Chapter 2: How Economics Affects Business Flashcards
Economics
The study of how society chooses to employ resources to produce goods and services and to distribute then for consumption.
Macroeconomics
Looks at the operation of a nation’s economy as a whole
Microeconomics
Looks at the behavior of people and organizations in particular markets
Resource Development
The study of how to increase resources and to create the conditions that will make better use of those resources
“Invisible Hand”
A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all
Capitalism
An economic system in which all or most of the factors of production and distribution (land, factories, railroads, and stores) are privately owned and operate for profit
Supply
The quantity of products that manufacturers or owners are willing to sell at different prices at a specific time
Demand
The quantity of products that people are willing to buy at different prices at a specific time
Market price
The price determined by supply and demand
Perfect competition
There are many sellers in a market and no seller is large enough to dictate price
Monopolistic competition
A large number of sellers produce products that are very similar but are perceived by buyers as different
Oligopoly
Just a few sellers dominate a market
Monopoly
There is only one seller of a product or service
Brain Drain
The loss of the best and brightest people to other countries
Communism
Economic and political system in which the state makes all economic decisions and owns all major factors of production
Free market economics
The market largely determines what goods and services get produced, who gets them, and how the economy grows
Command economics
The government largely decides what goods and services will be produced, who will get them, and how the economy will grow
Mixed economics
Some allocation of resources are made by the government and some by the market
Socialism
Based on the premise that some, if not most, basic businesses should be owned by the government so that profits can be evenly distributed among the people.
Gross domestic product
Total value of final goods and services produced in a country in a given year
Unemployment rate
The number of civilians at least sixteen years old who are unemployed and tried to find a job within the prior four weeks
Inflation
A general rise in the prices of goods and services over time
Disinflation
Price increases are slowing, or the inflation rate is declining
Deflation
Prices are declining
Consumer price index
Monthly statistics that measure the pace of inflation or deflation
Producer price index
An index that measures prices at the wholesale level
Business cycles
The periodic rises and falls that occur in all economies over time
Recession
Two or more consecutive quarters of decline in the GDP
Depression
A severe recession
Fiscal policy
The federal government’s efforts to keep the economy stable by increasing or decreasing taxes or spending
National debt
The sum of government deficits over time
Monetary policy
Management of the money supply and interest rates
