Intro to Business Openstax Chapter 1

barriers to entry Factors, such as technological or legal conditions, that prevent new firms from competing equally with an existing firm.

business An organization that strives for a profit by providing goods and services desired by its customers.

business cycles Upward and downward changes in the level of economic activity.

capital The inputs, such as tools, machinery, equipment, and buildings, used to produce goods and services and get them to the customer.

capitalism An economic system based on competition in the marketplace and private ownership of the factors of production (resources); also known as the private enterprise system.

circular flow The movement of inputs and outputs among households, businesses, and governments; a way of showing how the sectors of the economy interact.

communism An economic system characterized by government ownership of virtually all resources, government control of all markets, and economic decision-making by central government planning.

consumer price index (CPI) An index of the prices of a “market basket” of goods and services purchased by typical urban consumers.

contractionary policy The use of monetary policy by the Fed to tighten the money supply by selling government securities or raising interest rates.

cost-push inflation Inflation that occurs when increases in production costs push up the prices of final goods and services.

costs Expenses incurred from creating and selling goods and services.

crowding out The situation that occurs when government spending replaces spending by the private sector.

cyclical unemployment Unemployment that occurs when a downturn in the business cycle reduces the demand for labor throughout the economy.

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

demand curve A graph showing the quantity of a good or service that people are willing to buy at various prices.

demand-pull inflation Inflation that occurs when the demand for goods and services is greater than the supply.

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

economic growth An increase in a nation’s output of goods and services.

economic system The combination of policies, laws, and choices made by a nation’s government to establish the systems that determine what goods and services are produced and how they are allocated.

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

entrepreneurs People who combine the inputs of natural resources, labor, and capital to produce goods or services with the intention of making a profit or accomplishing a not-for-profit goal.

equilibrium The point at which quantity demanded equals quantity supplied.

expansionary policy The use of monetary policy by the Fed to increase, or loosen, the growth of the money supply.

factors of production The resources used to create goods and services.

federal budget deficit The condition that occurs when the federal government spends more for programs than it collects in taxes.

Federal Reserve System (the Fed) The central banking system of the United States.

fiscal policy The government’s use of taxation and spending to affect the economy.

frictional unemployment Short-term unemployment that is not related to the business cycle.

full employment The condition when all people who want to work and can work have jobs.

goods Tangible items manufactured by businesses.

gross domestic product (GDP) The total market value of all final goods and services produced within a nation’s borders each year.

inflation The situation in which the average of all prices of goods and services is rising. knowledge The combined talents and skills of the workforce.

knowledge workers Workers who create, distribute, and apply knowledge.

macroeconomics The subarea of economics that focuses on the economy as a whole by looking at aggregate data for large groups of people, companies, or products.

market structure The number of suppliers in a market.

microeconomics The subarea of economics that focuses on individual parts of the economy, such as households or firms.

mixed economies Economies that combine several economic systems; for example, an economy where the government owns certain industries but others are owned by the private sector.

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

monopolistic competition A market structure in which many firms offer products that are close substitutes and in which entry is relatively easy.

national debt The accumulated total of all of the federal government’s annual budget deficits.

not-for-profit organization An organization that exists to achieve some goal other than the usual business goal of profit.

oligopoly A market structure in which a few firms produce most or all of the output and in which large capital requirements or other factors limit the number of firms.

perfect (pure) competition A market structure in which a large number of small firms sell similar products, buyers and sellers have good information, and businesses can be easily opened or closed.

producer price index (PPI) An index of the prices paid by producers and wholesalers for various commodities, such as raw materials, partially finished goods, and finished products.

productivity The amount of goods and services one worker can produce.

profit The money left over after all costs are paid.

purchasing power The value of what money can buy.

pure monopoly A market structure in which a single firm accounts for all industry sales of a particular good or service and in which there are barriers to entry.

quality of life The general level of human happiness based on such things as life expectancy, educational standards, health, sanitation, and leisure time.

recession A decline in GDP that lasts for at least two consecutive quarters.

relationship management The practice of building, maintaining, and enhancing interactions with customers and other parties to develop long-term satisfaction through mutually beneficial partnerships.

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

risk The potential to lose time and money or otherwise not be able to accomplish an organization’s goals.

savings bonds Government bonds issued in relatively small denominations.

seasonal unemployment Unemployment that occurs during specific seasons in certain industries.

services Intangible offerings of businesses that can’t be held, touched, or stored.

socialism An economic system in which the basic industries are owned either by the government itself or by the private sector under strong government control.

standard of living A country’s output of goods and services that people can buy with the money they have.

strategic alliance A cooperative agreement between business firms; sometimes called a strategic partnership.

structural unemployment Unemployment that is caused by a mismatch between available jobs and the skills of available workers in an industry or region; not related to the business cycle.

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

supply curve A graph showing the quantity of a good or service that businesses will make available at various prices.

technology The application of science and engineering skills and knowledge to solve production and organizational problems.

unemployment rate The percentage of the total labor force that is not working but is actively looking for work.