ch 1-2 Flashcards
wants vs needs
wants - things u desire but dont need to survive
needs - things u need
private wants - things that individual ppl or groups of ppl want
public wants - wants that are widely shared with many
goods and services
businesses satisfy our wants and needs by providing
goods - physical products
and
services - tasks that businesses perform for customers
resources
items that people can use to make or obtain what they want (money, fuel, labor)
people can have unlimited wants but few have enough resources to satisfy them.
businesses also lack resources to do all the things they want to do
how to make the best out of limited resources
determine what ur needs are and satisfy them first
the decision making process
- identify the situation
- identify possible courses of action
- think of pros and cons
- make decision
- evaluate decision
personal vs business decision making
personal
- The longer a decision will affect your life, the more you need to evaluate your options and consider the possible consequences.
Business Decision Making
- Competition among businesses is intense. For this reason, businesses must decide how to best use and conserve their resources. Businesses must make thoughtful decisions that are consistent with their goals. Business managers constantly make decisions. Most companies allow managers to make routine decisions independently. Higher-level business managers usually make more important decisions that affect the future of their companies.
business
any commercial activity that seeks profit by providing goods and services
profit
the money left over after a business has paid the cost of providing goods and services
without profit a business cannot survive. it is the reward for satisfying the needs and wants of consumers and businesses.
The wealth created benefits the community bc businesses pay taxes and provide jobs.
competition
the contest between businesses to win customers.
it drives businesses to make good quality products, provide quality service, and offer the lowest prices
businesses must:
identify opportunities for products or services
evaluate the demand for products or services
obtain start-up money and operating capital
manage the production of goods and/or services
market the goods and/or services
keep records to satisfy government requirements and improve processes
market research
some business activities are supported by market research:
the act of gathering and analyzing information abt the wants needs and preferences of customers in a certain market
helps them
dentify opportunities
analyze demand
respond to consumer demand for goods and services.
how businesses affect consumers and vice versa
consumer ( person who uses goods or services
businesses impact consumers:
Businesses decide what goods and services to produce to meet the needs and wants of consumers. Businesses also affect consumers when they modify or discontinue products. The decision to stop manufacturing products is often because there is a decreasing demand for them. Businesses affect you as a wage earner. In order to make goods and provide services, businesses hire people to work.
consumers affect businesses:
Consumers decide what kinds of goods and services they want and where they will buy them. You reward companies by making the decision to purchase their products. When consumers choose not to purchase a business’s products or services, the business usually fails. To avoid failure, a business can modify its products, services, and business practices to satisfy consumers.
scarcity
a lack of resources
principle of scarcity - there are limited resources for satisfying unlimited wants and needs
When dealing with scarcity, it is important to think of the best way to use the item that is in short supply.
4 factors of production
factors of production : all the economic resources necessary to produce a society’s goods and services
natural resources - raw materials from nature that can be processed in different ways
labor resources
capital resources
entrepreneurial resources
natural resources
raw materials from nature that can be processed in different ways.
the economy of many countries depends on their natural resources
nonrenewable (limited - coal, oil, iron) and renewable (can be reproduced - wheat, cattle)
labor resources
the people who make the goods and services for which they are paid
labor can be : skilled or unskilled, physical or intellectual
capital resources or capital goods
not the same as capital/money
things used to produce goods and services like buildings, materials, equipment
entrepreneurial resources
they meet societies changing wants and needs
used by the ppl who recognize opportunities and start businesses
entrepreneurship - the process of recognizing a business opportunity, testing it in the market, and gathering the necessary resources
entrepreneur - individual who undertakes the creation, organization, and ownership of a business
entrepreneurial vs labor
Entrepreneurial resources are individuals who start and direct businesses to produce goods and services to satisfy needs or wants.
Labor resources are people who produce the goods or services.
economics + 3 basic questions
the study of how individuals and groups of individuals strive to satisfy their needs and wants by making choices
Societies make economic decisions about how to meet ppls needs w 3 economic questions :
- what should be produced? (deciding to use a resource for one purpose means giving up the opportunity to use it for something else - opportunity cost)
- how should it be produced? (methods of labor, quality? In a country w + workers but - capital resources, - equipment and + amounts of labor are used in producing goods.
- who should share in what is produced? (in most societies ppl can have as many goods and services as they can afford to buy. the amt of income people get determines how many goods and services they can have)
economic systems
the methods societies use to distribute resources. diff systems answer the 3 basic questions in different ways.
2 basic types : command and market (there is also a mix)
market economies
aka private enterprise system, the free enterprise system, or capitalism.
system in which economic decisions are made in the marketplace (place where buyers and sellers meet to exchange goods and services)
resources are privately owned. Citizens can own their own homes, land, and businesses. Business owners decide how their businesses will be run, what to produce and sell, and how much to charge.
Consumers choose their occupations and decide where to live, where to shop, and what to buy.People who have labor skills that are in demand earn higher incomes than those who do not.
government works to promote free trade and prevent unfair trade practices. There is an uneven distribution of income. individuals are responsible for being informed and making careful decisions.
relationship between price supply and demand
The price for an item is determined through the interactions of supply and demand.
Price - amount of money given/asked for when goods and services are bought/sold.
Supply - amount of goods + services that producers will provide at various prices.
Demand - amount or quantity of goods and services that consumers are willing to buy at various prices.
Producers want a price for their goods and services that will cover their costs and result in a profit.
The higher the price, the less consumers will buy. The lower the price, the more consumers will buy.
equilibrium price - point at which the quantity demanded and the quantity supplied meet.
competition and profit
In a market economy, competition is observed.
Competition between similar businesses is one of the basic characteristics of a free enterprise system, helping businesses to produce better products at lower prices to get customers.
Entrepreneurs take risks to make profits.
Profit motive is the desire to make a profit, and profit is the reward for taking a risk and starting a business.
