Chapter 1 Flashcards
business
organization that provides goods or services to earn profit
profits
difference between a business’ revenues and its expenses; lure of profits leads some people to abandon the security of working for someone else and assumes the risks of entrepreneurship
dimensions of the external environment
economic, technological, socio-cultural, domestic business, global business, political-legal
external environment
everything outside an organization’s boundaries that might affect it
economic system
a nation’s system for allocating its resources among citizens, both individuals and organizations
factors of production
resources that a country’s businesses use to produce goods and services (e.g. labor, capital, entrepreneurs, physical resources, information resources)
planned economy
economy that relies on a centralized government to control all or most factors of productions and to make all or most production and allocation decisions; communism, socialism
market economy
individual producers and consumers control production and allocation by creating combinations of supply and demand
mixed market economy
has characteristics of both market and planned economies
privatization
process of converting government enterprises into privately owned companies
demand
willingness and ability of buyers to purchase a product
supply
willingness and ability of producers to offer a good service for sale
private enterprise system
allows individuals to pursue their own interests with minimal government restrictions; private property rights, freedom of choice, profits, and competitions
private property rights
ownership of resources used to create wealth relies on individuals
freedom of choice
you can sell your labor to any employer you choose
competition
occurs when two or more businesses vie for the same resources or customers
for perfect competition to exist:
- all firms must be small
- number of firms in the industry must be large
monopolistic competition
market or industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those competitors
oligopoly
market or industry characterized by a handful of sellers with the power to influence the prices of their products
monopoly
market or industry in which there is only one producer that can therefore set the prices of its products
natural monopoly
industry in which one company can most efficiently supply all needed goods or services
economic indicators
stats that show whether an economic system is strengthening, weakening, or remaining stable; help assess performance of a company
business cycle
pattern of short-term ups and downs in an economy
aggregate output
total quantity of goods and services produced by an economic system during a given period; primary measure of growth in business cycle
