Business Economics Reviewer - First Summative Examination

Comprehensive vocabulary flashcards covering the basic principles of economics, market relationships, production factors, economies of scale, demand forecasting methods, and market structures as presented in the lecture notes.

Economics

The social science that studies how individuals, businesses, and governments allocate scarce resources to satisfy unlimited wants and needs.

Scarcity

The economic condition in which limited resources are insufficient to satisfy unlimited human wants.

Choice

The act of selecting one alternative over another because resources are limited.

Opportunity Cost

The value of the next best alternative that is sacrificed when a decision is made.

People Face Trade-offs

A principle stating that obtaining one thing usually requires giving up something else because resources are limited.

Rational People Think at the Margin

A principle explaining that individuals compare the additional benefits and additional costs before making decisions.

Trade Can Make Everyone Better Off

A principle stating that specialization and voluntary exchange benefit all parties involved.

Governments Can Improve Market Outcomes

A principle explaining that government intervention may increase economic efficiency by correcting market failures.

Production

The process of transforming inputs into goods and services to satisfy human wants.

Factors of Production

The resources used to produce goods and services, including land, labor, capital, and entrepreneurship.

Land

Refers to all natural resources used in the production process.

Labor

Refers to the physical and mental effort provided by workers in producing goods and services.

Capital

Refers to man-made resources such as machinery, equipment, tools, and buildings used in production.

Entrepreneurship

The ability to organize the factors of production, manage a business, and assume business risks.

Demand

The quantity of a product that consumers are willing and able to buy at different price levels during a given period.

Law of Demand

States that, all other factors remaining constant, the quantity demanded decreases as price increases and increases as price decreases.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded.

Demand Shifters

Factors that cause shifts in demand, including changes in consumer income, population, tastes and preferences, expectations, or the prices of related goods.

Consumer Preferences

Favorable preferences that increase demand and shift the demand curve to the right.

Supply

The quantity of a product that producers are willing and able to sell at different price levels during a given period.

Law of Supply

States that, all other factors remaining constant, the quantity supplied increases as price increases and decreases as price decreases.

Market Equilibrium

The condition in which the quantity demanded equals the quantity supplied.

Surplus

Occurs when the quantity supplied exceeds the quantity demanded at a given price.

Shortage

Occurs when the quantity demanded exceeds the quantity supplied at a given price.

Price Elasticity of Demand

Measures the responsiveness of quantity demanded to changes in the price of a product.

Elastic Demand

Demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price.

Inelastic Demand

Demand is inelastic when the percentage change in quantity demanded is less than the percentage change in price.

Unit Elastic Demand

Demand is unit elastic when the percentage change in quantity demanded is equal to the percentage change in price.

Gross Domestic Product (GDP)

The total monetary value of all final goods and services produced within a country's borders during a specific period.

Economies of Scale

Refers to the cost advantages gained when production increases, resulting in lower average costs per unit.

Internal Economies of Scale

Cost savings that result from the growth and efficiency improvements within a single firm.

External Economies of Scale

Cost advantages gained because of the growth of an industry or geographic area where businesses operate.

Economies of Scope

Refer to cost savings achieved when a business produces multiple products using shared resources and facilities.

Fixed Costs

Expenses that remain constant regardless of the level of production or sales.

Variable Costs

Expenses that change in direct proportion to the level of production or business activity.

Average Cost

The total cost divided by the number of units produced.

Demand Forecasting

The process of estimating future demand for products using historical data, market trends, and consumer behavior.

Trend Projection Method

Uses historical sales data to predict future demand.

Consumer Survey Method

Estimates future demand by asking consumers about their purchasing intentions.

Expert Opinion Method

Relies on the knowledge and experience of specialists to forecast future demand.

Market Experiment Method

Predicts demand by testing products in selected markets before full-scale production.

Scatter Diagram

A graph that shows the relationship between two variables by plotting the independent variable on the horizontal axis and the dependent variable on the vertical axis.

Regression Analysis

A statistical technique used to determine and predict the relationship between economic variables.

Business Decision Making

The process of selecting the best alternative to achieve organizational goals while efficiently utilizing available resources.

Market Structure

Refers to the characteristics of a market based on the number of sellers, product differentiation, and barriers to entry.

Perfect Competition

A market structure characterized by many buyers and sellers, homogeneous products, perfect information, and no barriers to entry.

Monopoly

A market structure in which a single seller controls the entire market and offers a product with no close substitutes.

Monopolistic Competition

A market structure in which many firms sell differentiated products and compete through price and non-price strategies.

Oligopoly

A market structure in which a few large firms dominate the market and each firm's decisions affect the actions of its competitors.

Product Differentiation

The process of making a product distinct from competitors through features, quality, branding, or customer service.

Barriers to Entry

Obstacles that make it difficult for new firms to enter an existing market.

Competition

The rivalry among businesses to attract customers by offering better prices, quality, or services.