Foundations to business (chapter 1)

Business

An organization that produces goods or services, satisfies customer needs, and tries to earn a profit.

Products

Goods, services, or ideas produced by a business.

Tangible Goods

Physical products you can touch (ex: steel, paper, food)

Intangible Goods

An idem or service that cannot be touched (ex: software, consulting, rideshare).

Customers

Individuals or organizations that buy a business’s products.

Consumers

People who use or consume a product.

Profit

Money left after subtracting the cost of producing and selling from the sales price.

Primary Goal of Business

Earn profit while maintaining social responsibility.

Nonprofit Organization

Produces goods/services but does NOT aim to make profit.

Stakeholders

Groups interested in a business’s success and outcomes.

Primary Stakeholders

Customers, employees, suppliers, and investors.

Secondary Stakeholders

Media, trade associations, and special interest groups

Economics .

Study of how resources are distributed to produce goods and services

Factors of Production

Resources used to produce goods and services.

Natural Resources

Land, water, minerals, and raw materials

Human Resources

Physical and mental abilities of people.

Financial Resources (Capital)

Money used to obtain other resources.

Intangible Resources

non-physical assets that hold long-term value for a company such as - Reputation and social responsibility.

Competitive Advantage

Strength that makes a business perform better than competitors.

Economic System

How a society distributes resources to produce goods/services.

Central Economic Problem

Unlimited wants but limited resources.

Communism

Government controls all resources and production; people receive based on need.

Socialism

Government owns basic industries, but individuals own most other businesses.

Capitalism (free-enterprise)

Individuals own and operate most businesses.

Pure Capitalism (Free Market)

No government intervention in the economy.

Modified Capitalism

Some government regulation of businesses.

Supply

Quantity businesses are willing to sell at a certain price.

Demand

Quantity consumers are willing to buy at a certain price.

Equilibrium Price

Price where supply equals demand.

Elastic Demand/Supply

Quantity changes a lot when price changes.

Inelastic Demand/Supply

Quantity changes little when price changes

Competition

Rivalry among businesses for customers.

Pure Competition

Many sellers, identical products, market sets price

Monopolistic Competition

Many sellers, slightly different products.

Oligopoly

Few large sellers dominate market.

Monopoly

One seller controls the entire market.

Economic Expansion

Economy grows, spending increases, employment rises.

Inflation

General rise in prices over time.

Economic Contraction

Economy shrinks, spending decreases, unemployment rises.

Deflation

General fall in prices.

Recession

Significant economic contraction.

Depression

Severe, long, lasting recession.

Trade Balance

Difference between exports and imports.

Budget Surplus

Government collects more money than it spends.

Budget Deficit

Government spends more than it collects.

Consumer Price Index (CPI)

Measures price changes of common goods/services.

GDP Per Capita

Total economic output per person.

Per Capita Income

Average income per person.

Median Household Income

Middle income level of households

Standard of Living

Level of wealth and comfort in a country

Agricultural Economy

Early economy based on farming and self sufficiency.

Manufacturing Economy

Industrial Revolution brought by factories for mass production.

Marketing Economy

Businesses focused on consumer needs and advertising.

Service Economy

Economy based mostly on services (about 80% today).

Digital Economy

Modern economy driven by technology and online business