Chapter 1: Exploring the World of Business and Economics Vocabulary

Comprehensive vocabulary flashcards generated from Chapter 1: Exploring the World of Business and Economics.

Free enterprise

An economic system in which individuals are free to decide what to produce, how to produce it, and at what price to sell it.

Cultural diversity

A system that recognizes and respects differences among people due to age, race, ethnicity, gender, sexual orientation, and ability.

Business

The organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society's needs.

Material resources

The raw materials used in manufacturing processes, as well as buildings and machinery.

Human resources

The people who furnish their labor to a business in return for wages.

Financial resources

The money required to pay employees, purchase materials, and generally keep a business operating.

Informational resources

Information that tells business managers how effectively the other three resources (material, human, and financial) are being combined and used.

Combining Business Resources

The conceptual model showing how human, material, financial, and informational resources are integrated within a business organization.

Service business

A business that produces services rather than physical goods, such as haircuts, legal advice, or tax preparation.

Manufacturing business

A business that processes various raw materials into tangible physical goods.

Marketing intermediary

A business that buys products from manufacturers and resells them to consumers or other businesses.

e-business

The organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society's needs through the facilities available on the internet.

Profit

What remains after all business expenses have been deducted from sales revenue.

Sales Revenue and Profit Relationship

The financial relationship where sales revenue is divided into business expenses and remaining profit.

Stakeholders

All the different people or groups of people who are affected by an organization's policies, decisions, and activities.

Economics

The study of how wealth is created and distributed.

Microeconomics

The study of the economic decisions made by individuals and businesses.

Macroeconomics

The study of the national economy and the global economy.

Factors of production

Inputs and resources used to produce goods and services, consisting of land and natural resources, labor, capital, and entrepreneurship.

Land and natural resources

Elements used in the production process to make goods, such as crude oil, forests, minerals, land, and water.

Labor

The time and effort used to produce goods and services, furnished by managers and employees.

Capital

The money, facilities, equipment, and machines used in an organization's operations.

Entrepreneurship

The activity that organizes land and natural resources, labor, and capital to produce goods and services.

Entrepreneur

A person who risks time, effort, and money to start and operate a business.

Capitalism

An economic system in which individuals own and operate the majority of businesses that provide goods and services.

Invisible hand

A term created by Adam Smith to describe how an individual's own personal gain benefits others and a nation's economy.

Laissez-faire

An economic doctrine implying that there should be no government interference in the economy.

Basic Assumptions of Laissez-Faire Capitalism

Adam Smith's four fundamental rights: right to create wealth, right to own private property and resources, right to economic freedom and freedom to compete, and right to limited government intervention.

Market economy

An economic system in which businesses and individuals decide what to produce and buy, and the market determines prices and quantities sold.

Mixed economy

An economy that exhibits elements of both capitalism and socialism.

Circular Flow in Our Mixed Economy

The diagram illustrating continuous economic exchanges among households, businesses, resource markets, product markets, and governments.

Command economy

An economic system in which the government decides what goods and services will be produced, how they will be produced, for whom they will be produced, and who owns and controls the major factors of production.

Productivity

The average level of output per worker per hour.

Gross domestic product (GDP)

The total dollar value of all goods and services produced by all people within the boundaries of a country during a specified time period, usually one year.

Inflation

A general rise in the level of prices.

Deflation

A general decrease in the level of prices.

Unemployment rate

The percentage of a nation's labor force that is unemployed at any given time.

Consumer price index (CPI)

A monthly index that measures the changes in prices of a fixed basket of goods purchased by a typical consumer in an urban area.

Producer price index (PPI)

A monthly index that measures prices that producers receive for their finished goods.

Balance of trade

The difference between the value of a nation's exports and a nation's imports over a specific period of time.

Consumer confidence index

A measure of how optimistic or pessimistic consumers are about the nation's economy, usually reported monthly.

Corporate profits

The total amount of profits made by corporations over selected time periods.

Inflation rate

An economic statistic that tracks the increase in prices of goods and services over a period of time.

National income

The total income earned by various components of the economy, including employees, interest and rental income, business profits, and other income types.

New housing starts

The total number of new homes started during a specific time period.

Prime interest rate

The lowest interest rate that banks charge their most credit-worthy customers.

Recession

Two or more consecutive three-month periods of decline in a country's GDP.

Depression

A severe recession that lasts longer than a typical recession and involves a much larger decline in business activity.

Business cycle

The recurrence of periods of growth and recession in a nation's economic activity, consisting of peak, recession, trough, and recovery.

Monetary policies

Actions of the Federal Reserve to promote maximum employment, stabilize prices, and increase or decrease interest rates.

Fiscal policy

Government influence on the amount of savings and expenditures, accomplished by altering the tax structure and changing government spending levels.

Federal deficit

A financial shortfall created when the federal government spends more in a fiscal year than it receives.

National debt

The total sum of all federal deficits.

Competition

Rivalry among businesses for sales to potential customers.

Perfect competition

The market situation in which there are many buyers and sellers of a product, and no single buyer or seller is powerful enough to affect the price of that product.

Supply

The quantity of a product that producers are willing to sell at each of various prices.

Demand

The quantity of a product that buyers are willing to purchase at each of various prices.

Market price

The price of a product at which the quantity demanded is exactly equal to the quantity supplied.

Supply Curve and Demand Curve

A graph showing the inverse demand curve and upward-sloping supply curve intersecting at the market price equilibrium.

Monopolistic competition

A market situation in which there are many buyers along with a relatively large number of sellers who differentiate their products from competitors' products.

Product differentiation

The process of developing and promoting differences between a business's product and all competitive products.

Oligopoly

A market or industry in which there are few sellers.

Monopoly

A market or industry with only one seller, where customers can buy the product or service only from that single seller.

Standard of living

A loose, subjective measure of how well off an individual or a society is, mainly in terms of want satisfaction through goods and services.

Domestic system

A method of manufacturing in which an entrepreneur distributes raw materials to various homes, where families process them into finished goods to be sold by the entrepreneur.

Factory system

A manufacturing system in which all materials, machinery, and workers required to produce a product are assembled in one place.

Specialization

The separation of a manufacturing process into distinct tasks and the assignment of different tasks to different individuals.

Service economy

An economy in which more effort is devoted to the production of services than to the production of goods.

Social media

Online interactions that allow people and businesses to communicate and share ideas, personal information, and information about products or services.

Sustainability

The ability to create and maintain conditions under which present and future generations can live in productive harmony, permitting the fulfillment of social, economic, and other requirements.