Lesson 2: Economic Concepts for Entrepreneurs

In this lesson students will be introduced to economic concepts that are important to entrepreneurs using mini games/activities. 

Economics

Thinking like an economist and using economic reasoning propositions is important to entrepreneurs. Entrepreneurs must make decisions all the time regarding their time, money, and business operations. Therefore, it’s important that entrepreneurs can use economic concepts to think like an economist and utilize tools such as cost-benefit analysis to make choices and understand how incentives can affect the decisions people make. 

Objectives:

After completing this lesson students will be able to:

• define and identify economic concepts. 
• apply the economic way of thinking to entrepreneurship decision-making. 

Standards and Benchmarks

Standard 2: Decision Making

Effective decision making requires comparing the additional costs of alternatives with the additional benefits. Many choices involve doing a little more or a little less of something: few choices are “all or nothing” decisions.

• Benchmark Grade 12
  1. To produce the profit-maximizing level of output and hire the optimal number of workers, and other resources, producers must compare the marginal benefits and marginal costs of producing a little more with the marginal benefits and marginal costs of producing a little less.
  2. To determine the optimal level of a public policy program, voters and government officials must compare the marginal benefits and marginal costs of providing a little more or a little less of the program’s services. 

Standard 4: Incentives

People usually respond predictably to positive and negative incentives.  

• Benchmark Grade 8
  1. Responses to incentives are usually predictable because people normally pursue their self-interest or deviate from their self-interest in consistent ways.
  2. Changes in incentives usually cause people to change their behavior in predictable ways. 
  3. Incentives can be monetary or non-monetary, or both.

Standard 14: Entrepreneurship 

Entrepreneurs take on the calculated risk of starting new businesses, either by embarking on new ventures similar to existing ones or by introducing new innovations. Entrepreneurial innovation is an important source of economic growth. 

• Benchmark Grade 12 

1. Entrepreneurial decisions affect job opportunities. 

• Benchmark Grade 8
  1. Entrepreneurs compare the expected benefits of entering a new enterprise with the expected costs.

1.  In addition to profits, entrepreneurs respond to other incentives, including the opportunity to be their own boss, the chance to achieve recognition, and the satisfaction of creating new products or improving existing ones. In addition to financial losses, other disincentives to which entrepreneurs respond include the responsibility, long hours, and stress of running a business.

Concepts

Cost-Benefit analysis, Decision-Making, Entrepreneurship, Incentives, Opportunity Costs, Scarcity, 

Time Required

60 minutes