Business: Chapter 1

Economic Stablization Act

a $700 billion bailout plan created to stabilize the nation's economy and restore confidence in the banking and financial industries

Free Enterprise

the system of business in which individuals are free to decide what to produce, how to produce it, and at what price to sell it

Cultural (or workplace) Diversity

differences among people in a work force owing to race, ethnicity, and gender


the organized effort of individuals to produce and sell, for a profit, the products and services that satisfy society's needs


what remains after all business expenses have been deducted from sales revenue


all the different people or groups of people who are affected by the policies and decisions made by an organization


the study of how wealth is created and distributed


the study of the decisions made by individuals and businesses


the study of the national economy and the global economy


the way in which people deal with the creation and distribution of wealth

Factors of Productions

resources used to produce goods and services


a person who risks time, effort, and money to start and operate a business


an economic system in which individuals own and operate the majority of businesses that provide goods and services

Invisible Hand

a term created by Adam Smith to describe how an individual's own personal gain benifits others and a nation's economy

Market Economy

an economic system in which businesses and individuals decide what to produce and buy, and the market determines quantities sold and prices

Mixed Economy

an economy that exhibits elements of both capitalism and socialism

Consumer Products

goods and services purchased by individuals for personal consumption

Command Economy

an economic system in which the government decides what goods and services will be produced, how they will be produced, for whom available goods and services will be produced, and who owns and controls the major factors of production


the average level of output per worker per hour

Gross Domestic Product (GDP)

the total dollar value of all goods and services produced by all people within the boundaries of a country during a one-year period


a general rise in the level of prices


a general decrease in the level of prices

Consumer Price Index (CPI)

a monthly index that measures the changes in prices of a fixed basket of goods purchased by a typical consumer in an urban area

Producer Price Index (PPI)

an index that measures prices at the wholesale level

Business Cycle

the recurrence of periods of growth and recession in a nation's economic activity


two or more consecutive three-month periods of decline in a country's GDP


a severe recession that lasts longer than a recession

Monetary Policies

federal reserve decisions that determine the size of the supply of money in the nation and the level of interest rates

Fiscal Policy

government influence on the amount of savings and expenditures; accomplished by altering the tax structure and by changing the levels of government spending

Federal Deficit

a shortfall created when the federal government spends more in a fiscal year than it receives

National Debt

the total of all federal deficits


rivalry among businesses for sales to potential customers

Perfect (or pure) Competition

the market situation in which there are many buyers and sellers of a product, and no single buyer or seller is powerful enough to affect the price of that product


the quantity of a product that producers are willing to sell at each of various prices


the quantity of a product that buyers are willing to purchase at each of various prices

Market Price

the price at which that quantity demanded is exactly equal to the quantity supplied

Monopolistic Competition

a market situation in which there are many buyers along with a relatively large number of sellers who differentiate their products from the products of competitors

Product Differentiation

the process of developing and promoting differences between one's products and all similar products


a market (or industry) in which there are few sellers


a market (or industry) with only one seller

Natural Monopoly

an industry requiring huge investments in captial and within which any duplication of facilities would be wasteful and thus not in the public interest

Standard of Living

a loose, subjective measure of how well off an indivdual or a society is mainly in terms of want satisfaction through goods and services


a system of exchange in which goods or services are traded directly for other goods and/or services without using money

Domestic System

a method of manufacturing in which an entrepreneur distriburtes raw materials to various homes, where families process them into finished goods to be offered for sale by the merchant entrepreneur

Factory System

a system of manufacturing in which all the materials, machinery, and workers reuiqred to manufacture a product are assembled in one place


the separation of a manufacturing process into distinct tasks and the assignment of the different tasks to different individuals


the organized effort of individuals to produc and sell through the internet, for a profit, the products and services that satisfy society's needs


meeting the needs of the present without comproming the ability of future generations to meet their own needs