Economic Principles and Business Organizations

These flashcards cover fundamental economic concepts, the laws of supply and demand, business organization types, market mechanisms, and investment principles.

Demand

The willingness and ability of consumers to purchase a good or service at various prices.

Law of Demand

As the price of a good decreases, the quantity demanded increases, and vice versa.

Inverse relationship

A relationship where one variable increases as the other decreases.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in price.

Law of Supply

As the price of a good increases, the quantity supplied increases, and vice versa.

Direct relationship

A relationship where two variables move in the same direction.

Market price

The price at which goods and services are sold in a competitive market.

Equilibrium price

The price at which the quantity of a good demanded equals the quantity supplied.

Sole proprietorship

A business owned and operated by a single individual.

Partnership

A business operation where two or more individuals share ownership and profits.

Unlimited liability

A situation where the owners of a business are personally responsible for the business's debts.

Corporation

A legal entity that is separate from its owners, providing limited liability.

Limited liability

A legal structure where an owner's financial liability is limited to their investment in the company.

Franchise

A business model where a parent company allows individuals to operate a business under its brand.

Stockholder/shareholder

An individual or entity that owns shares in a corporation.

Macroeconomics

The branch of economics that examines the economy as a whole.

Microeconomics

The branch of economics that studies individual consumers and businesses.

Scarcity

The limited nature of society's resources.

Opportunity cost

The cost of forgoing the next best alternative when making a decision.

Factors of production

The resources used in the production of goods and services: Land, Labor, Capital, and Entrepreneurship.

Production possibilities

A curve showing the maximum attainable combinations of two goods that can be produced with available resources.

Mixed Economy

An economic system combining private and public enterprise.

Circular Flow

A model that illustrates how money moves through the economy.

Gross Domestic Product (GDP)

The total value of all goods and services produced in a country within a given time period.

P/E Ratio

Price-to-earnings ratio; a measure used to value a company by comparing its current share price to its earnings per share.

Dividend

A portion of a company's earnings distributed to shareholders.

Buying long (The Bulls)

Investing in a stock expecting its price will rise.

Selling short (The Bears)

Selling borrowed stock expecting that its price will fall.

Compound interest

Interest calculated on the initial principal and also on the accumulated interest from previous periods.

Risk and reward

The relationship between the potential risk involved in an investment and the potential return.

Stock Market

A collection of markets where stocks (shares of ownership in businesses) are bought and sold.