Topic 1 - Understanding Economic Systems and Business Flashcards
The nature of a business
A business is an organization that strives for a profit by providing goods and services desired by its customers.
Refers to a country’s output of goods and services that people can buy with the money they have.
Standard of living
Refers to the general level of human happiness based on such things as life expectancy, educational standards, health, sanitation, and leisure time.
Quality of life
The money a company earns from providing services or selling goods to customers.
Revenue
Expenses that a company incurs from creating and selling goods and services.
Costs
The money left over after all expenses are paid.
Profit
Profit
Revenue - Costs = Profit
Organization that exists to achieve some other goals than the usual business goal of profit.
Not-for-Profit Organizations
Government is the largest not-for-profit group.
Commodities that are useful inputs in their natural state are known as ………. . They include
farmland, forests, mineral and oil deposits, and water.
Natural resources
Refers to the economic contributions of people working with their minds and muscles. This input includes the talents of everyone—from a restaurant cook to a nuclear physicist—who performs the many tasks of manufacturing and selling goods and services
Labor, or human resources
The tools, machinery, equipment, and buildings used to produce goods and services and get them to the consumer are known as?
Capital
Are the people who combine the inputs of natural resources, labor, and capital to produce
goods or services with the intention of making a profit or accomplishing a not-for-profit goal. These people make the decisions that set the course for their businesses; they create products and production processes or develop services. Because they are not guaranteed a profit in return for their time and effort, they must be risk-takers.
Entrepreneurs
Refers to the combined talents and skills of the workforce and has become a primary driver of economic growth. Today’s competitive environment places a premium on knowledge and learning over physical resources.
Knowledge
Factors of Production: The Building Blocks of Business.
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- Natural Resources
- Labour (Human resources)
- Entreprenurship
- Knowlege
External Environment
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- Economic
- Political
- Demographic
- Social
- Competitive
- Global
- Technological
Three components of political climate
Political and Legal Influences
- The amount of government activity
- Types of laws passed
- General political stability of a government.
- Fluctuations in economic activity create business cycles
- Government can impact the
level of economic activity through taxes
and interest rate levels. - Forces of supply and demand determine how prices and quantities of goods and services behave in a free market.
Economic Influences
What is the study of people’s vital statistics, such as their age, gender, race, ethnicity, and location.
Demography
Demographic factors
……… influence what, how, where and when people purchase products or services.
- Attitudes
- Values
- Ethics
- Lifestyle
Social Factros
The application of science and engineering skills and knowledge to solve production and organizational problems.
Technology
……….. is 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.
Economic system
………. is the study of how a society uses scarce resources to produce and distribute goods and services.
Economics
What are the economic concerns?
- What is produced?
- How much is produced?
- How it is produced?
- For whom is it produced?
An economic system based on competition in the marketplace and private ownership of the factors of production; also known as the private enterprise system.
Capitalism
An economic system characterized by government ownership of virtually all resources, government control of all markets, and economic decision-making by government planning.
Communism
An economic system in which the basic industries are owned either by the government itself or by the private sector under strong government control.
Socialism
Economies that use more than one economic system; for example, an economy where the government owns certain industries but others are owned by the private sector.
Mixed Economies
The subarea of economics that focuses on the economy as a whole by looking at aggregate data for large groups of people, companies, or products.
Macroeconomics
The subarea of economics that focuses on individual parts of the economy, such as households or firms.
Microeconomics
An increase in a nation’s output of goods and services. The more a nation produces, the higher its standard of living.
Economic growth
The total market value of all final goods and services produced within a nation’s borders each year
Gross domestic product (GDP)
The upward and downward changes in the level of economic activity is called ………
Business cycles
A decline in GDP that lasts for two consecutive quarters.
Recession
The condition when all people who want to work can work or have jobs.
Keeping people on the job
Full employment
The percentage of the total labor force that is not working but is actively looking for work.
Keeping people on the job
Unemployment rate
Short-term unemployment that is not related to the business cycle.
Types of Unemployment
Frictional unemployment
Unemployment that is caused by a mismatch between jobs and workers’ skills.
Types of Unemployment
Structural unemployment
Unemployment that occurs when a downturn in the business cycle reduce demand for labour.
Types of Unemployment
Cylical unemployment
Unemployment that occurs during specific seasons in certain industries.
Types of Unemployment
Seasonal unemployment
- The situation in which the average of all prices of goods and services is rising
- Inflation’s higher prices reduce purchasing power - the value of what money can buy.
Keeping Prices Steady
Inflation
Occurs when the demand for goods and services is greater than the supply.
Types of inflation
Demand-pull inflation
An increase in production costs push up prices of final goods and services.
Types of inflation
Cost-push inflation
The quantity of goods or services that people are willing to buy at various prices.
Demand
The quantity of goods and services that businesses will make available at various prices.
Supply
- A large number of small firms are in the market
- The firms sell similar products
- Buyers and sellers have good information about prices, sources of supply, etc.
- It is easy to open a new business or close an existing one.
Market structures
Perfect competition
Market structures
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- Perfect competition
- Pure monopoly
- Monopolistic Competition
- Oligopoly
- A single firm accounts for all the industry sales
- The firm is the industry
- Barriers to entry prevent new firms from competing with the existing firm
Pure monopoly
- Many firms are in the market
- The firms offer products that are close substitutes but still differ
- It is relatively easy to enter the market.
Monopolisitc Competition
- A Few firms produce most or all of the output
- Large capital requirements or other factors limit the number of firms
Oligopoly
