Entrepreneurship

There are many products and services that we cannot do without. These are called primary needs (sometimes we just call them ‘basic needs’). Think, for example, of food, shelter and health care.There are also many products and services that we would like to have. These are called secondary needs (or wants).

In class, discuss and list your primary and secondary needs. Use the images below to give you ideas of products and services

                                              

As an entrepreneur you play an important role in your community. You therefore need to understand how your community and the world function. To do this you need to know about economics, the study of how people choose to use resources. To do this, economics studies how people choose to use resources.

Land, raw materials, buildings and equipment are resources. Another resource is the time that we spend working. The skills and knowledge that we use to create useful products and services are also resources. Entrepreneurs use ideas to start new businesses, so ideas are also a resource.

                   

We use resources to meet our needs.

• A basic or primary need is anything that we need to live. This includes food, water, clothes, shelter and health care.

• A secondary need is anything that we would like to have. These needs can be luxury items such as designer clothes.

They can also be important things like an education.

                                              

1. Discuss your primary and secondary needs with a partner.

2. Discuss how our needs change as we grow older.

3. Explain how the secondary needs of you and your friend differ.

4. Explain how your parents’ or grandparents’ secondary needs differ from yours.

5. How do you think that the secondary needs of a teenager in Holland, Fiji or Greenland differ from yours?

                                    

The basic economic problem To explain how we use resources in a community or in the world, economists use an idea called ‘the basic economic problem’.

The basic economic problem says that people have unlimited needs, but that we have limited resources. Think for example of some of the things that you would like to buy. You do not have money for everything and will need to choose. In a country, there is usually not enough land, machinery, time and so on for everything that we need or want. The result is that we need to make choices. We need to choose among things.

For example, which crops to grow, how much money to spend on clothes, how much time to spend studying and so on. The way we live are a result of our choices.Economists use models to explain things.

A model is a simplified version of a real situation.

The basic economic problem is a model.

We explain the basic economics problem by using specific terms and concepts. The idea of scarcity The basic economic problem is that we have limited resources for unlimited needs. This is called scarcity.To be scarce means to lack or be insufficient. Because things are scarce, we need to make choices.Here are some examples of choices that we need to make when using scarce resources.

1. Identify and list the needs of your family, community and country.

2. How do you think that your family, community and country should prioritise these needs?

3. Rank the needs from most important to least important. Explain your choices.

The choices we make have a cost. We call this opportunity cost.

• When a farmer chooses to plant cassava in a field, he cannot plant maize in the same field. The maize is an opportunity cost.

• When a learner chooses to spend her evening studying, she cannot go to a party at the same time. The party is an opportunity cost.

• When the learner spends his money on a pizza, he cannot buy the cold drink. The cold drink is an opportunity cost.

In economics we say that when we need to make a choice between options, then an opportunity cost is the value of the next best option. It is the relationship between scarcity and choice.

Think about how you prioritise needs in your family, community and country.What are the opportunity costs of the following:

1. Your family investing in your education?

2. Your community building a new school?3. The government investing in a new highway?

Every day we use many goods and services. Goods are products that we can see and touch. These include books, pens, shoes, hats, furniture and many other items. Services are provided by other people such as doctors, barbers, bus drivers, teachers and tour guides. We cannot touch a service, so we say that a service is intangible.

Work in pairs and make a list of goods and services that you use. Compare your list with that of your partner.

The way that we use goods and services depends on our primary and secondary needs. We first fill our primary needs and, if we can, we fill our secondary needs. Consumption is the use of goods and services to satisfy customer needs.

Imagine that your class are the citizens of this small green island called Ishuri. Here, you can produce all the products and services that you need.

Every month each class member earns a hundred Ishuri francs. Your challenge is to choose how to spend your money so that you fulfil all your daily needs.

1. Set up your imaginary island in your classroom.

a) Select the products and services that you will produce.

b)Design and print Ishuri francs and distribute a hundred francs to each class member.

c) Hold an imaginary market day where each learner buys products and services.

2. Evaluate how you and your classmates chose to spend your money.

a) Did you meet all your daily needs?

b)What were the opportunity costs?

Our future depends on how we use our resources.For example, we use trees for building and firewood. Every time we fell a tree, we need to plant a new tree (rational use). In this way we make sure that we will always have building materials and firewood.

Sustainability means using natural resources so that they are not damaged or permanently depleted. It means maintaining our resources forever.

If you want to know if a resource is being used sustainably, ask yourself the question: ‘Can I do this forever?’

When we use a resource, we need to act responsibly so that many generations to come can still use the resource.Our actions today have an effect on the future. What would happen, for example, if we did not plant new trees when we felled trees for firewood? This is called irrational consumption (use) of our resources.

