Chapter 2: How Economic Issues Affect Business - Vocabulary Flashcards

Vocabulary flashcards covering key concepts from the lecture notes on economics (chapter 2), including capitalism, market structures, macro/microeconomics, and economic indicators.

Macroeconomics

The study of the operation of a nation’s economy as a whole.

Microeconomics

The study of the behaviour of people and organizations in particular markets.

Resource Development

The study of how to increase resources and create the conditions that will make better use of those resources.

Capitalism

An economic system in which all or most of the means of production and distribution are privately owned and operated for profit.

Free-market capitalism

Capitalism in which decisions about what to produce and in what quantities are made by buyers and sellers negotiating prices; no country is purely capitalist.

Communism

An economic and political system in which the state makes almost all economic decisions and owns almost all major factors of production.

Socialism

An economic system based on government ownership of some basic businesses to distribute profits more evenly.

Mixed economy

An economy that combines private ownership with government involvement; it typically features a blend of free market principles and centralized planning. .

Equilibrium point

The price and quantity at which quantity supplied equals quantity demanded, clearing the market.

Supply

The quantity of products that producers are willing to sell at different prices at a specific time; generally rises as price rises.

Demand

The quantity of products that buyers are willing to buy at different prices at a specific time; generally rises as price falls.

Price determination

The process by which supply and demand interact to establish an equilibrium price.

Equilibrium price

The market price at which the quantity supplied equals the quantity demanded.

Perfect competition

A market structure with many sellers, none large enough to dictate price; no single seller can control the market.

Monopolistic competition

A market with many sellers offering differentiated products.

Oligopoly

A market dominated by a few sellers; high entry barriers and interdependent pricing.

Monopoly

A market with a single seller that controls supply and price.

GDP (Gross Domestic Product)

The total value of goods and services produced in an economy; a primary measure of economic performance.

Productivity

Output per hour of labor; increases when technology or processes improve efficiency.

Standard of living

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

Quality of life

General well-being of a society, including health care, environment, education, safety, and freedom.

Unemployment

The condition of being without work while actively seeking employment; measured by the unemployment rate.

Frictional unemployment

Unemployment caused by people moving between jobs or entering the workforce for the first time.

Structural unemployment

Unemployment caused by a mismatch between workers’ skills/location and job requirements.

Cyclical unemployment

Unemployment caused by a downturn in the business cycle (recessions).

Seasonal unemployment

Unemployment due to regular seasonal patterns in demand for labor.

Inflation

A general rise in the prices of goods and services over time; measured by price indexes like the CPI.

Consumer Price Index (CPI)

An index used to measure changes in the average price level of consumer goods and services.

Producer Price Index (PPI)

An index that measures price changes received by producers for goods and services.

Deflation

A decrease in the general price level.

Disinflation

A slowing rate of inflation (inflation rate is decreasing).

The Business Cycle

Periodic rises and falls in economic activity: boom, recession, depression, recovery.

Boom

A period of strong economic growth and high activity.

Recession

A decline in GDP for two or more consecutive quarters.

Depression

A severe and prolonged recession, often with deflation.

Recovery

The phase of the cycle when the economy starts to grow again after a recession or depression.

Wealth of Nations (Adam Smith)

A foundational work that described capitalism as a system of rights and freedoms with incentives to work and invest.

Housing starts

The beginning of new residential construction projects; a leading economic indicator.