Chapter1-4 Flashcards
What is revenue?
The money that your customers give you when they pay for your product or service
What is cost?
The money that you give for the things you need to run your business
What is profit?
When your revenue exceeds the cost
What are the 4 factors of production
Natural resources, labor, capital, and entrepreneurs
what does internal environment have?
Entrepreneurs, managers, workers, and customers
What does the external environment have?
Economic, political, legal, demographic, social, competitive, global, and technological
What is a business?
An organization that strives for a profit by providing goods and services desired by its customers
What are goods?
Tangible items manufactured by businesses
What are services?
Intangible offerings of business that can’t be held, touched, or stored
What is the standard of living measured by?
Measured by the output of goods and services people can buy with the money they have
What is the quality of life?
The general level of human happiness based on such things as life expectancy, educational standards, health, sanitation, and leisure time
What are risks?
The potential to use time and money or otherwise not be able to accomplish an organizations goods
What are not-for-profit organizations?
They achieve some goal other than the usual business goal of profit
What is an Economic influence?
Fluctuation in the level of economic activity create business cycles that affect businesses and individuals in many ways
When an economy grows, what happens?
Unemployment rates are low, and income levels rise
What is the factor that change inflation and interest rates?
Economic activity
What does supply and demand determine?
Determine how prices and quantities of goods and services behave in a free market
What are the 3 components of political and legal influences?
The amount of government activity, types of laws it passes, and the general political stability of government
what are demographic factors?
A uncontrollable factor in the business environment and extremely important to managers
What do demographic factors help?
Companies define the markets for their products and also determine the size and composition of the workforce
What are social factors?
Attitudes, values, ethnics, and lifestyles influence what, how, where, and when people purchase products or services
Why are social factors difficult to predict?
They can be subjective and constantly change
What is the nations economic system?
The combination of policies, laws, and choices made by its government to establish the systems that determine what goods and services are produced and how they are allocated
What is economics?
The study of how a society uses scarce resources to produce and distribute goods and services
what are the 2 broad categories of economics?
Free market and capitalism
What is capitalism?
Based on the competition in the marketplace and private ownership of the factors of production, and has steady growth. An example, the united states
What are the economic rights?
Own property, make profit, make free choices, and to compete
What happens in communism?
The government owns virtually all resources and controls all markets, economic decision making is centralized, and the government decides what will be produced, when, and how, and has no growth. An example, Cuba, and North Korea
What is socialism?
An economic system in which the basic industries are owned by the government control. Controls critical, large-scale industries. The state determines the goals of businesses, prices, selection of goods, and the rights of workers. Stable with slight growth. An example, Finland, India, and israel
What is a mixed economy system?
Uses more than one economic system. Government owns basic industries, and provides health care. Government involved through taxing.and has continued growth. An example, Great Britain, France, Sweden, and canada
What is macroeconomics?
The study of the economy as a whole. Looks to aggregate data for large groups or people, companies, or products considered as a whole
What is microeconomics?
Focuses on individual parts of the economy, like households and firms
what are circular flow inputs?
Natural resources, labor, capital, entrepreneurship, and knowledge
What are circular flow outputs?
Goods and services
What is economic growth?
An increase in a nations output of goods and services
What is GDP?
The basic measure of economic growth. The total market value of all final goods and services produced within a nations borders each year. When GDP rises it means the economy is growing. When the growth rate is 0, it means the economy begins to decline
What is the business cycle?
Upward and downward changes. Vary in length. Changes in GDP trace the patterns as economic activity expands and contracts
What is recession?
A decline in GDP that lasts 2 consecutive quarters, meaning 3 months. It is followed by a recovery period when economic activity once again increases
What is full employment?
Having jobs for all who want to and can work. Where 94-96% of those available to work actually have jobs
What is unemployment rate?
Indicates the percentage of the total labor force that is not working but is actually looking for work.
what are the 4 types of unemployment ?
Frictional, structural, cyclical, and seasonal
What is inflation?
Situation in which the average of all prices of goods and services is rising
What is purchasing power?
A function of two things, inflation and income. If income and inflation rise, there in no change in purchasing power. If prices rise and income stays the same, purchasing power decreases. If income rises and inflation stays the same, purchasing power increases.
what are the 2 types of inflation?
Demand-pull, and cost-push
What is demand-pull?
Occurs when the demand for goods and services is greater than the supply. Buyers have more money than amount needed to buy goods and services.
what is cost-push?
Triggered by increases in production costs, such as an expenses for materials and wages. Push up the prices of final goods and services
what is wage-price spiral?
Wage increases causing a major cost-push inflation
What is the consumer price index?
An index of the prices of a ‘market basket” of goods and services purchased by typical urban consumers. It is published monthly by the department of labor.
what are the major components of consumer price index?
Food, beverage, clothing, transportation, housing, medical exam, recreation, and education. There are special index’s for food and energy
What is the producer price index?
Measures the price paid by producers and wholesalers for various commodities, such as raw materials, partially finished goods and finished products
What is the family of index?
Crude goods (raw materials), intermediate goods(becomes part of finished goods), and finished goods
What are 2 main tools for achieve in macroeconomic goals?
Monetary policy and fiscal policy
What is monetary policy?
Refers to a governments programs for controlling the amount of money circulating in the economy and interest rate
What is the federal reserve system?
The central banking system of the u.s., prints money and controls how much of it will be in circulation. Can use monetary policy
What is contractionary policy?
The federal reserve system restricts or tightens the money supply by selling government securities or raising interest rates. Reduces spending and lowers inflation
What is expansionary policy?
The federal reserve system increases or loosens growth in the money supply, and stimulates the economy. Interest rates decline, business and consumer spending go up.
what is fiscal policy?
An economic tool used by the government. A program of taxation and spending.
What is the demand cure?
Tells you how much you can sell, at what price
What is equilibrium?
The quantity of demand equals the quantity supplied. When the demand and supply curve cross
What causes changes in demand?
Changes in fashion, or tastes. Expectations about future prices, and changes in the number of buyers
What causes changes in supply?
Changes in prices of other goods, taxes, and high energy and goals prices
What is a market structure?
The number of supplies in a market