1. Discuss and explain how the listed problems are caused by irrational consumption of goods and services.

• pollution

• overfishing

• destruction of rainforest habitat for Rwanda’s wildlife

Rwanda is often called the ‘Land of a Thousand Hills’. In the rural areas, farmers grow crops and keep livestock to support their families and to sell for export. At Lake Kivu, fishermen earn their living by catching fish.We need to protect and pass down our scarce resources to the next generation of Rwandans.

Read the case study ‘Cooperatives can increase food production on your own and answer the questions that follow.

Rwanda has one of the highest population densities in Africa. Namibia in southern Africa has one of the lowest population densities. In an area where there is one person living in Namibia, there are more than a hundred people living in the same size area in Rwanda.

A high population density means that many people share the land. We are already farming all available arable land, so how can we manage this scarce resource so that there is enough for all Rwandans?One way that Rwandan farmers can make the most out of their land is to work in cooperatives.

A cooperative is an organization that is owned by its members. The members share all profits.Many cooperatives train farmers in better farming methods that can improve production, for example, how to store rainwater, avoid erosion and manage pests. It is also easier to sell products for export in large quantities.

Questions

1. Land is a scarce resource in Rwanda. Working in a cooperative is a way to manage this resource sustainably.

a) List three other scarce resources.

b)Suggest ways to manage these scarce resources.

2. Some communities feel that converting land from national parks to farm land will help create more jobs in Rwanda.

a) Explain why a national park is a resource for Rwanda.

b)Do you feel that conserving land for national parks is important?

Explain your answer.

c)Propose another option to the community for creating more jobs.

3. Present your findings to the class as a poster, or an oral.

There are different types of goods. We can divide goods into economic goods and free goods.

An economic good is a good or service that we need and want to buy. There are limited amounts of economic goods, so they all have a degree of scarcity. An economic good therefore also has an opportunity cost.

A free good is a good that does not cost anything. There is as much as we need of a free good, so it has no scarcity or opportunity costs.There are only a few free goods. One example is air. It does not matter how much air you breathe, the person next to you still has enough air for him- or herself. Sometimes people share ideas freely. These ideas are also free goods.

In the past, water was a free good. Today, it is only a free good if you live near a river with clean water where you can use as much as you like without depleting the river. Many people today pay to use water, so it is no longer a free good.Since they don’t cost anything and there is enough for everyone, we cannot trade free goods.

Some goods can be used instead of other goods. We say that they are substitutes. We also use goods that cannot be used on their own but only together with another good. These are called complementary goods.

Substitute goods are two goods that can be used for the same purpose. We can therefore choose to buy the one or the other good. When you are hungry you can substitute a banana with a sweet potato. You can also substitute rice with ubugari, but you cannot substitute milk with beer or a shirt with a pair of pants.

Complementary goods are products that go together. If you buy one of the products, then you also need the other. For example, we buy fish with rice and we buy a pair of shoes with shoelaces. If we buy a flashlight we also need batteries. Computer hardware and software, DVD players and DVDs are also examples of complementary goods.

We can classify goods as durable or perishable goods.

Durable goods are goods that last for a long time. We therefore do not buy durable goods often. Examples of durable goods include metal cooking pots, hand tools, cars, refrigerators, furniture, electronic equipment and jewellery.

Make a list of durable goods that are found in your home. Compare your list with your partner’s list.

Perishable goods do not last for a long time. Examples are food that can spoil, decay or become unsafe to eat. Food products include vegetables, meat, poultry, fish, milk and other dairy products.

One way to make perishable goods last longer is to preserve them.

Read the case study ‘The importance of processing food’.In class, discuss the questions.

We have many different ways to preserve food today. In the past, people preserved many food products, such as fish, by salting them. Salt was therefore an important good. In Rwanda, food is dried to preserve it. We dry maize, beans and sorghum.The Roman Empire built trade routes to transport salt and many wars were fought over salt.Historians believe that the word ‘salary' comes from a Roman term that refers to the money paid to soldiers so that they could buy salt.

Questions

1. Do you think that salt was a primary or secondary need in the past? Explain your answer.

2. List three perishable goods. How can you preserve these goods?

3. People started wars because of salt. Which goods do countries fight over today?

Biodegradable and non-biodegradable goods

Some goods are biodegradable. This means that they can decompose (decay or rot).

All fresh food products are biodegradable. Vegetables, for example, rot and break down.Many other products break down slowly.

If it takes a very long time for a product to decay, we say that it is non-biodegradable.The table shows how long it takes products to biodegrade.

As an entrepreneur we need to sell products and services. We also need to be responsible citizens that care for our environment.You can help to stop non-biodegradable products from filling up landfills by practising the three Rs of waste management: Reduce, reuse and recycle.

• Reduce – only buy the things that you need. Use durable items rather than disposable items.

