PCC Business Chapter 1

Business

An organization that provides goods or services to earn profits.

Profits

The difference between a business’s revenues and its expenses.

External Environment

Factors outside the organization’s boundaries that influence and affect the business.

Economic System/Order

A nation’s system of production for allocating resources and distributing goods and services among its citizens.

Factors of production

The resources that a country’s businesses use to produce goods and services.

Planned Economy

An economy that relies on a centralized government to control most factors of production.

Socialism

A system where the government owns and operates selected major industries and distributes income according to hard work.

Communism

A system where the government owns and operates all factors of production.

Free Market Economy

An economy where individual producers and consumers control production and allocation.

Demand

The willingness and ability of buyers to purchase a product.

Supply

The willingness and ability of producers to offer a good or service for sale.

Equilibrium/Market Price

The price at which the supply curve and demand curve intersect on a graph.

Private Enterprise Systems

Systems where economic indicators show whether an economic system is strengthening or weakening.

Business Cycle

The patterns of short-term ups and downs in an economy.

Aggregate output

The total quantity of goods and services produced by an economic system during a given period.

Standard of Living

The total quantity and quality of goods and services that can be purchased.

Gross Domestic Product (GDP)

The total monetary value of all final goods and services produced in a national economy.

Productivity

A measure of economic growth comparing how much a system produces with the resources used.

Balance of Trade

The economic value of all products exported minus the economic value of imported products.

National Debt

The amount of money the government owes its creditors.

Stability

Condition in which the amount of money and the quantity of goods and services produced are growing at the same rate.

Inflation

Widespread price increases occurring throughout an economic system.

Unemployment

The level of joblessness among people actively seeking work.

Recession

A period during which aggregate output declines.

Depression

A prolonged and deep recession.