The One Lesson of Business Flashcards
Wealth is created when
assets move from lower to higher valued assets
An individual’s value for a good or service is measured as
the amount of money he or she is willing to pay for it.
To value a good means that
you want it and can pay for it.
The biggest advantage of capitalism
is that it creates wealth by letting people follow their self-interests.
Voluntary transactions create
wealth.
Seller surplus is
the difference between the sellers value and the price
Buyers surplus
the buyer’s value minus the price
Zero-sum fallacy is
when one party makes money and another loses.
Governments play a critical role in the wealth-creating process by
enforcing property rights and contracts
The absence of property rights
contributes to poverty.
Without private property and contract enforcement
wealth-creating transactions are less likely to occur.
Secure property rights are associated with measures of
environmental quality and human well-being.
Economics can be used by businesses
to spot money-making opportunities.
Efficient economies are when
all assets are employed in their highest-value uses.
A good policy facilitates
the movement of assets to higher-valued uses; and a bad policy prevents assets from moving or to lower-valued uses.
Determining policy requires
deep analysis of its effects
Making money principle is to
find an asset employed in lower value use, buy it, and then sell to someone who places higher value on it.
The one lesson in business is the art of
identifying assets in low valued uses and moving them to high valued uses and making profit
Taxes are
revenue collected by the government.
Subsidies are
opposite of taxes and encourage low value consumers to buy or high value sellers to sell, it destroys wealth by moving assets in the wrong direction.
Price Controls is
a regulation that allows trade only at certain prices.
Companies can be thought of
as collections of transactions, buying raw materials like capital and labor to selling finished goods and services.
Organizations impose taxes, subsidies, and price controls within their companies that
either deter profitable transactions or encourage unprofitable ones.
Voluntary transactions create wealth by
moving assets from lower to higher valued uses.
Anything that impedes the movement of assets to higher-valued uses
destroys wealth.
The art of business consists of
finding assets in low valued use and devising ways to profitably move them to higher valued ones.
A company can be thought of
as a series of transactions.