• Reuse – find new uses for items, for example, a glass jar can be used to store other items.

• Recycle – tin, glass and many other products can be converted back into usable material. Tin cans, for example, are melted and shaped into new sheets of tin.

1. Identify and list biodegradable and non-biodegradable products that are used in your family, school and community.

2. Create a poster where you show how to manage the waste from non-biodegradable products.

Factors influencing consumption of goods and services

There are many factors that influence how we consume goods and services.

The price of a good or service influences how many we buy and how often we buy.Consumers want to buy goods and services as cheaply as possible. Sellers want to make as much money as possible so they want to charge as much as possible.When the price of a product increases, consumers have a few choices. They either buy less of the product and/or they look for substitute goods. If they cannot buy less or find a cheaper alternative, then consumers save money on other products.For example, let’s say that the price of cassava increases. Consumers will look for alternatives to cassava. They may buy more rice or other staples. Since cassava is a primary need, consumers must buy the product (or an alternative). They will therefore have less money to buy other products that fill secondary needs.

How much money we earn also influences which products or services we buy. People who have a low income may only have enough money to satisfy their primary needs. People that earn a higher income can satisfy their primary needs and then choose to spend the remaining money on their secondary needs.

Tastes and preferences change all the time.

A culture is the characteristics of a particular society. Our culture is defined by our language, religion, food, music and art.The goods and services that we consume therefore also depend on our culture. Think, for example, of the music that you listen to. Do you think that a person living in New Zealand listens to the same artists? How about the food that you eat? Would a person living in Russia eat similar dishes?

In class, discuss and list the goods and services that are influenced by our culture.

We are all part of a family. Each family lives in a community that in turn is part of a country. Our social structure also determines how we consume goods and services. For example, people who are wealthy buy more luxury products. Teenagers buy more fashion wear and parents buy school books and other items for their children.

     

Your style of clothing, hairstyle and accessories are determined by the current fashion. Fashion often spreads around the world. Today, many people in Rwanda wear similar fashions to people in London or Paris. Most cultures also have their own fashions, for example, popular music by local artists. A successful entrepreneur will always try to produce and sell products that are in fashion.

                                           

The way we feel about the future influences how we buy products and services. When we feel good about the future of our community or country, we often spend more money. For example, if a new shopping centre is being built in Kigali, entrepreneurs who open shops there are usually confident about finding customers.When we are concerned about the future, then we save our money and wait for better times.

Explain which factors changed the consumption of goods and services in the examples below:

1. Giramata is an entrepreneur. She opened a beauty salon and has developed a new style of braids. Luckily, one of her customers was an actress that starred in a popular Rwandan movie.

Giramata had to hire new braiders to keep up with the growing demand for braiding.

2. Keza works for Cards for Africa. She creates hand-made Christmas cards. During the month of November, Keza had to work extra hours to keep up with the demand for her cards.

3. Yves works for a company that imports cell phones. Since the government improved the communication network, Yves’ orders for cell phones have increased.

Section A

In 2004, college learner Mark Zuckerberg saw that learners wanted to network with others and invented the online networking service, Facebook.Users create a profile and add other users as ‘friends’. They can then exchange messages and post updates and photos.Facebook is popular. By 2012, there were one billion users.It is free to use Facebook. The company earns money from advertising.

1. Is Mark Zuckerberg an entrepreneur? Explain your answer. (2)

2. A good entrepreneur is innovative and creative. Does this apply to Mark Zuckerberg? Explain your answer. (2)

3. Facebook’s users have access to the Internet via cell phones or computers. Is online networking a primary or secondary need? Explain your answer. (4)

4. Facebook’s competition includes Instagram and SnapChat. Are these substitute goods? Explain your answer. (2)

5. To start Facebook, Mark Zuckerberg had to find and allocate business resources.

a) List three types of resources used to start a business. (3)

b) Which skills and knowledge did Mark Zuckerberg’s employees need? (3)

6. Users on Facebook post personal pictures and images. Explain why it is important for Facebook to uphold moral and ethical values. (4)

                                                                                                                         [20]

Section B

As an entrepreneur you will need to hire employees from your community. Your workforce may be made up of individuals from different ethnic groups. Some of your employees may have disabilities. Because your business is small, everyone must work together closely and learn to get along with others.

1. Explain what is meant by diversity. (5)

2. Why is diversity in business today more important than it was a hundred years ago? Explain your answer. (5)

3. Every employee brings a different skill to his or her job. Discuss why this is important for your business. (5)

4. Give a suggestion for how you can teach young Rwandans to respect personal choices and diversity. (5)

                                                                                                                            [20]

Section C

Personal development is important for every entrepreneur.Identify skills that you need to develop, and design a personal development plan. (10)

                                                                                                                            [10]

                                                                                                            Total marks: 50