Chapter 1 Flashcards
Key vocabulary and concepts from Chapter 1 of Introduction to Business in OpenStax
business
an organization that strives for a profit by providing goods and services desired by its customers
goods
tangible items manufactured by businesses, such as laptops
services
intangible offerings of businesses that can’t be held, touched, or stored, such as a haircut
standard of living
a measure of the output of goods and services people can buy with the money they have
quality of life
general level of human happiness based on such things as life expectancy, educational standards, health, sanitation, and leisure time
risk
the potential to lose time and money or otherwise not be able to accomplish an organization’s goals
revenue
the money a company receives by providing services or selling goods to customers
costs
expenses such as rent, salaries, supplies, and transportation that the company incurs from creating and selling goods and services
profit
the money that is left over when you subtract costs from revenue (when negative, it is a loss)
not-for-profit organization
an organization, such as a charity, that exists to achieve some goal other than the usual business goal of profit
natural resources
one of the four factors of production that includes farmland, forests, mineral and oil deposits, and water
labor
one of the four factors of production that consists of the economic contributions of the human resources working with their minds and muscles
capital
one of the four factors of production that includes the tools, machinery, equipment, and buildings used to produce goods and services
entrepreneurs
one of the four factors of production that consists of the people who combine the inputs of natural resources, labor, and capital to produce goods and services
knowledge
the new, fifth factor of production that refers to the combined talents and skills of the workforce
demography
the study of people’s vital statistics, such as their age, gender, race, ethnicity, and location
productivity
the amount of goods and services one worker can produce
economics
the study of how a society uses scarce resources to produce and distribute goods and services
capitalism
an economic system based on competition in the marketplace and private ownership of the factors of production (resources)
communism
an economic system in which the government owns virtually all resources and controls all markets
socialism
an economic system in which the basic industries are owned by the government or by the private sector under strong government control
mixed economies
societies that use more than one economic system (e.g. blending together socialism and capitalism)
macroeconomics
the study of the economy as a whole
microeconomics
the study of individual parts of the economy, such as households or companies
gross domestic product (GDP)
the total market value of all final goods and services produced within a nation’s borders each year; represents the most basic measure of economic growth
recession
a decline in GDP that lasts for two consecutive quarters
inflation
when the average of all prices of goods and services is rising
purchasing power
the value of what money can buy, which is reduced by inflation
demand-pull inflation
when the demand for goods and services is greater than the supply
cost-push inflation
when increases in production costs (such as expenses for materials and wages) causes an increase in prices of final goods and services
consumer price index (CPI)
an index of the prices of a “market basket” of goods and services purchased by typical urban consumers
producer price index (PPI)
measures the prices paid by producers and wholesalers for various commodities
monetary policy
a government’s programs for controlling the amount of money circulating in the economy and interest rates
Federal Reserve System
also known as “the Fed”; the central banking system of the United States that prints money and controls how much of it will be in circulation
contractionary policy
a type of monetary policy in which the Fed restricts the money supply by selling government securities or raising interest rates
expansionary policy
a type of monetary policy in which the Fed increases growth in the money supply and lowers interest rates
fiscal policy
a government’s programs for taxation and spending
federal budget deficit
when the government spends more for programs, such as social services, education, and defense, than it collects in taxes
demand
the quantity of a good or service that people are willing to buy at various prices; slopes downward because higher price means lower quantity demanded
supply
the quantity of a good or service that business will make available at various prices; slopes upward because higher price means higher quantity supplied
equilibrium
the point at which there is balance between the quantity consumers will buy and the quantity suppliers make available
barriers to entry
factors that prevent new firms from competing equally with the existing firm
perfect competition
a market structure in which there are a large number of small firms in the market that sell similar products; price is determined by supply and demand; there are no barriers to entry
pure monopoly
a market structure in which a single firm accounts for all industry sales of a particular good or service; the firm controls the price; there are often very high barriers to entry
monopolistic competition
a market structure in which there are many firms in the market that have similar, but differentiated products; price differences result from product differences
oligopoly
a few firms produce most or all of a good or service; barriers to entry are many
