Ch. 1 Flashcards
Business
an organization that strives for a profit by providing goods and services desired by its customers.
Goods
are tangible items manufactured by businesses, such as laptops.
services
are intangible offerings of businesses that can’t be held, touched, or stored. Physicians, lawyers, hairstylists are examples of those who provide services.
standard of living
of any country is measured by the output of goods and services people can buy with the money they have.
revenue
the amount of money a company brings in
Revenues - costs = profit
non-profit organization
is an organization that exists to achieve some goal other than the usual business goal of profit.
Factors of production
Natural resources
Labor (human resources)
Capital
Entrepreneurship
Knowledge
Business environmental influences (PESTLE)
Politcal & legal
demographic
social
technology
global
competitive
Political & legal influences
the amount of government activity, types of laws, & political stability.
demographic influences
vital statistics, such as their age, gender, race and ethnicity, and location.
social influences
attitudes, values, ethics, and lifestyles - influence
technology influences
application of science and engineering skills and knowledge to solve production and organizational problems.
global influences
social issues that affect those in other countries, their cultural norms, consumer trends and economic status.
competitve influences
What are competitors doing?
economic system
The combination of policies, laws, and choices, and by its government to establish the systems that determine what goods and services are produced and how they are allocated.
economics
the study of how a society uses scarce resources to produce and distribute goods and services.
Capitalism
Businesses are privately owned
freedom of trade
strong incentives to work hard to earn profit
companies are managed by private owners
ex: US
Communism
government owns all or most enterprises
complete government control of markets
no incentive to work hard or produce quality products
centralized management by the government bureaucracy. little or no flexibility in decision-making at the factory level.
no growth and perhaps disappearance
Ex: cuba, north korea
Socialism
basic industris such as railroads are owned by government
some markets are controlled and some are free.
private-sector incesntives are the same as capitalism
significanat government planning and regulation
stable with probable slight growth
Ex: Finland, India
Mixed Economy
private owenership of land and businesses, but government control some enterprises
some markets such as nuclear energy are regulated by the government
private sector incentives are the same as capitalism
Capitalism
the private enterprise system, is based on competition in the marketplace and private ownership of the factors of production (resources).
4 capitalist rights
Right to own property
Right to make a profit
Right to make free choices
Right to compete
Macroeconomics
the study of the economy as a whole. It looks at aggregate data for large groups of people, companies, or products considered as a whole.
microeconomics
focuses on individual parts of the economy, such as households or firms.
economic growth
an increase in a nation’s output of goods and services. The more the nation produces, the higher its standard of living.
GDP
Gross domestic product. The total market value of all final goods and services produced within a nation’s borders each year. When GDP rises, the economy is growing.
growth
an increase in a nation’s output of goods and services. The more the nation produces, the higher its standard of living.
Macroeconomic goals
Economic growth
Full employment
Price stability
Business cycles
the upward and downward changes of economic activity
Recession
A decline in GDP that lasts for two consecutive quarters
Economic unemployment rate
the rate indicates the percentage of the total labor force that is not working but is actively looking for work.
5 types of unemployment
frictional
structural
cyclical
seasonal
Frictional Unemployment
short-term unemployment that is not related to the business cycle
- People who are unemployed while waiting to start a better job
- Those who are reentering the job market
- Those entering for the first time, such as new college graduates
Structural unemployment
caused by a mismatch between available jobs and the skills of available workers in an industry or a region
- Unrelated to business cycle but is not involuntary.
Cyclical unemployment
occurs when a downturn in the business cycle reduces the demand for labor throughout the economy
- In large recession, cyclical unemployment is widespread, and even people with good job skills can’t find jobs
Seasonal unemployment
occurs during specific times of the year in certain industries
purchasing power
the value of what money can buy. It’s affected by:
Inflation
income
Inflation types
Demand - pull
cost - push
Demand inflation
occurs when the demand for goods and services is greater than the supply
- Buyers have more money available than the amount needed to buy
- Demand, which exceeds the supply, tends to pull prices up
Cost inflation
Is triggered by increases in production costs, such as expenses for materials and wages
- Theses increases push up the prices of final goods and services
- Wage increases are a major cause
monetary policy
refers to a government’s programs for controlling the amount of money circulation in the economy and interest rates
- Changes in the money supply affect both the level of economic activity and rate inflation
federal reserve system
the banking system of the United States, prints money and controls how much of it will be in circulation
- The increase or decrease of money in circulation affects inflation
- The Fed can use monetary policy to contract or expand the economy.
contractionary policy
increase interest rate, increase unemployment, increase inflation, decrease spending
- The result is slows economy
expansionary policy
decrease interest rate, decrease unemployment, decrease inflation, increase spending
- The result is growing economy
fiscal period
the government’s program of taxation and spending taxes are the major source of revenue for our government
demand
the quantity of a good or service that people are willing to buy at various prices
- The higher the price the lower the quantity demanded
- On a graph the demand curve slopes a graph of this relationship is called a demand curve
supply
the quantity of a good or service that businesses are willing to make available at various prices.
- The higher the price the higher the price, the greater the number a supplier will produce
- On a graph the supply curve slopes
equilibrium point
where the supply and demand curves intersect
relationship management
building, maintaining, and enhancing interactions with customers and other parties to develop long-term satisfaction through mutually beneficial partnerships
strategic alliances
cooperative agreements between business firms
