Exam #1 (Chapters 1-3) - Introduction to Business

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A set of vocabulary flashcards covering core terms and concepts from the lecture notes across business, economics, ethics, and global trade.

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66 Terms

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Profit

The financial gain from business activities; essential for growth, funding operations, salaries, investments, and sustainability.

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Business

An activity that provides goods and services to others while seeking a profit.

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Goods

Tangible items that can be owned (e.g., shoes, cars, televisions).

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Services

Intangible activities that require the consumer's presence (e.g., haircut, legal advice, car repair).

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Economic ripple effect of profits

When salaries are spent in the economy, fueling spending, job creation, and higher living standards.

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Private ownership

Economies where consumers decide what to buy; firms produce based on demand, influencing living standards.

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Value

The worth of a product to a buyer; to be successful, value must exceed price.

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Stakeholders

Anyone affected by a business: customers, employees, stockholders, suppliers, communities, environmental groups.

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Stakeholder wheel

A visual model showing the need to balance diverse stakeholder demands around a business.

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For-profit vs. non-profit

For-profits pursue personal profits; non-profits fund programs or causes; both require sound finances.

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Non-profit employee considerations

Talented workers may accept lower salaries in exchange for meaningful work and non-monetary benefits.

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Demographics in business

Trends like more working women and rising numbers of female CEOs.

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Internal environment

controllable factors inside a business (employees, structure, culture).

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External environment

Uncontrollable factors outside a business (economic, legal, technology, social, global events).

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GDPR analogy

Example of external environment: new data privacy laws changing data handling and costs.

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Technology

Tech advances that boost efficiency (AI, cloud computing, e-commerce).

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Productivity

Output divided by input; higher productivity lowers costs and prices.

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Supply Curve

Shows how price affects the quantity suppliers are willing to sell; typically upward sloping.

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Demand Curve

Shows how price affects the quantity consumers are willing to buy; typically downward sloping.

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Market Equilibrium

Point where the supply and demand curves intersect; Qs equals Qd.

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Surplus

When price is above equilibrium, excess supply occurs.

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Shortage

When price is below equilibrium, excess demand occurs.

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Five factors of production

Land, Labor, Capital, Entrepreneurship, Knowledge – the sources of wealth creation.

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Economic systems

Command, Free Market (Capitalism), Socialism, Communism, Mixed Economy.

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Invisible Hand

Adam Smith's idea that self‑interested action unintentionally benefits society through resource allocation.

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Capitalist rights

Four basic rights: private property, private business/profits, freedom of competition, freedom of choice.

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Pros of capitalism

Encourages risk-taking, competition, innovation, and quality/fair prices.

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Cons of capitalism

Can lead to income inequality and disadvantages for some groups.

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GDP

Gross Domestic Product: total value of goods/services produced in a country in a year.

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Productivity indicators

Output per input; higher productivity lowers costs and prices.

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Unemployment types

Structural, cyclical, seasonal, frictional.

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Inflation/Deflation/Stagflation

Inflation: general price rise; Deflation: price decline; Stagflation: slow economy with rising prices.

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CPI

Consumer Price Index; measures pace of inflation/deflation.

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PPI

Producer Price Index; measures wholesale price changes.

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Fiscal Policy

Government taxation and spending to stabilize the economy.

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Monetary Policy

Central Bank actions to manage money supply and interest rates.

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US debt-to-GDP

Ratio of national debt to GDP; a high ratio can be unsustainable.

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Manufacturing to services shift

Economies move from manufacturing to services; service productivity measurement is complex.

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Service productivity/data challenges

Measuring service productivity and handling data on individuals can be difficult.

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Global market size

Approximately 8 billion people; projected growth toward 9+ billion, creating international opportunities.

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Importing/Exporting

Importing: buying foreign goods for domestic use; Exporting: selling domestically produced goods abroad.

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Free trade benefits

Stronger comparative advantage, increased innovation, efficiency, lower prices, greater variety.

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Free trade drawbacks

Possible displacement of domestic workers; may prompt protectionism.

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Comparative advantage

Country specializes where it has lower opportunity cost, boosting global production.

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Absolute advantage

Country produces a good more efficiently or at lower cost than others.

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Trade deficits/creditors

US trade deficit persists; China emerges as a major creditor.

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Fair Trade

Ethical trading practices beyond simple free trade.

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Dumping

Selling a good in a foreign market below cost or below home-market price; often illegal.

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Global expansion modes

Licensing, Franchising, Exporting, Contract Manufacturing, Joint Ventures, Strategic Alliances, Direct Foreign Investment.

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Offshoring

Relocating a business process to another country for cost or capability reasons.

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Pros of offshoring

Cost savings, focus on core activities, efficiency, competitiveness, access to global talent.

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Cons of offshoring

Domestic job losses, quality control issues, supply-chain risk, reduced managerial control, ethical concerns.

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CSR

Corporate Social Responsibility; businesses address societal welfare beyond profit.

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Ethical dilemma

A situation with conflicting moral choices, often involving legality vs. ethics.

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Ethics vs law

Ethical behavior goes beyond mere legality; legality does not guarantee ethics.

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Code of ethics

Guidelines to promote ethical conduct: compliance-based (controls/penalties) vs integrity-based (values-driven).

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Six steps to improve ethics

Top management support; clear expectations; training; ethics office; supplier codes; walk the talk.

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Whistleblowing protections

Reporting unethical conduct with safeguards against retaliation.

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Kennedy’s consumer rights

Right to safety, right to be informed, right to choose, right to be heard.

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CSR vs profit

Profit and CSR can align long-term when focused on value, trust, and customer loyalty.

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Insider trading

Using nonpublic information for personal gain; example: Martha Stewart case.

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Turnover costs

Costs of losing and replacing employees; strategic benefits like better benefits can reduce turnover.

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Social audits/watchdogs

Groups that monitor ethics: investors, researchers, environmentalists, unions, consumers.

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Supply chain responsibility

Multinational suppliers must meet codes of conduct and ensure worker safety and fair wages.

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FCPA

Foreign Corrupt Practices Act; prohibits bribery of foreign officials by U.S. companies; enforcement globally.

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Moral of the chapter

Adapt, understand the business environment, and apply economic principles to create value and societal well-being.

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