Business 1 Quiz

Value

The relationship between price of a good/service and benefits offered to customer.

Business

Any organization or activity that provides goods/services in effort to earn a profit.

Profit

Money a business earns in sales (revenue), minus expenses, such as cost of goods and the cost of salaries.

Loss

When a business incurs expenses that are greater than its revenue.

What must businesses do?

• Seek opportunities and avoid pitfalls

• Evaluate risks

• Understand their market

• Adhere to ethical practices

• Meet their goal of generating profits while delivering value to customers

Entrepreneurs

People who risk their time, money, and other resources to start and manage a business.

Standard of living

The quality and quantity of goods and services available to a population

Quality of life

The overall sense of well-being experienced by either an individual or a group

Industrial Revolution

Mid-1700s to the mid-1800s, technological advances fueled rapid industrialization in America

Entrepreneurship Era

In the second half of the 1800s, large-scale entrepreneurs emerged and built business empires.

Production Era

In early 1900s businesses refined production process and created greater effciencies.

Marketing Era

After WWII, businesses began to develop brands to help consumers understand the differences around different products.

Relationship Era

Today, firms aim to build long-term relationships with customers.

Nonprofits

Businesslike establishments that employ people and produce goods and services with the fundamental goal of contributing to the community rather than generating financial gain. Health, human services, art, religion, culture.

Factors of production

Four fundamental elements, NATURAL RESOURCES, CAPITAL, HUMAN RESOURCES, ENTREPRENEURSHIP, that businesses need to achieve their objectives.

Natural resources

Inputs that offer value in their natural state

Capital

Synthetic resources that a business needs to produce goods or services

Human resources

Physical, intellectual, and creative contributions of everyone who works within an economy.

Entrepreneurship in FOP

Process of creating opportunities by harnessing other factors of production

BE: The economic environment

Gov. take active steps to reduce the risks of business, stabilize the economy, and induce growth. Affected by corruption, ethical lapses.

BE: The competitive environment

Companies develop long-term, mutually beneficial relationships with customers. Speed to market provides competitive advantage.

Speed to market

The rate at which a new product moves from conception to commercialization.

BE: The technological environment

Impact of digital technology has transformed businesses

Business technology

Any tools, especially computers, telecommunications, and other digital products, businesses use to become more efficient and effective.

E-commerce

Business transactions conducted online, typically via the internet.

BE: The social environment

Embodies the values, atitiudes, customs, and beliefs shared by groups of people

Demographics

The measurable characteristics of a population. These factors include population size, density, and traits of age, gender, and race.

Social trends

• Diversity

• Aging population

• Rising worker expectations

• Ethics and social responsibility

BE: The global environment

Technology and free trade have blurred lines between individual economies in the world.

Free Trade

An international economic and political movement designed to help goods and services flow more freely across international boundaries.

General Agreement on tarriffs and trade (GATT)

An international trade agreement that has taken bold steps to lower tariffs and promote free trade worldwide

The workforce advantage

• Finding and holding best talent contributes to a firm’s competitive edge

• Investing in worker satisfaction yields tangible bottom-line results.

• Excellent product and superb top management also play major roles in employee satisfaction

Economy

A financial and social system of how resources flow through society, from production to distribution, to consumption

Economics

Study of the choices that people, companies, and governments make in allocating society’s resources

Macroeconomics

Study of a country’s overall economic dynamics: employment rate, gross domestic products, taxation policies.

Microeconomics

Study of small economic units such as individual consumers, families, and individual businesses.

Subprime mortgage loans

Granted to borrowers with low credit scores, and provided lenders higher return than many other investments.

Troubled Assets Relief Program (TARP)

Introduced as an economic bailout play.

Fiscal Policy

Government efforts to influence the economy through taxation and spending. Designed to encourage growth, boost employment, curb inflation.

Budget Surplus

Overage that occurs when revenue is higher than expenses over a given period of time.

Budget Deficit

Shortfall that occurs when expenses are higher than revenue over a given period of time.

Federal debt

Sum of all money that fed government has borrowed over the years and not yet repaid.

Monetary Policy

Fed Reserve decisions that shape the economy by influencing interest rates and the supply of money.

Federal Reserve

• Bailing out shaky firms during financial crisis

• Providing banking services for member banks and the fed government

• Managing the US monetary policy.

