Week 2 Ch. 2: Economics, Accounting and Organizations Flashcards
Economy
the sum total of all the economic activity within a given region
Economics
the study of how a society uses its scarce resources to produce and distribute goods and services
Microeconomics
the study of how consumers, businesses, and industries collectively determine the quantity of goods and services demanded and supplied at different prices
Macroeconomics
the study of “big picture”issues in an economy, including competitive behaviour among firms, the effect of government policies, and overall resource allocation issues
Factors of Production
• Natural resources
• Human resources
• Capital
• Entrepreneurship
• Knowledge
Natural resources
land, forests, minerals, water, and other tangible assets usable in their natural state
Human resources
all the people who work in an organization or on its behalf
Capital
the funds that finance the operations of a business as well as the physical, human-made elements used to produce goods and services
ex. factories and computers
Entrepreneurship
the combination of innovation, initiative, and willingness to take the risks required to create and operate new businesses
Knowledge
expertise gained through experience or association
Scarcity
a condition of any productive resource that has finite supply
Opportunity cost
the value of the most appealing alternative not chosen
Economic indicators
• statistics that measure the performance of the economy
• leading and lagging
Key Economic Indicators
• Housing starts
• Durable-goods orders
• Price indexes
• Unemployment rate
• Gross domestic product (GDP)
Planned system
economic system in which the government controls most of the factors of production and regulates their allocation
Free-market system
an economic system in which decisions about what to produce and in what quantities are decided by the market’s buyers and sellers
Capitalism
economic system based on economic freedom and competition
Capitalism
economic system based on economic freedom and competition
Nationalization
a government’s takeover of selected companies or industries
Privatization
turning over services once performed by the government and allowing private businesses to perform them instead
Regulation
relying more on laws and policies than on market forces to govern economic activity
Deregulation
removing regulations to allow the market to prevent excesses and correct itself over time
Monetary policy
government policy and actions taken by the Federal Reserve Board to regulate the nation’s money supply
Fiscal policy
strategy for the use of government revenue collection and spending to influence the business cycle
Demand
buyers’ willingness and ability to purchase products at various price points
Supply
a specific quantity of a product that the seller is able and willing to provide at various prices
Demand curve
a graph of the quantities of a product that buyers will purchase at various prices
Supply curve
a graph of the quantities of a product that sellers will offer for sale, regardless of demand, at various prices
Equilibrium price
• the point at which quantity supplied equals quantity demanded
• bc the supply and demand curves are dynamic, so is the equilibrium point
• as variables affecting supply and demand change, so will the equilibrium price
Competition
rivalry among businesses for the same customers
Pure competition
a situation in which so many buyers and sellers exist that no single buyer or seller can individually influence market prices
What Businesses are Affect by
• Inflation
• Unemployment rate
Inflation
an economic condition in which prices rise steadily throughout the economy
Unemployment rate
the portion of the labor force (everyone over 16 who has or is looking for a job) currently without a job
Money
• anything generally accepted as a means of paying for goods and services
• serves as a medium of exchange, a unit of accounting, a store of value, and a standard of deferred value
Canada
the overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or “overnight”) funds among themselves
Discount rate
the interest rate that member banks pay when they borrow funds from the Central bank
Prime rate
the interest rate a bank charges its best loan customers
Investment banks
firms that offer a variety of services related to initial public stock offerings, mergers and acquisitions, and other investment matters
Commercial banks
financial institutions that accept deposits, offer various types of checking and savings accounts, and provide loans
