Section 1 VOCAB-Understanding Economic Systems and Business

Business/Firm

An organization that strives for a profit by providing goods and services desired by its customers; create goods and services that people can buy, which are the basis of our standard of living.

Goods

Tangible items manufactured by businesses.

Services

Intangible offerings that cannot be held, touched, or stored.

The Standard of Living

The output of goods and services people can buy with the money they have.

Quality of Life

The general level of human happiness based on factors like life expectancy, educational standards, health, sanitation, and leisure time.

Risk

The potential to lose time and money or not accomplish their goals.

Revenue

The money a company receives by providing services or selling goods to customers.

Costs

Expenses incurred from creating and selling goods and services, such as rent, salaries, supplies, and transportation.

Loss

A company whose costs are greater than revenue.

Not-for-profit Organization

An organization that exists to achieve goals other than making a profit.

FACTORS of Production

Natural resources, labor, capital, entrepreneurship, knowledge.

MEANS of Production

Land, labor, capital.

Natural Resources

Commodities that are useful inputs in their natural state, such as farmland, forests, mineral and oil deposits, and water.

Labor/Human Resources

The economic contributions of people working with their minds and muscles, including the talents of everyone involved in manufacturing and selling goods and services.

Capital

The tools, machinery, equipment, and buildings used to produce goods and services, excluding money.

Entrepreneurs

Individuals who combine natural resources, labor, and capital to produce goods or services with the intention of making a profit or achieving a not-for-profit goal; They make decisions that set the course for their businesses and create products and services.

Knowledge

It refers to the combined talents and skills of the workforce and has become a primary driver of economic growth.

External Business Environment Factors

Economic, political and legal, demographic, social, competitive, global, and technological.

Internal Environment

Includes all aspects of a business that management can control, such as operations and employee management; day-to-day decisions like purchasing supplies, hiring employees, and selling products.

Economic Influences

Includes fluctuations in economic activity that create business cycles affecting unemployment, income levels, inflation, and interest rates.

Demography

The study of people's vital statistics, such as age, gender, race and ethnicity, and location.

Social Factors

Includes attitudes, values, ethics, and lifestyles that influence purchasing decisions, and they can be subjective and change over time.

Technology

Applies science and engineering to solve production and organizational problems, stimulating growth and improving productivity; cloud computing for data access and storage, mobile technology for communication, and robots for automating repetitive tasks.

Productivity

Measures the amount of goods and services produced by one worker, which can be enhanced through effective use of technology.

Mobile Technology

It enables communication with employees, customers, suppliers, and others quickly and efficiently.

Economics

The study of how a society uses scarce resources to produce and distribute goods and services.

Economic System

The policies, laws, and choices made by its government that determine what goods and services are produced and how they are allocated.

Mixed Market System

Incorporates elements from more than one economic system; falls between pure capitalism and communism, using government policies to promote economic stability and growth.

Capitalism

based on competition in the marketplace and private ownership of the factors of production; guarantees the right to own property, make a profit, make free choices, and compete; the private enterprise system

Competition

beneficial as it drives innovation, improves quality, and lowers prices for consumers; leads to better and more diverse products, keeps prices stable, and increases the efficiency of producers.

Marketplace

determines what types and amounts of goods and services should be produced and how they should be distributed.

Communism

The government owns virtually all resources and controls all markets.

Socialism

An economic system where basic industries are owned by the government or by the private sector under strong government control.

Market-oriented Systems

Economic systems that incorporate market principles and competition, moving away from strict government control.

Macroeconomics

studies the economy as a WHOLE, analyzing aggregate data for large groups.

Microeconomics

focuses on INDIVIDUAL parts of the economy, such as households or firms.

Circular Flow

illustrates the interaction of households, businesses, and governments through inputs and outputs.

Gross Domestic Product (GDP)

measures economic growth; sum of all goods and services produced in a nation in a year.

Business Cycle

The upward and downward changes in economic activity, characterized by expansions and contractions.

Recession

A decline in GDP that lasts for two consecutive quarters.

Full Employment

about 96% of those available to work actually have jobs.

Unemployment Rate

The percentage of the total labor force that is not working but is actively looking for work (4%).

