chapter 5

• is the capacity and willingness to develop, organize, and manage a business venture along with any of its risk in order to make a profit

  entrepreneurship
• it tries to identify the needs of the marketplace and to meet those needs by supplying a service or product

  entrepreneurship
• is the dynamic process of creating incremental wealth

  entrepreneurship
• they assumes risk

  entrepreneur
• are people who work for someone else

  employee
• are people who create something for the first time

  inventor
• is a free thinker, a problem solver, able to reduce complex problems to simple ones, with a very high level of self confidence, willing to take risks, and has the ability to tolerate ambiguity and uncertainty

  inventor
• does not likely to view monetary benefits as a measure of success

  inventor
• the use of savings ot become future income

  investment
• types of Entrepreneurial business

  manufacturing

  wholesaling

  retailing

  service
• are popular small retail outlets that can be found in almost all neighborhoods

  sari-sari store
• advantages of entrepreneurship


  entrepreneurs are their own bosses

  entrepreneurs can choose a business that interests them

  entrepreneurs can be creative

  entrepreneurs can make lots of money
• disadvantages of entrepreneurship

  entrepreneurship is risky

  entrepreneurs face uncertain and irregular incomes

  entrepreneurs work long hours

  entrepreneurs must make all decisions by themselves
• it is the process of pursuing a new venture

  Entrepreneurial process
• Entrepreneurial process

  1. identification and evaluation of the opportunity
  2. development of the business plan
  3. determination of the required resources
  4. management of the resulting enterprise
• refers to the study of whatever is right and good for human

  ethics
• are items that are necessary to produce other goods and services

  capital goods
• what are the direct investments

  business investments

  real estate
• refers to accounting assets that are purchased in the hope of making money on their own, as opposed to something like a delivery car for a restaurant

  business investment
• involves the purchase, ownership, management, rental and/or sale of a real estate for profit

  real estate
• what are the indirect investments

  saving account

  bonds

  stocks
• is an interest-bearing deposit account held at a bank or other financial institution

  saving account
• is a loan an investor makes to a corporation, government, federal agency, or other organization in exchange for interest payments over a specified term

  bonds
• you become one of the owners of a corporation. it represents ownership shares, also known as equity shares

  stocks
• types of stocks

  commom stock

  preferred stocks
• is security that represents ownership in a corporation

  common stock
• are the profits earned from the sale of stocks, real estate, or other income producing property

  capital gain
• is a type of corporate security that has features of both bonds and common stock

  preferred stocks
• what are the other kinds of indirect investments

  mutual funds

  life insurance
• reduces the overall risk of loss to investorsbecause losses incurred by one firmmaybe offset by profit earned by another.

  diversification
• is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities

  mutual funds
• company sell insurance policies that also act as a saving account, to provide financial protection for family members in terms of death

  life insurance
• it may be particularly useful in an emergencyinvolving an unplanned expense.

  cash value
• is an entity that facilitates the buying and selling or marketable securities like stocks and exchange traded funds

  broker
• the starts of buying and selling stocks electronically through computer

  late 1990's and early 2000's
• also called as electronic trading. it is some you can do in seconds but before you do that, be clear about why you are buying or selling and the extent of risk on your investments

  online investing
• is a payment of a factor of production in excess of its opportunity cost.

  rent
• what are the four types of rent

  inframarginal rent

  pure economic rent

  quasi rent

  monopoly rent
• "Infra” means below or under. “Marginal” means at the margin or the end or last. It is quasi rent earned by a perfectly competitive firm in the short run.


  inframarginal rent
• Payment made to monopolists that are more than the minimum that the firm would accept

  monopoly rent