Chapter 1 Flashcards
Business
an organization that strives for a profit by providing goods & services desired by its customers
Goods
Tangible Items
Services
Intangible items that cannot be held, touched, or stores
Standard of Living
the output of goods & services that people can buy
Quality of Life
general level of human happiness based on life expectancy, educational standards, health, sanitation, & leisure time
Risk
potential to lose time & money or not be able to accomplish an organization’s goals
Revenue
money received by providing services or selling goods
Profit
money left over after covering costs
Loss
when costs are higher than revenue
Factors of Production
natural resources, labor (human resources), capital, and entrepreneurship, Knowledge
Natural Resources
commodities that are useful inputs in their natural state
Labor (human resources)
economic contributions of people working with their mind & muscle
Capital
tools, machinery, equipment, & buildings used to produce goods & services and get them to consumers
Entrepreneur
people who combine the inputs of natural resources, labor, and capital to produce goods & services with the intention of making a profit or accomplishing a not-for-profit goal
Knowledge
combined talents and skills of the workforce; primary driver of economic goal
External Business Environment
sectors that create a unique set of challenges and opportunities for business; ex: technological, economic, global, political/legal, demographic, social, & competitive
Demographic
the study of people’s vital statistics: age, gender, race & ethnicity, & location
Economic Systems
combination of policies, laws, & choices made by its government establishing systems that determines what services and goods are produced and where they are allocated
Economics
the study of how a society uses scarce resources to produce & distribute goods and services
Macroeconomics
the study of the economy as a whole
Microeconomics
focuses on individual parts of the economy - household/firms
Macroeconomic goals
- economic growth
- full employment
- price stability
Economic Growth
an increase in a nation’s output of goods and services
Gross Domestic Product (GDP)
the total market value of all final goods & services produced within a nation’s borders each year
Business Cycles
upwards and downward changes
Recession
a decline in GDP that lasts for 2 consecutive quarters (3 months)
Full Employment
having jobs for people who want to and can work
Unemployment Rate
indicates the % of the total labor force not working but is actively looking for work
Frictional Unemployment
short term unemployment that is not related to the business cycle
Structural Unemployment
unrelated to the business cycle but is involuntary
Cyclical Unemployment
occurs when a downturn in the business cycle reduces the demand for labor throughout the economy
Seasonal Unemployment
occurs during specific times of the year in certain industries
Inflation
the average of all prices of foods & services is rising
Purchasing Power
the value of what money can buy; function of inflation & income
Demand-Pull Inflation
when the demand for goods & services is greater than the supply
Cost-Push Inflation
increases in production costs, which then push up the prices of final goods & services
Consumer Price Index (CPI)
an index of the prices of a “market basket” of goods & services purchased by typical urban consumers
Producer Price Index (PPI)
measures the price paid by producers and wholesalers for various commodities
Monetary Policy
a government’s programs for controlling the amount of money circulating in the economy & interest rates
Federal Reserve Systems (Feds)
central banking system, prints money & controls how much of it will be in circulation
Federal Funds Rate
the interest rate charged on overnight loans between banks
Contractionary Policy
the Fed restricts, or tightens, the money supply by selling government securities or raising interest rates; used to reduce inflation
Expansionary Policy
the Fed increases, or loosens, growth in the money supply; increases inflation
Fiscal Policy
taxation and spending
Federal Budget Deficit
when the government spends more than it collects in taxes
Federal Budget Surplus
revenue exceeds spending
National Debt
accumulated total of past deficits
Demand
the quantity of a good/service that people are willing to buy at various prices
Demand Curve
a graph showing the relationship between price & demand; slopes downward and to the right
Supply
the quantity of a good/service that businesses will make available at various prices
Supply Curve
relationship between various prices and the quantities a business will supply; slopes upwards and to the right
Market Structures
Pure Monopoly, Oligopoly, Monopolistic Competition, Perfect Competition
Barriers to Entry
factors that prevent a new firm from competing equally with existing firms
Collusion (illegal)
firms coordinating their pricing and output decisions
Antitrust Cases
legal challenges arising out of laws designed to control anti-competitive behavior
Relationship Management
involves building, maintaining, & enhancing interactions with customers and other parties to develop long-term satisfaction through mutually beneficial partnerships
Supply Chain Management
building strong bonds with suppliers
Relationship Marketing
building strong bonds with customers
