Chapter 2

Entrepreneurs in a Market
Economy
2.1 Entrepreneurs Satisfy Needs and
Wants
2.2 How Economic Decisions are Made
2.3 What Affects Price?

Entrepreneurship: Ideas in Action 6e

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 Lesson 2.2
How Economic Decisions are Made
Learning Objectives
2.2-1 Compare and contrast different types of
economic systems.
2.2-2 Describe the characteristics of the U.S.
economy.
2.2-3 Explain how scarcity affects economic
decisions.
2.2-4 Explain how business functions are used to
satisfy consumers.

Chapter 2 Entrepreneurship: Ideas in Action 6e

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 Economic Systems

 Command Economy
 Market Economy
 Traditional Economy
 Mixed Economy

Chapter 2 Entrepreneurship: Ideas in Action 6e

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 The U.S. Economic System

 Capitalism
 The private ownership of resources by
individuals rather than by the government
 Private Property
 Freedom of Choice

Chapter 2 Entrepreneurship: Ideas in Action 6e

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 The U.S. Economic System (continued)

 Profit
 The difference between the revenues earned by a
business and the costs of operating the business
 Competition

Chapter 2 Entrepreneurship: Ideas in Action 6e

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 Economic Choices

 Economic decision making

 The process of choosing which needs and
wants, among several, you will satisfy
using the resources you have
 Scarcity
 When people’s needs and wants are
unlimited but the resources to meet those
needs and wants are limited

Chapter 2 Entrepreneurship: Ideas in Action 6e

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 Economic Choices (continued)

 Opportunity cost
 The value of the next-best alternative: the one you pass up

Chapter 2 Entrepreneurship: Ideas in Action 6e

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 Functions of Business

 Production
 Marketing
 Product
 Distribution
 Price
 Promotion
 Management
 Finance
Chapter 2 Entrepreneurship: Ideas in Action 6e
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 Questions for 2.2

1. Entrepreneurship thrives in a market economy. T/F

2. The traditional economy is used in developed countries. F/T
3. A mixed economy often results when a country shifts away from a command economy toward a market economy. T/F
4. The US economic system is best described as a traditional economy. F/T
5. The rivalry amount businesses to sell their goods and services is called competition T/F
6. Two factors that commonly enter into economic decision making are scarcity and opportunity cost. T/F
7. The value of the next-best economic alternative is the trade-off cost. F/T
8. The functions of business operate independently of each other. F/T
9. The primary reason a business exists in a market economy is to earn a profit. ?

Chapter 2 Entrepreneurship: Ideas in Action 6e

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