Ch 6 + 8 Flashcards
The monetary value of a product
Price
System of allocating goods and services without prices
Rationing
A simplified version of a complex behavior expressed in the form of an equation, graph, or illustration.
Economic model
Price where quantity supplied equals quantity demanded
Equilibrium Price
Situation where quantity supplied is greater than quantity demanded at a given price
Surplus
Situation where quantity supplied is less than quantity demanded at a given price
Shortage
The highest legal price that can be charged for a product.
Price ceiling
The lowest legal price that can be paid for a product.
Price Floor
A requirement that an owner is personally and fully responsible for all losses and debts of a business; applies to proprietorships and general partnerships.
Unlimited Liability
An unincorporated business owned and operated by two or more people who share the profits and have unlimited liability for the debts and obligations of the firm.
Partnership
A form of business organization recognized by law as a separate legal entity with all the rights ad responsibilities of an individual, including the right to buy and sell property, enter into legal contracts, and sue and be sued.
Corporation
Certificate of ownership in a corporation; can be either common or preffered stock.
Stock
Check paid to stockholders, usually quarterly, representing a portion of corporate profits
Dividend
Formal contract to repay borrowed money and interest on the borrowed money at regular future intervals.
Bond
Payment made for the use of borrowed money, usually paid at periodic intervals for long-term bonds or loans.
Interest
Requirement in which a corporation, but not its owner, is responsible for all losses and debts of the bussinesses.
Limited Liability
Business investment that involves renting or leasing another successful business model
Franchise
Measure of business profits determined by subtracting all expenses, including taxes from revenues
Net Income
Total amount of new funds the business generates from operations; broadest measure of profits for a firm because it includes both net income and non cash charges
Cash Flow
Combination of firms producing the same kind of products
Horizontal merger
Combination of firms involved in different steps of manufacturing, marketing, or sales.
Vertical merger
Firm with four or more business making unrelated products, with no single business responsible for the majority of its sales.
Conglomerate
Provider of investment funds to a start-up business in exchange for partial ownership of the business.
Venture Captalist
Using social networking to appeal to potential investors
Crowdfunding
Economic institute that operates like a business but does not seek financial gain; school, churches, and community-service organizations.
Nonprofit Organization
Nonprofit service cooperative that accepts deposits, make loans, and provides other financial services.
Credit Union
Process of negotiation between union and management representatives over pay, benefits, and job-related matters.
Collective Bargaining
Nonprofit organization of local businesses whose purpose is to promote their interests.
Chamber of Commerce
Advantages of prices? (4)
Neutrality
Flexibility
Familarity
Efficiency
What are the 2 goals of Price Ceiling?
To protect buyers from paying overly high prices.
To save resources for other needs, such as war.
What are the 2 goals of Price Floors?
To protect businesses during times of difficulty.
To stabilize prices and incomes from certain businesses.
How do prices help allocate resources between markets?
By signaling to producers and consumers what goods and services are in high demand and what resources are scarce. Prices adjust accordingly, and resources are allocated to where they are most valued.
How do Markets Talk?
Gold Prices Rise
Stock Prices fall
Oil Prices Rise
How do surplus and shortage help establish Equilibrium?
By allowing businesses to observe and determine how much they should adjust the prices of their goods
Advantages of Corporations?
Ease of raising financial capital
Provides limited liability
Unlimited life
Ease of transferring ownership
Disadvantages of Corporations?
Double taxation of corporate profits
Difficulty and expense of getting a charter (getting legally established)
Owners have little voice in how the business is run
Subject to more government regulation than other forms of business
Advantages of partnerships?
Ease of Start up
Ease of management
Lack of separate taxes on a partnership’s income
Can easily attract financial capital more easily than proprietorship
More efficient operation due to their slightly larger size
Disadvantages of Partnerships?
Each partner is fully responsible for the acts of all other partners.
In limited partnership, each partner is responsible for the debts of the business, but only to his or her investment in the firm.
Limited life.
Potential for conflict between partners.
Advantages of Proprietorship?
Easy to start up.
Ease of management.
Owners keep all profits.
Not required to pay separate business income taxes.
Psychological satisfaction of being your own boss.
Easy to get out of business
Disadvantages of Proprietorships?
Unlimited liability.
Difficulty of raising financial capital.
Small size
Limited managerial experience.
Difficulty of attracting qualified employees.
Limited life.
The three types of Cooperatives?
Consumer
Service
Producer
A non-profit service cooperative that accepts deposits, makes loans, and provides other other services.
Credit Union
Large and have a global presence and a diversified portfolio of products and services.
Multinational Corporation as Conglomerates
What are the reasons for a merge?
Faster Growth
Synergy - greater affect from combination
Economies of scale - more profitable
Diversification
Elimination of rivals
Change or loss of Corporate identity
Relation between dividend and stockholders
Dividend is what a company pays its stockholders
One person owns and runs the business
Sole Proprietorship
A business owned by two or more people
Partnership
A business legally recognized as a separate entity.
Corporation
