BUSINESS part 1 exam 1 : Exploring Business and Economic Foundations

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 (or 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.

Service businesses

Produce services, such as haircuts, legal advice, or tax preparation (Example: H&R Block).

Manufacturing businesses

Process various materials into tangible goods (Example: Intel).

Marketing intermediaries

Buy products from manufacturers and then resell them (Example: Sony Corporation).

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.

Loss

A negative profit, which results when a firm's expenses are greater than its sales revenue.

Stakeholders

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

Profit

The reward business owners receive for producing goods and services that customers want.

Risk of ownership

The risk of not being paid and the risk of losing whatever they have invested into the business.

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.

Land and natural resources

Elements used in the production process to make appliances, automobiles, and other products (Examples: crude oil, forests, minerals, land, and water).

Labor

The time and effort used to produce goods and services (Examples: managers and employees).

Capital

The money, facilities, equipment, and machines used in the operation of organizations (Example: manufacturing equipment at a production facility).

Entrepreneurship

The activity that organizes land and natural resources, labor, and capital.

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

Implies that there should be no government interference in the 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 (also known as a free-market economy).

Mixed economy

An economy that exhibits elements of both capitalism and socialism.

Command economy

An economic system in which the government decides what goods and services will be produced, how they will 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 (or pure) 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 any product) 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 competitive 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

Natural monopoly

An industry that requires a huge investment in capital and within which any duplication of facilities would be wasteful

Limited (or legal) monopoly

Created when a government entity issues a franchise, license, copyright, patent, or trademark

Federal antitrust laws

Discourage or prohibit both monopolies and attempts to form monopolies in order to ensure that competitive markets exist and customers have a choice for products they need or want to purchase

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 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.

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.

The 1929 stock market crash

An event that significantly impacted the nation's economy and led to the Great Depression.

Great Depression

A severe worldwide economic depression that took place during the 1930s.

Federal government involvement in business

Actions taken by the government to stimulate the economy, reduce unemployment, and ease problems during the Great Depression.

World War I

A global war originating in Europe that lasted from 1914 to 1918.

World War II

A global conflict that lasted from 1939 to 1945 involving most of the world's nations.

Korean War

A conflict between North Korea and South Korea from 1950 to 1953.

Vietnam War

A conflict in Vietnam from 1955 to 1975 involving North Vietnam and South Vietnam.

Economic growth in the 1950s and 1960s

A period characterized by rapid economic growth and a higher standard of living.

Social responsibility movement

A movement during the 1960s focused on the ethical obligations of businesses to society.

Shortage of crude oil in the mid-1970s

A period marked by a lack of crude oil leading to higher prices for most goods.

High inflation in the late 1970s

A period characterized by rising prices and reduced business profits.

Sustained economic growth in the 1990s

A period of continuous economic expansion during the 1990s.

Challenges in the economy

Issues such as social unrest, discrimination, inequality, and the need for job creation.

Research and technology in business

Tools and methods used to enhance productivity and competitiveness in the marketplace.

National debt

The total amount of money that a country's government has borrowed.

Natural resources conservation

The sustainable management of natural resources to prevent depletion.

Healthcare and social programs

Services designed to meet the needs of low-income families, single parents, and older Americans.