Chapter 1: Exploring the World of Business and Economics

BUS 100 003 - Enterprise

Free Enterprise

The system of business in which individuals are free to decide what to produce, how to produce it, and at what price to sell it.

Cultural/workplace Diversity

A system that recognizes and respects the differences among people because of their 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.

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.

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 decisions made by individuals and businesses.

Macroeconomics

The study of the national economy and the global economy.

Economy

The way in which people deal with the creation and distribution of wealth.

Factors of production

Inputs and resources used to produce goods and services.

Entrpreneur

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 personal gain benefits others and a nation’s economy.

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.

Consumer products

Goods and services purchased by individuals for personal consumption.

Command Economy

An economic system in which the government decides what goods and services will be produced, how they’ll be produced, for whom available goods and services 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 a one-year period.

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 unemployed at any 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.

Business Cycle

The recurrence of periods of growth and recession in a nation’s economic activity.

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 has a larger decline in business activity when compared to a recession.

Monetary Policies

Federal Reserve’s actions 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 by changing the levels of government spending.

Federal Deficit

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

National Debt

The total 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 at which the quantity demanded is exactly equal to the quantity supplied.

Monopolistic Competition

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

Product differentiation

The process of developing and promoting differences between a company’s products and all competitve products.

Oligopoly

A market (or industry) in which there are few sellers.

Monopoly

A market (or industry) with only one seller, and customers can only buy the product or service from that 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 distributed raw materials to various homes, where families would process them into finished goods to be offered for sale by the entrepreneur.

Factory System

A system of manufacturing in which all the materials, machinery, and workers required to manufacture 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

The online interaction that allows 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 exist in productive harmony, and permit fulfilling the social, economic, and other requirements of future and present generations.