AP Business Vocabulary

Business: Organization that produces and sells goods or services

Goods: Tangible products customers can physically touch

Services: Intangible actions performed for payment

Profit: Revenue minus total costs

Revenue: money earned from sales

Costs: expenses required to operate

Customer: Buyer who makes the purchase decision

Consumer: person who uses the product

Need: a basic requirement necessary for survival

Want: Something that enhances quality of life but is not essential

Problem-Solution Fit: product effectively solves a customer problem

Value Creation: Designing and delivering products or services that solves problems or meet needs in a way customers value

Value Capture: Generating revenue and profit by charging for the value a business creates

Value Proposition: Clear statement of why customers should choose the product

Market: A physical or virtual space where buyers and sellers interact to exchange goods or services

Voluntary Exchange: A transaction in which both the buyer and seller willingly trade because each expects to benefit

Market Price (Equilibrium Price): The price at which quantity demanded equals quantity supplied, resulting in no shortage or surplus

Shortage: A situation in which quality demanded is greater than quantity supplied at a given price

Surplus: A situation in which quantity supplied is greater than quantity demanded at a given price

Competitive Advantage: A business's ability to outperform rivals in the same market, leading to greater market share and higher profits

Differentiated Products: Goods or services with unique features that distinguish them from competitors

Barriers to Entry: Obstacles that make it difficult for new firms to enter a market and compete with existing firms

Market Share: The percentage of total sales in a market controlled by a specific firm

Monopoly: A market structure in which one firm sells a unique product with high barriers to entry and substantial control over price