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business

any commercial, industrial or professional activity undertaken by an individual or a group

tangible product

sells a physical item that can be touched

ex: car

intangible (aka service)

provides customer with an intangible product

ex: insurance

exchange

return the product in order to receive a new one

extractor

business that involves extraction of raw materials to be used for customers

manufacturer warranty

guarantee given to purchaser by a company that the product is reliable

• otherwise company will replace or repair

• certain conditions apply - wear & tear, time, accidents

profit

surplus of money after total costs are deducted from total revenue

importance of profit

desire to work hard to earn higher profit

helps make our economy strong

revenue

income generated from normal business operations

expense

cost of operations that a company incurs to generate revenue

difference between profit and loss

profit - surplus of money after total costs are deducted from total revenue

loss - when a business doesn’t have enough money compared to their revenue

economy

the process or system by which goods and services are produced, sold, and bought in a country or region

3 important questions an economy looks to answer

1. what to produce

2. how to produce it

3. for whom to produce it

traditional economy

a system where economic decisions are based on customs and time-honored beliefs

market economy

a system where individuals own most of the resources

mixed economy

an economic system where there are both free market and command economic practices

command economy

a system where production, investment, prices, and incomes are determined by a government

land

gifts of nature, not created by human effort

• natural resources

capital

tools, equipment and factories to produce goods and services (physical assets)

• money used to purchase natural resources, land, or other capital goods

entrepreneurship

people who take risk to start a business

• creates valuable goods or service for consumers

consumer role

buying decisions of all consumers

• individuals, businesses, governments

helps determine how we use our resources & influence our economy

worker role

provides a service and/or sells goods

standard of living

• the way you live based on what you can afford

• affected by money you earn as a worker

labor productivity

• quantity of goods a worker can produce in 1 hour

to improve standard of living, produce more and better workers

citizen role

pay taxes

• taxes are used for public goods such as schools, roads, parks

vote!

gdp

monetary value of all goods and services produced within a nation’s geographic borders over a specified period of time

does not include foreign investments or spending

primary indicator of a country’s economic performance

difference between supply & demand

supply: amount of goods & services businesses are willing to provide

demand: amount of goods & services individuals are willing to purchase

free enterprise

business carried on for profit and not owned by the government

-us economy

aka

capitalism or private enterprise

right to private property

right to own, use, or dispose of things of value

• dispose how?

- sell

-give away

-throw away

• examples

-land

-buildings

-tools

right to profits

right to make money

• profit

is the money left from sales subtracting expenses

• why this right?

run the risk of losing their investment

• profit motive

desire to work hard to earn higher profit

helps make our economy strong

right to fair competition

rivalry among businesses to sell goods and services

• encourages businesses to

  -improve products

  -offer better services

  -prices reasonable

  -innovation

freedom of choice

choice to

• enter a business or career you desire

• own property

• make a profit

• to compete

right to

• buy what and where you please

• unionize

• travel when and where

• to express your own opinion w/o slander

globalization

the development of an integrated global economy

• free trade

imports / exports

• free flow of capital

investing in other countries

• cheaper foreign labor markets

outsourcing- producing products/services in another country

causes of globalization

• improved communications

internet

• improved transportation

bulk shipping & air transport

• economic cooperation

trading blocs

EU & NAFTA

globalization impact

• more efficient markets

improved production

• increased competition

better quality & lower prices

• stabilized security

limiting military conflicts

• more wealth equality throughout the world

more people working

free trade

when 2 countries agree to trade goods w/o tariffs, quotas, or restrictions

advantages of free trade

• increased sales

• more jobs

• improves poorer economies

disadvantages of free trade

• outsourcing jobs

• agreements tend to favor one side