economy

3 main business types

Sole proprietorship, partnership, corporation

What is one disadvantage of a sole proprietorship

unlimited liability

why do many businesses form partnerships?

They share resources and risks

What is limited Liability?

Owners are not personally responsible for business debts

What Is profit an incentive for entrepreneurs

Profit rewards, risk taking, and innovation

what is pure competition

Many sellers, identical products, price takers

what is monopolistic competition

Many sellers offering differentiated products

What is a monopoly

One seller controls the entire market

How do firms finance operations

earnings, selling stock, and borrowing

What is a none-price competition?

Competiting with branding, quality and service instead of price.

What is the main purpose of labor unions?

To protect workers and negotiate better wages and conditions.

What is human capital?

The skills, training, and knowledge workers possess

What determines demand for labor?

the demand for goods and services the workers help produce.

How are wages determined in market economy

by interaction of labor supply and demand

what is structural unemployment

Unemployment because skills no longer match available jobs

What is cyclical unemployment

Unemployment caused by downturns in business

what is frictional unemployment

short term unemployment while people change or search for jobs

how does automation affect workers

it replace some jobs but also create new technology based jobs

What is GDP gross domestic product

The total value of all final goods and services produced in the country in one year

what does the consumer price index (CPI) measure

Changes in prices of a “Basket” of typical consumer good and services

what happens when infaltion’s rises faster than wages

workers lose purchasing power

What is nominal GDP

GDP measured in current prices not adjusted for inflation

What is real GDP

GDP adjusted for inflation to show true changes in output

What does the unemployment rate measure

The percentage of labor force that is jobless but actively seeking work

Five phases of business cycle

Expansion, peak, contraction, trough, recovery

what happens during an expatiation

GDP rises, businesses hire, and unemployment fails

what happens during a contraction

GDP falls, business cut production and unemployment rises

What is peak business cycle

The highest of economic activity before a slowdown

what is trough

Lowest point of economic activity nbefore recovery begins

GDP per capita

average output or input per person indication standard of living