Ch. 3 Market Economy
- 1. Chapter 3 –Market Economy Business Ownership Spring 2007 Williams C. Greene, (2000). Entrepreneurship Ideas in Action. Cincinnati, OH: South-Western.
- 2. Lesson 3.1 What is an Economy? Different countries have different economic systems; different systems affect how an item is produced, how it is distributed, and the demand for the item. (pg. 50)
- 3. Scarcity Scarcity occurs when people’s needs and wants are unlimited and the resources to produce the goods and services to meet those needs and wants are limited. (pg. 50)
- 4. Command Economy In a command economy , the government determines what, how, and for whom products and services are produced. Because the government makes these decisions there is little choice for consumers. (pg. 50)
- 5. Market Economy In a market economy, individuals decide what, how, and for whom to produce goods and services. Individual choice creates the market, so there are many items available that are very similar. (pg. 51)
- 6. Which one is the U.S. So, what kind of an economy are we in living in the United States? Command Economy or Market Economy
- 7. Supply and Demand If a market economy is based on personal choice, why does there always seem to be just enough of everything? This is due to Supply and Demand (pg. 52)
- 8. Supply Supply is how much of a good or service a producer is willing to produce at different prices. Suppliers are willing to supply more of a product or service at a higher price (pg. 52)
- 9. Demand Demand is an individual’s need or desire for a product or service at a given price. Individuals are willing to consume more of a product or service at a lower price (pg. 52)
- 10. Equilibrium Price and Quantity The point at which the supply and demand curves meet is what is known as the equilibrium price and quantity . (pg. 53) Equilibrium Price
- 11. Monopoly When a company controls all of a market, it has a monopoly .
- 12. Lesson 3.2 The Concept of Cost Entrepreneurs need to know how much it costs to produce their goods or services to determine their profits. To do that they must consider all the resources that go into producing the good or service to determine the selling price.
- 13. Fixed Costs vs. Variable Costs Fixed Costs are costs that must be paid regardless of how much of a good or service is produced. Fixed costs are also called (Sunk Costs) Example: Rent Variable Costs are costs that go up and down depending on the quantity of the good or service produced. Example: Buying more apple pies at Mc D’s as more customers demand them (pg. 55)
- 14. Marginal Benefits vs. Marginal Costs Marginal benefit measures the advantages of producing one additional unit of a good or service. Marginal Cost measures the disadvantages of producing one additional unit of a good or service. (pg. 56)
- 15. Opportunity Cost Opportunity cost is the cost of choosing one opportunity or investment over another. Example: You want to start your own business but you have been offered a job that pays $60,000 with extra benefits. (pg. 57)