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Chapter 02

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Section 2.1 Importance of  Entrepreneurship in the Economy Section 2.2 Thinking Globally, Acting Locally OBJETI!ES       "escribe an economic system I#entify #i$erent economic systems E%amine supply an# #eman# relationships E%plore the role of competition in a market economy "escribe the pro&t moti'e Learn about nonpro&t organi(ations    Economics is all about the )o* of goo#s an# ser'ices bet*een people+ hen there are not enough goo#s an# ser'ices to meet the #eman#, the result is a scarcity of those goo#s an# ser'ices+ An economic system -or economy. is a metho# use# by a society to allocate goo#s an# ser'ices among its people an# to cope *ith scarcity+    In a command economy , the go'ernment o*ns or manages the nation/s resources an# businesses+ In a market economy , suppliers pro#uce *hate'er goo#s an# ser'ices they *ish an# set prices base# on *hat consumers are *illing to pay+ Another name for the market economy is the free enterprise system + A supply curve on a graph sho*s the 0uantity of a pro#uct or ser'ice a supplier is *illing to sell across a range of prices o'er a speci&e# perio# of time+ A demand curve on a graph sho*s the 0uantity of a pro#uct or ser'ice consumers are *illing to buy across a range of prices o'er a speci&e# perio# of time+   If a supplier  lo*ers the price of a pro#uct or ser'ice, consumers typically buy from that supplier rather than from others+ In a market economy, there is not only competition bet*een suppliers but also competition bet*een consumers+ hen consumers compete against each other to buy a pro#uct, they push prices up*ar#+ 1ro&t is a business/s re*ar# for successfully pro'i#ing goo#s an# ser'ices that satisfy consumers/ #eman#s+   The prot motive  is an incenti'e that encourages entrepreneurs to take business risks in the hope of making a pro&t+  Entrepreneurs *ho consistently make a pro&t o'er time can buil# their o*n *ealth an# ensure &nancial in#epen#ence+  2any entrepreneurs use pro&t to bene&t their e%isting businesses, start ne* ones, or in'est in the enterprises of others+  A unit of sale has a selling price to the consumer an# an e%pense for the entrepreneur+ The economics of one unit is the #i$erence bet*een the selling price an# its e%pense+ Another *ay to look at pro&t is as a percentage of the selling price+ This calculation tells an entrepreneur the pro&t percentage base# on sales+ The formula per unit of sale is3 An entrepreneur buys plain backpacks an# #ecorates them at home *ith han#4#ra*n art, stitching, buttons, an# stickers before reselling them at the )ea market for 567 each+ Because each backpack is #i$erent, the entrepreneur uses an a'erage backpack as the unit of sale+ A nonprot orani!ation  operates solely to ser'e the goo# of society+ 8onpro&ts are not go'ernmental organi(ations+ They operate much like for4pro&t businesses+ 2oney comes into the nonpro&t from #onations, go'ernment grants, or the sale of goo#s an# ser'ices to consumers+  8onpro&t companies also ha'e e%penses+ If the money coming in is greater than the money going out, a nonpro&t company *ill ha'e a surplus -pro&t.+  Any pro&t a nonpro&t earns must, by la*, be use# to support the organi(ation/s social mission+ It cannot be use# for the &nancial gain of the people running the nonpro&t+ OBJETI!ES    "e&ne the global economy I#entify factors that a$ect entrepreneurs in international tra#e "escribe relationships bet*een the global economy an# the local economy    "#portin is the business acti'ity in *hich goo#s or ser'ices are sent from a country an# sol# to foreign consumers+ $mportin is the business acti'ity in *hich goo#s an# ser'ices are brought into a country from foreign suppliers+ 2o#ern technology connects suppliers an# consumers aroun# the *orl#+ The Internet, in particular, has ma#e international tra#e easier, faster, an# more con'enient than e'er before+ A trade %arrier is a go'ernmental restriction on international tra#e+   The forein e#c&ane rate  is the 'alue of one currency unit in relation to another+  'air trade  policies ensure that small pro#ucers in #e'eloping nations earn su9cient pro&t on their e%porte# goo#s to impro'e their *orking, en'ironmental, an# social con#itions+  Entrepreneurs can bene&t their local economies by3        1urchasing materials an# supplies from local merchants Opening an account at a local bank, cre#it union, or other &nancial institution  Joining a local business association, tra#e group, or ci'ic organi(ation that supports local economic #e'elopment 1aying local ta%es that bene&t schools an# other public ser'ices In'esting money in local businesses "onating money, time, or goo#s to local charities an# organi(ations :iring local employees Supplying goo#s an# ser'ices to local consumers