U.S. Economy, Entrepreneurship, and Personal Finance Flashcards

Flashcards covering key concepts from lecture notes on competition in a market economy, entrepreneurship, the four economic sectors, and personal budgets.

What defines a market economy such as that of the United States?

A market economy is an economic system where businesses are owned by people rather than the government, and consumers buy goods and services from businesses.

What is a price incentive, and how does it affect consumer behavior?

A price incentive occurs when a business lowers its price (such as Store A charging $\$2$ less than Store B for the exact same product), leading more consumers to buy from that store to save money.

How do businesses compete for consumers besides lowering prices?

Businesses compete by creating higher quality products (such as Brand A requiring only $1$ paper towel to clean a spill compared to Brand B requiring $3$), offering good customer service with friendly and helpful workers, and advertising through commercials, signs, and social media ads.

What is an entrepreneur?

An entrepreneur is a person who starts their own business by identifying a need or gap in the market and creating a new good, service, or business to fill that need.

What are the benefits and risks of entrepreneurship listed in the text?

Benefits include being your own boss, building a business around something you enjoy, and trying to make lots of money. Risks include spending savings to start a business, working long hours, and trying not to lose lots of money.

What does it mean that entrepreneurs are visionaries, and what key characteristics do they possess?

Being a visionary means planning for the future with imagination. Key characteristics include being a critical thinker, good communicator, problem solver, focused, creative, determined, risk-taker, leader, hard worker, learner, planner, money manager, optimistic, perseverant, and knowledge-seeker.

What are the four major sectors of the United States economy?

The four major sectors are households, private businesses, government, and banks.

How do households participate in the U.S. economy?

Households act as human resources by selling their labor to private businesses for an income, pay taxes to the government, and act as consumers by purchasing goods and services from businesses.

What is the primary goal of private businesses, and how do they achieve it?

Private businesses aim to make a profit (money) by specializing in a few goods and services (such as McDonald's specializing in fast food) and paying household members to make and sell those goods and services.

How does the government participate in the U.S. economy?

Local, state, and federal governments collect taxes from households and businesses to provide public goods and services (such as schools, roads, national security, and public assistance) without making a profit.

What are the three main services provided by banks?

Banks provide savings accounts, checking accounts, and loans.

What is the difference between interest earned on a savings account and interest charged on a loan?

Interest on a savings account is money paid by the bank to customers for saving their money with the bank. Interest on a loan is money charged by the bank to customers for borrowing money.

How do checking accounts allow people to make purchases?

A checking account allows people to easily spend money by withdrawing funds to purchase goods and services by writing a check or using a debit card.

What are fixed expenses, and what are examples of them?

Fixed expenses are expenses that do not change from week to week or month to month, such as monthly car payments, rent or mortgage payments, and internet or phone bills.

What are variable expenses, and what are examples of them?

Variable expenses are expenses that change from week to week or month to month and may or may not occur regularly, such as groceries, car repairs, and fun activities.

What does the phrase 'to make ends meet' mean in personal budgeting?

The phrase means that a person has enough income to pay all of their expenses.

According to the sample August personal budget, what were the monthly salary income, total expenses, and savings?

In the August sample budget, the monthly salary income was $\$2,000$, total expenses were $\$1,800$, and total savings were $\$200$.