Money Supply

Total amount of money within the overall economy

M1 Money Supply

All currency plus checking accounts and travelers checks. Easy

M2 Money Supply

All of M1 money s, plus most savings accounts, money market accounts, and certificates of deposit.

Open Market Operations

Fed reserve function of buying and selling government securities, which include treasury bonds, notes, and bills.

Discount Rate

The rate of interest that the fed reserve charges when if loans funds to banks.

Reserve requirement

A rule set by the fed, which specifies minimum amount of reserves (or funds) a bank must hold, expressed as a percentage of the bank’s deposits.

Free market system

An economic system where prices and production are determined by supply and demand, minimal government intervention.

Economic system

A structure system for allocating limited resources.

Capitalism

An economic system, also known as the private enterprise or free market system, based on private ownership, economic freedom, and fair competition.

Fundamental rights of capitalism

• Right to own business and keep after-tax profits

• Right to private property

• Right to free choice

• Right to fiar competition.

Pure competition

A market structure with many competitors selling virtually identical products. Barriers to entry low.

Monopolistic competition

A market structure with many competitors selling differentiated products, barriers to entry low.

Oligopoly

A market structure with only a handful of competitors selling products that can be similar or different. Barriers to entry high.

Monopoly

A market structure with one producer completely dominating the industry, leaving no room for any significant competitors. Barriers to entry virtually insurmountable.

Supply

The quantity of products that producers are willing to offer for sale at different market prices.

Supply curve

Graphed relationship between price and quantity from a supplier standpoint.

Demand

The quantity of products that consumers are willing to buy at different market prices.

Demand Curve

Graphed relationship between price and quantity from a customer standpoint.

Equilibrium Price

The constant interaction between the supply and demand helps determine the market price in any given category. Price point at which the quantity demanded of a product equals the quantity supplied.

Socialism

Eco. sys. based on principle that the gov. should own and operate key enterprises that directly affect public welfare.

Communism

Eco. and poli. sys. that calls for public ownership of virtually all enterprises, under the directions of a strong central government.

Mixed economies

Eco. that embody elements of both planned and market-based economic systems.

Privatization

The process of converting gov-owned businesses to private ownership.

GDP

Total value of all final goods and services produced within a nation’s physical boundaries over a given period of time. Meas. economic performance of indiv. nations, and compares growth among nations.

Unemployment rate

Percentage of people in the labor force over the age of 16 who do not have jobs and are actively seeking employment.

Contraction

Period of economic downturn, marked by rising unemployment and failing business production.

Recession

Economic downturn marked by a decrease in the GDP for two consecutive quarters.

Producer Price Index

A measure of inflation that evaluates the change over time in the prices that business pay each other for goods/services on a weighted average.

Productivity

The basic relationship between the production of goods and services (output) and the resources needed to produce them (input). Output/input=productivity

Key reasons for internation trade

Access to factors of prod, reduced risk, inflow of innovation.

Access to factors of production

IT helps even out some of the resource imbalances among nations.

Reduced Risk

GT reduces dependence on one economy, lowering the risk for multinational firms.

Inflow of innovation

IT is a source of new ideas for companies.

Opportunity cost

Opportunity of giving up the second-best choice when making a decision.

Absolute advantage

Benefit a country has in a given industry when it can produce more of a product than other nations using the same amount of resources.

Comparative advantage

Benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries.

Balance of trade

Basic measure of the difference in value between a nation’s exports and imports, inc. both goods and services.

Trade surplus

Overage that occurs when the total value of a nation’s exports is higher than the total value of its imports.

Trade deficit

Shortfall that occurs when the total value of a nation’s imports is higher than the total value of its exports.

Balance of payments surplus

Overage that occurs when more money flows into a nation that out of that nation.

Balance of payments deficit

Shortfall that occurs when more money flows out a nation than into that nation.

Exchange rate

Measurment of the value of one nation’s currency relative to the currency of other nations. When dollar is strong than euro, US firms and European exporters benefit.

Countertrade

IT that involves the barter of products for products rather than for currency.

Foreign outsourcing

Contracting with foreign suppliers to produce prod, usually at a fraction of the cost of domestic prod. (Contract manufacturing)

Foreign Licensing and Foreign Franchising

Next level of commitment to IM, a firm (franchisor) grants authority to a foreign firm (franchisee) for rights to produce and market its products/services in a specific geographic area. Allows expansion into foreign markets-little to no investment.