Introduction to Business Chapter 1 Flashcards
Business
Organization that provides goods or services to earn profits
Profits
difference between a business’s revenues and its expenses
External Environment
everything outside an organization’s boundaries that might affect it
Domestic Business Environment
the environment in which a firm conducts its operations and derives its revenues
Global Business Environment
the international forces that affect a business
Factors affecting the global environment at a general level include
International trade agreements, international economic conditions, and political unrest
Technological Environment
Generally includes all the ways by which firms create value for their constituents
Political Environment
Reflects relationship between business and government, usually in the form of government regulations of business
Sociocultural Environment
includes the customs,mores,values and demographic characteristics of the society in which an organization functions.
Economic Environment
refers to relevant conditions that exist in the economic system in which a company operates
Factor of production
the resources that a country’s businesses use to produce goods and service
Labor
sometimes called human resources of human capital, includes the physical and intellectual contributions people make while engaced in economic production
Capital
the financial resources needed to operate a business
Entrepreneurs
a person who accepts the risks and opportunities entailed in creating and operating a new business
Physical Resources
the tangible things that organizations use to conduct their business
Information resources
data and other information used by other businesses
Planned Economy
economy that relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions
Market Economy
Economy in which individuals control production and allocation decisions through supply and demand
Communism
political system in which the government owns and operates all factor of production
Market
mechanism for exchange between buyers and sellers of a particular good or service
Capitalism
system which allows the private ownership of the factors of production and encourages entrepreneurship by offering profits as an incentive
Mixed Market Economy
economic system featuring characteristics of both planned and market economies
Privatization
process of converting government enterprises to privately owned companies
Socialism
partially planned system when the government owns and operates selected major industries
Demand
the willingness and ability of buyers to purchase a products (a good or service)
Supply
the willingness and ability of producers to offer a good or service for sale
The law of demand
Buyers will purchase (demand) more of a product as its price drops and less of a product as its price increases
The law of supply
producers will offer (supply) more of a product for sale as its price rises and less of a product as its price drops
Demand and supply schedule
reveal the relationships among different levels of demand and supply at different price levels
demand curve
graph showing how many units of a product will be demanded (bought) at a different price
supply curve
graph showing how many units of a product will be supplied (offered for sale) at different prices
Market price (equilibrium price)
the price at which the quantity of goods demanded and the quantity of goods supplied are equal
Surplus
situation in which the quantity supplied exceed the quantity demanded
Shortage
the quantity demanded will be greater than the quantity supplied
Private Enterprise
system that allows individuals to purchase their own interests with minimal government restriction
Competition
when two or more businesses vie for the same resource or customers
Private enterprise requires presence of four elements
- Private property rights
- Freedom of choice
- Profits
- Competition
Monopolistic Competition
Market or industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors
Oligopoly
market or industry characterized by a handful of generally large sellers with the power to influence the prices of their products
Monopoly
when an industry of market has only one producer (or else is so dominated by one producer that other firms cannot compete with)
Natural Monopoly
Industry in which one company can most efficiently supply all needed goods or services
Economic indicators
Business Cycle
the pattern of short term ups and downs in an economy
Aggregate Cycle
the total quantity of goods and services produced by an economic system during a given period
Standard of living
the total quantity and quality of goods and services people can purchase with the currency used in their economic system
Gross Domestic Product (GDP)
total value of all goods and services produced by within a given period by a national economy through domestic factors of production
Gross National Product (GNP)
total value of all goods and services produced by a national economy within a giving period regardless of where the factors of production are located
GDP Per Capita
GDP per individual person
Real GDP
GDP that has been adjusted to account for changes in currency values and price changes
Nominal GDP
GDP measured in current dollars or with all components valued at certain prices
Purchasing Power Parity
the principle that exchange rates are set so that the prices of similar products in different countries are about the same
Productivity
a measure of economic growth that compares how much a system produces with the resources needed to produce it
Balance of trade
the economic value of all the products that a country exports minus the economic value of all the products it imports
National Debt
the amount of money the government owes its creditors
Stability
is a condition in which the amount of money available in an economic system and the quantity of goods and services produced in it are growing at about the same rate
Inflation
occurs when an economic system experiences widespread price increases
Consumer Price Index (CPI)
a measure of the prices of typical products purchased by consumers living in urban areas
Unemployment
the level of joblessness among people actively seeking work in an economic system
Recession
a period during which aggregate output as measured by GDP declines
Depression
a prolonged and deep recession
Fiscal Policies
policies used by a government regarding how it collects and spends revenues
Monetary Policies
policies used by government to control the size of its money supplies
Stabilization Policy
Government economic policy intended to smooth out fluctuations in output and unemployment and to stabilize prices
