AP Business Vocabulary

Business

Organization that produces and sells goods or services

Goods

Tangible products customers can physically touch

Services

Intangible actions performed for payment

Profit

Revenue minus total costs

Revenue

Money earned from sales

Costs

expenses required to operate

Customer

Buyer who makes the purchase decision

Consumer

Person who uses the product

Need

A basic requirement necessary for survival

Want

Something that enhances quality of life but is not essential

Problem-Solution Fit

Products effectively solve a customer problem

Value Creation

Designing and delivering products or services that solves problems or meet needs in a way customers value

Value Capture

Generating revenue and profit by charging for the value a business creates

Value Proposition

Clear statement of why customers should choose the product

Market

A physical or virtual space where buyers and sellers interact to exchange goods or services

Voluntary Exchange

A transaction in which both the buyer and seller willingly trade because each expects to benefit

Market Price (Equailibrium Price)

The price at which quantity demanded equals quantity supplied, resulting in no shortage or surplus

Shortage

A situation in which quality demanded is greater than quantity supplies at a given price

Surplus

A situation in which quantity supplied is greater than quantity demanded at a given price

Competitive Advantage

A business’s ability to outperform rivals in the same market, leading to greater market share and higher profits

Differentiated Products

Goods or services with unique features that distinguish them from competitors

Barriers to Entry

Obstacles that make it difficult for new firms to enter a market and compete with existing firms

Market Share

The percentage of total sales in a market controlled by a specific firm

Monopoly

A market structure in which one firm sells a unique product with high barriers to entry and substantial control over price