Discouraged Workers

Those not seeking jobs because they believe no one will hire them; DOES NOT count as unemployment rate.

Types of Unemployment

frictional, structural, cyclical, and seasonal.

Frictional Unemployment

Short-term unemployment not related to the business cycle, including those waiting for a better job or entering the job market for the first time.

Structural Unemployment

Involuntary unemployment caused by a mismatch between available jobs and the skills of available workers.

Cyclical Unemployment

Unemployment that occurs when a downturn in the business cycle reduces the demand for labor throughout the economy; occurs during downturns when labor demand decreases.

Seasonal Unemployment

occurs during specific times of the year and affects workers such as retail employees during the holiday season and agricultural workers.

Inflation

the rise in the average prices of goods and services.

Purchasing Power

the value of what money can buy; a function of inflation and income.

Demand-pull Inflation

when demand exceeds supply.

Cost Push Inflation

increases in production costs, such as expenses for materials and wages/wage increases.

Consumer Price Index (CPI)

An index of the prices of a market basket of goods and services purchased by typical urban consumers; Food and beverages, clothing, transportation, housing, medical care, recreation, and education.

Producer Price Index (PPI)

An index measuring the prices paid by producers and wholesalers for various commodities; indicates subsequent price changes for businesses and consumers; Crude goods, intermediate goods, finished goods, processed foods, lumber, containers, fuels and lubricants, metals, and construction.

Monetary Policy

A government's programs for controlling the amount of money circulating in the economy and interest rates.

The Federal Reserve System (the Fed)

the central banking system of the United States; prints money and controls how much of it will be in circulation; controls money supply by its regulation of certain bank activities.

Federal Funds Rate

The interest rate charged on overnight loans between banks.

Contractionary Monetary Policy

Restricts the money supply, leading to slower economic growth and higher unemployment.

Expansionary Monetary Policy

That increases the money supply, stimulating economic growth and reducing unemployment.

Fiscal Policy

The government's program of taxation and spending to influence the economy.

Crowding Out

When government spending reduces private sector spending.

Federal Budget Deficit

When the government spends more than it collects in taxes.

National Debt

The accumulated total of past federal budget deficits.

Treasury Bond/Note/Bill

A federal IOU that pays interest to its owners.

Demand

The quantity of a good or service that people are willing to buy at various prices.

Law of Supply and Demand

The higher the price, the greater the number of goods a supplier will supply, and vice versa; The higher the price, the lower the quantity demanded, and vice versa.

Demand Curve

A graph that depicts the relationship between price and quantity demanded, typically sloping downward and to the right.

Supply

The quantity of a good or service that businesses will make available at various prices.

Supply Curve

A graph that shows the relationship between various prices and the quantities a business will supply, typically sloping upward and to the right.

Equilibrium

The quantity demanded equals the quantity supplied.

Surplus

(basically profit); when the quantity supplied exceeds the quantity demanded at a given price.

Shortage

When the quantity demanded exceeds the quantity supplied at a given price.

Market Structure

The number of suppliers in a market.

Perfect Competition

Characterized by a large number of small firms selling similar products, with good information about prices and easy entry and exit; Prices determined by supply and demand, with no control by individual firms; Firms produce at lowest cost and resources allocated efficiently.

Pure Monopoly

A single firm accounts for all industry sales of a particular good or service; single firm has significant control over the price and supply of the product.

Barriers to Entry

Factors that prevent new firms from competing equally with the existing firm; often technological or legal.

Natural Resource Control

A barrier to entry where one firm controls most of a natural resource.

Oligopoly

Characterized by a small number of firms that dominate the market; includes few firms, interdependent pricing, barriers to entry.

Monopolistic Competition

Where many firms sell products that are similar but not identical; includes many firms, product differentiation, and some control over prices.

Antitrust Cases

Legal challenges arising out of laws designed to control anticompetitive behavior.

Relationship Management

Involves building and maintaining interactions with customers and suppliers to develop long-term satisfaction and partnerships.

Strategic Alliances

Cooperative agreements between firms that are critical for competitiveness, especially in high-tech industries.

Supply Chain Management

Builds strong bonds with suppliers to enhance overall business performance.