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GBS 151 > Chapter 1: Understand Economic Systems & Business > Flashcards

Chapter 1: Understand Economic Systems & Business Flashcards

1
Q

What is Business?

A

an organization that strives for a profit by providing goods and services provided by its customers.

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2
Q

Goods vs Services

A

goods: tangible
services: intangible offerings

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3
Q

What is a “Standard of Living”?

A

measured by the output of goods and services people can buy with their money.
*businesses create our standard of living.

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4
Q

Revenue

A

the money a company gets from providing goods and services.

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5
Q

Cost

A

expenses a company incurs from creating the good or service.

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6
Q

Profit

A

The money left over from revenue after costs are paid.

REVENUE - COSTS = PROFIT

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7
Q

Not-For-Profit (NFP)

A
  • Does not strive for profit
  • Does not compete with other NFPs.
  • Provides service for
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8
Q

NFP and For-Profit similarities

A
  • Need resources to meet their goals

* Need to develop strategy, budget carefully, measure performance, foster an ethical workplace, etc.

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9
Q

Five Factors of Production

A
  • Natural Resources
  • Labor
  • Capital
  • Entrepreneurship
  • Knowledge
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10
Q

Capital vs Money

A

Capital: inputs
Money: buys the inputs

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11
Q

Natural Resources

A

land, materials, oil, etc.

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12
Q

Labor

A

people that are capable of working for you.

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13
Q

Entrepreneurship

A

combines natural resources, labor, and capital to create a product.

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14
Q

Knowledge

A
  • Combined talents and skills of the workforce
  • Key role in the success of business
  • Essential to economic growth
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15
Q

General Types of Business

A
  • Manufacturing
  • Services
  • Reselling
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16
Q

Manufacturing (business)

A

makes things

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17
Q

Services (business)

A

provides a service (tax prep., doctor, etc.)

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18
Q

Reselling (business)

A

buys from suppliers, sells to businesses or consumers

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19
Q

External factors that have a direct influence business

A
  • economics
  • political & legal
  • demographic
  • social
  • competitive
  • global
  • technological
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20
Q

Internal factors that affect business

A
  • entrepreneurs
  • managers
  • workers
  • customers
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21
Q

How does economic changes affect business?

A
  • creates business cycles
  • supply and demand determine prices and quantities
  • strong economic activity = low unemployment rates and higher income levels
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22
Q

How does political changes affect business?

A
  • affect day-to-day operations.

* the types of laws it passes (affect competition, min. wage, environmental protection, worker safety, etc.)

23
Q

How can the government affect the level of economic activity?

A
  • change policies –> affect taxes and interest rate level –> stimulate business cycle.
  • affect supply and demand
24
Q

Why do demographic shifts and technological developments create both challenges and new opportunities for business?

A
  • demographics: help define the market and workforce.

* technology: increases productivity, communication, etc.

25
Q

How does technology affect wealth and standard of living?

A

advancement in technology –> increased productivity –> increased profits & lower costs –> lower price for customers –> increase in standard of living.

26
Q

What is economics?

A

the study of how a society uses scarce resources to produce and distribute goods and services.

27
Q

Economic System

A

the combination of polices, laws, and choices made by its government to establish the systems that determine what goods and services are produced and how they are allocated.

28
Q

Major Economic Systems

A
  • Capitalism ( Free Market)

* Communism and Socialism (Planned Economies)

29
Q

Capitalism

A
  • ” Private Enterprise System “
  • Competition in the marketplace
  • Private Ownership
  • Large number of businesses
  • Buy and sell freely
  • Guaranteed economic rights
30
Q

Communism

A
  • Government owns all
  • All economic decisions made by the government.
  • No competition
  • Less motivation, productivity, and quality of life
31
Q

Socialism

A 
Basic industries owned by government.
Smaller businesses owned privately
Healthcare and unemployment offered to citizens.
Higher unemployment rate 
Higher taxes
32
Q

Mixed Economy

A

use more than one economic system.

33
Q

Macroeconomics

A

study of the economy as a whole.

34
Q

Microeconomics

A

individual parts of the economy.

households or firms

35
Q

Capitalism Economic Rights

A

right to own property
right to make a profit
right to make free choices
right to compete

36
Q

Why Is competition good for businesses and customers?

A

quality and diverse products

37
Q

Three Sectors of US Economy

A

Individual, Business, and Government

38
Q

How are the three sectors linked?

A

Individual provides inputs to businesses, recieve rent, wages, interest, and ownership profiles.→

businesses converts inputs to outputs for consumers, recieve revenue from customers→

government purchases from business, supply goods and services, recieve taxes from individuals and businesses. →

39
Q

Three Major Microeconomic Goals

A
  • Economic Growth
  • Full Employment
  • Price Stability
  • Indicates nation’s economic health
40
Q

Economic Growth

A
  • an increase in the nation’s output

- measured by the GPD

41
Q

Full Employment

A
  • jobs for everyone wanting and willing
  • measured by unemployment rate
  • always defined as under 100 %
42
Q

Why is unemployment under 100% ?

A
  • People may not work for many reasons ( school, family, though they are still employable )
43
Q

Types of Unemployment

A
  • Frictional Unemployment
  • Structural Unemployment
  • Cyclical Unemployment
  • Seasonal Unemployment
44
Q

Real GDP

A

GDP adjusted for inflation

45
Q

Price Stability

A

Measured by income vs. inflation

46
Q

Demand- Pull Inflation

A

happens when the demand is greater than the supply

47
Q

Cost- Push Inflation

A

triggered by increase in production costs

48
Q

Business Cycle and its Phases

A
  • up and down of economic activity

- rise in output → rise in income → rise in employment → rise in prices → declines

49
Q

Recession

A

decline in GDP that lasts for two consecutive quarters (each a three month pernod)

50
Q

How do businesses adapt to periods of contraction and expansion ?

A
  • Expansion : hard time hiring good employees and finding natural resources.
  • Contraction: more supply than demand.
51
Q

Purchasing Power

A

The value of what money can buy.

*measured from inflation and income

52
Q

Inflation

A

average of all prices of goods and services rising.

53
Q

Monetary Policy

A

goverment program for controlling the amount of money circulating in the economy and interest rates.

54
Q

Who implements monetary policy in the US?

A

the Federal Reserve System

GBS 151 (5 decks)

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