Exam 1 Flashcards
What is a business?
An organization that provides a product or service that is marketed to make money/profit.
What does a business have to do?
A business must improve the standard of living (make life better for those it targets and those it employs)
What is the difference for a non-profit?
A non-profit business is different because its main goal is to not to make a profit. Instead, it focuses on improving the well-being of society – respond to a specific goal (Well-being; Common Good; Social Responsibility)
Inflation
The rate of increase in prices over a given period (overall increase in prices and cost of living in a country)
- High in our current economy, negatively impacts society b/c income can’t keep up with inflation increase therefore less money for consumers.
- ex: inflation caused an increase in interest rates when purchasing a car.
Economic Factors
Variables that impact the overall economy, as well as individual businesses
- Ex: tax rates, exchange rates, inflation, labor supply and demand, recessions, etc.
Trade Deficit
A country is importing more goods and services than it is exporting, can be either good or bad.
- Results in negative balance of trade
- US is in a trade deficit
Outsourcing
A third party is contracted by a company for specific jobs or services, potentially for less money.
- US outsources labor, desktop publishing, etc.
Factors of Production
Includes what companies take in and use for their businesses.
- Land, labor, capital, entrepreneurship
Economic Environment
o All economic factors that impact the profit of companies
- Stability of the economy (is our quality of life and standard of living improving or declining) – inflation and national debt have impact.
- Is the economy controlled?
Competitive Environment
o Businesses compete to sell and market products that meet unique needs, wants, and desires of society.
o Competitors try to fulfill something different than others.
- Product type
- Price point
- Special features/benefits
- Different areas of distribution (online, small retail, large retail)
Technological Environment
o State of science and technology in a country
o Progress of technology
o Funding for industry progression
o Laws of advancement for technology
Global Environment
o Interacting with the economies of other countries
- Products made in other countries (Phones sold in the US are made in China)
- Migration of jobs
- Ownership of processes: bottling companies
Social Environment
o Shared values, beliefs, and customs between groups of people
o SOCIAL TRENDS (diversity, aging population, rising worker expectations, ethics & social responsibility)
Environmental Trends
- Driven by regulations, industry standards, and social pressures.
- Noneconomic (environmental/geographic) factors that impact our economy – ex: global warming
- Businesses now need to keep on top of the latest environmental issues and provide meaningful solutions within their businesses, products, and services they offer.
o Ex: reducing carbon emissions in energy production and being more green
Macroeconomics
overall economic dynamics for a country
- Employment rate
- GDP
- Taxation policies
Microeconomics
smaller economic units
- Individual consumers
- Families
- Individual businesses
Monetary Policy
- Actions that shape the economy by influencing interest rates and the supply of money.
- Managed by the Federal Reserve
- Current monetary policy does not make sense as
o Interest rates are increasing.
o Higher prices mean less saving.
o The federal reserve slows economic growth to control inflationary pressures.
o As demand for goods decreases, excessive inventory plummets prices and impacts GDP + productivity.
Dept Ceiling
- Maximum amount that Congress allows the government to borrow.
o Mostly about whether the federal government can pay for already present debts.
Gross Domestic Product
- Measure of US economic activity - measures the total monetary value of the final goods and services produced in the US over a specific period of time.
- Measures economic health and market conditions of the country
Advantages & Disadvantages
Advantages = Extending product life cycles, Region-specific resources do not limit production, Distribution and telecommunications innovation
Disadvantages = Import of harmful products and unfair trade practices, Competitive pricing
Absolute Advantage
- Absolute advantage = benefit that a country has in an industry when it produces more of a product than other nations using the same amount of resources
o Can produce something in a specific country better than the rest of the world (ex: US – wheat production)
Opportunity Cost
Opportunity cost = The opportunity of giving up the second-best choice when making a decision.
o The value of the production that a country gives up in order to produce the first product.
Surplus/Deficit
- Trade surplus = total value of a nation’s exports is higher than the total value of its imports
- Trade deficit = total value of a nation’s imports is higher than the total value of its exports
Effects of Monetary Exchange Rates
Has impact on investment performance, interest rates, and inflation.
