Chapter 1 Flashcards
brain drain
loss of the best and brightest people
Communism
economic and political system in which government makes almost all economic decisions and owns almost all the major factors of production
capitalism
all or most factors of production and distribution are owned by individuals
invisible hand
the process that turns self-directed gain into social and economic benefits for all when a person prospers
Under free market capitalism, people have four basic rights:
- The right to own property 2. The right to own a business and keep all that business’s profits 3. The right to freedom of competition 4. The right to freedom of choice
Socialism
economic system based on the premise that some, if not most, basic business should be owned by the government so that profits can be more evenly distributed among the people.
Business
any activity that seeks to provide goods and services to others while operating at a profit
Goods
tangible products such as computers, food, clothing, cars and appliances
Services
intangible products such as education, healthcare, insurance, recreation, and travel and tourism.
Revenue
total amount of money a business take in during a given period by selling goods and services
Profit
The amount of money a business earns above and beyond what it spends for salaries and other expenses needed to run the operation
Loss
A loss occurs when a business’s expenses are more than its revenues
Entreprenuer
A person who risks time and money to start and manage a business
Risk
the chance an entrepreneur takes of losing time and money on a business that may not prove to be profitable.
Standard of living
refers to the amount of goods and services people can buy with the money they have
Stakeholders
All the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address.
Nonprofit organization
an organization whose goals do not include making a personal profit for its owners or organizers
Business environment
consists of surrounding factors that either help or hinder the development of business
What are the five elements of the business environment?
- economic and legal 2. technological 3. competitive 4. social 5. global
Effectiveness
producing the desired result
efficiency
producing goods and services using the least amount of resources
Productivity
the amount of output you generate given the amount of input
Demography
the statistical study of the human population with regard to its size, density, and other characteristics such as age, race, gender, and income.
Economics
the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals
macroeconomics
looks at the operation of a nation’s economy as a whole
microeconomics
looks at the behavior of people and organizations in markets for particular products or services.
Resource development
the study of how to increase resources
factors of production
are the resources used to create wealth: land, labor, capital, entrepreneurship, and knowledge
command economies
the government largely decides what goods and services will be produced, who gets them, and how the economy will grow
Free-market economies
the market largely determines what goods and services get produced, who gets them, and how the economy grows
Supply
refers to the quantities of products manufacturers or owners are willing to sell at different prices at a specific time.
Demand
refers to the quantity of products that people are willing to buy at different prices at a specific time
Market price
determined by supply and demand. It is the price toward which the market will trend
Perfect competition
exists when there are many sellers in a market and none is large enough to dictate the price of a product
Monopolistic competition
large number of sellers produce very similar products that buyers nevertheless perceive as different
Oligopoly
a degree of competition in which just a few sellers dominate the market
Monopoly
one seller controls the total supply of a product or service, and sets the price
Gross domestic product
total value of goods and services produced in a country in a given year
unemployment rate
percentage of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks
Inflation
general rise in the prices of goods and services over time
Disinflation
occurs when price increases start slowing
Deflation
prices are declining
Stagflation
economy is slowing but prices are going up somehow
consumer price index (CPI)
monthly statistics that measure the pace of inflation and deflation
core inflation
CPI minus food and energy costs
producer price index
measures the change in prices at the wholesale level
recession
two or more consecutive quarters of decline in GDP
depression
a severe recession, usually accompanied by deflation
Fiscal policy
refers to federal governments efforts to keep the economy stable by increasing or decreasing taxes or government spending
Keynesians economic theory
theory that a government policy of increasing spending and cutting taxes could stimulate the economy in recession
National debt
the sum of government deficits over time
monetary policy
management of the money supply and interest rates by the Federal Reserve Bank
What are the two branches of economics?
Macroeconomics and microeconomics
What are the the most important factors of production?
Entrepreneurship and knowledge
What are the key economic indicators in the US?
Gross domestic product (GDP) and consumer price index (CPI)
What are the four phases of business cycles?
Economic boom, recession, depression, recovery
What is the history of economic development in the US?
Agricultural workers displaced by improve tech. Then, manufacturing productivity improved which also displaced workers. This led to the development of the service industry. The service industry is now giving way to an information-based global revolution.
