raw materials used in the production of products

Uniform Commercial Code (UCC)
Groups of laws that covers everything from sales to bank deposits and investment securities. This applies to sales transactions between merchants. More Laws Enacted by the Government
to Protect the Consumer The government has created laws to protect the entrepreneurs’ ideas and intellectual property

Patent: A legal document that gives an inventor the sole right to produce, use, and sell an invention. A patent lasts for 20 years. During this period, no business or individual can copy or sue the patented invention without the patent holder’s permission.

Copyright: Protects original works of an author. (e.g., music, books, computer software.) A copyright lasts for 70 years after the death of the author.

Trademark: Word, symbol, design, or combination of these that a business uses to identify itself or something it sells. Protect Your Invention/Business What protection do you have for your
Invention or Business? Define entrepreneurship
Explain the profit motive
Describe the effects of supply, demand and scarcity on businesses
Graph a supply and demand curve
Describe concept of equilibrium
Describe the impact of small business/entrepreneur’s contributions
Explain the role of competition and how does “market structure” (i.e., monopolies) affects price
Describe government’s role in business Let’s Review Profits - Good or Bad? WHY? WHAT IS ? r What is Entrepreneurship?
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