Unit 1 - Economics and Business Environment

Economics

Study of how society uses scarce resourses

Scarcity

Resources are limited, so individuals and businesses must make choices about how to use them.

Macroeconomics

focuses on the economy as a whole rather than an individual consumer or business.

Business

Organization that provides goods or services to earn a profit

Profit

the money a business has left after the cost of producing its goods or services is subtracted from the money it earns. (money earned - cost of production)

4 Factors of Production

Land, labor, capital, entrepreneurship

Land

1 factor of production - natural resources used to produce goods and services

Labor

1 factor of production - human effort used in production

Capitol

1 factor of production - tools, equipment, buildings, and other resources used to produce goods and services

Entrepreneurship

1 factor of production - the ability to organize resources, take risks, and start/manage a business

Supply

how much of a good or service producers are willing and able to sell.

Demand

how much of a good or service consumers are willing and able to buy.

Equilibrium

a market reaches this when Quantity supplied = quantity demanded

Inflation

rising prices over time. can affect businesses by increasing operating costs.

Unemployment rate

measures people who are seeking work but unable to find it.

What GDP stands for

Gross Domestic Product

What GDP measures

economic growth

Capitalism

markets and competition play a major role.

Mixed Economy

combines elements of market activity with government involved (The US is described as this)

Socialist

an economic system in which government has a larger role in economic activity

Communist

an economic system based on collective/state ownership

Traditional

an economy heavily influenced by customs and traditions

Monopoly

single seller

Oligopoly

dominated by a few large firms

Demographic factors

characters of a population including age, education, income, population changes

Technological

involves changes in technology

Economic factors

conditions such as inflation, unemployment, and economic growth

Competitive

actions and strategies of competing businesses

Political

government and political influences

Legal

laws and regulations

Social

changes in society, culture, and social behavior

Global

events and conditions involving other countries and international economy

Monetary policy

controlled by the Federal Reserve. one tool is changing interest rates

Fiscal policy

involves government spending and taxation