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Introduction to Business > Topic 1 : Economic foundation of Business > Flashcards

Topic 1 : Economic foundation of Business Flashcards

1
Q

What is one of the most important consideration in economy? And why

A

The resources. They are limited and need to be considered before producing a good or a service

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2
Q

What is “Economic”

A

The study of how society manages its rare/limited resources

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3
Q

Following the 10 principles in Economics, what are the 3 categories that seperates those principles?

A
  1. How people make decisions (decision making)
  2. How people interact with each other
  3. Forces and trends affecting the economy
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4
Q

What are the 10 principles in Economics?

A

Trade offs, costs, margin, incentives, trade, market. governement, standard of living, prices vs the printing of money, Inflation vs Employment.

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5
Q

Explain the concept of TRADE OFFS

A

If you want to get one thing, you have to give up another. It is required when you’re making decisions.

You trade one goal against another.

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6
Q

Explain the concept of COSTS

A

It’s what you GIVE to obtain what you want/need.

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7
Q

What are opportunity costs? Give examples.

A

The cost of giving up to obtain an item. What I lose by going with X decision.

Ex : - Go to class or sleep in?
- Manufacture your own clothing line or transfer the tasks to another firm?

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8
Q

Explain briefly what are MARGINS. What could be an example?

A

Small and incremental (+) adjustment to an existing plan of action.

The cost VS the benefit it may creates

Ex : Making the decision to pursue your studies and do a PhD

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9
Q

T or F : People do not responds to incentives

A

False. Incentives usually motivates people to respond

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10
Q

Explain what an incentive is in an economic perspective.

A

A marginal (+) change in costs of benefits to push and motivate people to respond.

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11
Q

What is called the entity that allows different parties to interact with each other to exchange goods and/or services?

A

A Market

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12
Q

Regarding resources, how does the principle of a Market helps? Why?

A

The market helps allocating resources, because its a way to organize the economic activities.

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13
Q

How can the Government intervene in economy?

A

They can promote EFFICIENCY and EQUITY.

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14
Q

When does a Market Failure occurs? What are the causes

A

When markets fail to allocate resources efficiently.

Causes : Market power, externality (impact on a bystander)

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15
Q

T or F : The standard of living depends on a country’s production.

A

True

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16
Q

How do you measure a STANDARD OF LIVING of a country? (2 ways)

A
  1. Comparing personal incomes within the society
  2. Comparing total market value of a country’s productivity
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17
Q

Explain Productivity using those terms : Producing, time, goods.

A

Productivity is measured by the amount of goods and services produced during each hour or a worker’s time.

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18
Q

What happens to the prices when the government prints too much money?

A

The prices rise.

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19
Q

What happens to the value of money when the government prints too much money?

A

The Value of money decreases

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20
Q

What do you call the phenomen when the prices increase, but the value of money decreases?

A

Inflation

21
Q

T or F : A decrease in inflation rate leads to a decrease in unemployment rate. And vice-versa

A

False. A decrease in inflation leads to an unemployment increase. And vice versa.

22
Q

What is an ECONOMIC SYSTEM?

A

A description of how a particular society distributes its resources to produce goods and services.

23
Q

What are the 3 most common forms of economic systems?

A

COMMUNISM, SOCIALISM, CAPITALISM

24
Q

In a communist system, who owns the nation’s resources?

A

The people (the state)

25
Q

Communism can seem efficient, but name a few realities that could demonstrate the contrary

A
  • Low standards of living
  • High prices
  • Corruption
  • Little freedom
  • critic shortage of consumer goods
26
Q

In a socialist system, how are the industries shared?

A

The government own the basic major industries, while individuals own the small businesses.

27
Q

Name some basic characteristics of a socialist system

A
  • Democratic and recognizes individual freedoms
  • Allows high standard of living
  • Stable
  • Taxes and unemployment are generally high
28
Q

T or F. In a capitalist system, some decisions are made with the necessary intervention of the government.

A

False. All decisions are made by individuals without any governmental intervention

29
Q

What is the main difference between a laissez-faire capitalism and a modified capitalism

A

Government intervention.

Gov. can intervene in a modified capitalism and regulate the business to some extent.

vs

Gov can’t in all the economic decisions made in a laissez-faire capitalism.

30
Q

What is a capitalist system in economics

A

Individuals own and operate the majority of businesses that provides goods and services.

31
Q

Fill the voids :
1. While it is ecouraged in socialism and capitalism, in communism there’s no _________.

  1. In capitalism, all the ______ goes to the individuals
  2. In communism, the products are ________, while there is a _______ choice in capitalism.
  3. The ________ owns mostly the small businesses in Socialism.
  4. People living in a ___________ system have unlimited choices of employment.
  5. In socialism and capitalism, the prices are determined by the the _______ and the ________.
A
  1. Competition
  2. Profits
  3. limited, wide
  4. Individuals
  5. Capitalist
  6. Supply, demand.
32
Q

What is the principle of a FREE ENTREPRISE SYSTEM?

A

Basic indiviudals and business rights existto motivate companies to succeed

33
Q

What are the characteristics of a free entreprise system? In other words, what are the rights that individuals have?

A
  1. Right to OWN property
  2. Right to EARN profit and USE them freely
  3. Right to determinate business operations
  4. Right to CHOOSE… which career to pursue, where to locate the business, what goods/services to purchase
34
Q

What is a market?

A

Group of buyers and sellers of a particular good/service.

35
Q

What is a competitive market?

A

When there are many buyers and sellers, each has a negligible impact on the market prices.

36
Q

What are called the 3 main degrees of competition in an industry/market?

A

Perfect competition, Oligopoly, Monopoly

37
Q

What are the false informations in this statement? Correct them.

In a perfect competition, the products are the same. Although, each firms can set their own prices for their products. There are numerous buyers and sellers. An exemple of a firm in a perfect competition would be Google.

A

WRONG : “each firms can set their own prices for their products” : they have no influence over prices. They are price taken, which means that their actions and transactions do not affect the market price.

WRONG : “An exemple of a firm in a perfect competition would be Google.” No. Google is situated in an oligopoly. A better example would be a farm market (fruit and vegetables)

38
Q

What is an Oligopoly? Give some examples of firms in an Oligopoly.

A

It is a competition degree in a market or industry where there are many sellers. The products are slightly differentiated. Each seller may set a price for their own products.

Ex : Apple, Amazon, Google, Facebook, …

39
Q

How many sellers are there in a Monopoly? Who controls the price?

A

Only one. They control the prices

40
Q

Explain the Law of Supply

A

The quantity supplied increases if the price increases.

41
Q

Explain the Law of Demand

A

The quantity demanded decreases if the price increases.

42
Q

In the subject of Supply and Demand, what is the equilibrum point?

A

The EP determines a price when the products supplied EQUALS the amount of products the consumers are willing to buy.

43
Q

What’s a business?

A

A set of individuals trying to earn profits by providing products that satisfy people’s needs

44
Q

What is a product?

A

Goods or services with tangible and intangible characteristics that provide satisfaction and benefits.

45
Q

How do you calculate a benefit?

A

Benefit = Costs - price sold to consumer

46
Q

To start a business (or to enter the business world), what are the needs?

A

Management skills, Marketing expertise, financial resources, a product, personnel

47
Q

What are some attitudes and responsibilities to adopt and keep when you start a business?

A
  1. You have to act ethically
  2. Ready to adapt to change
  3. Abide (conform) to the law
48
Q

What are some groups that have stakes in the success and outcome of a business? (Parties prenantes)

A

Community, Society, Owners, Lenders, Costumers, Government, employees, etc.

Introduction to Business (9 decks)

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