Business
any activity that seeks to provide goods and services to others while operating
Goods
TANGIBLE products such as computers, food, clothing, cars, and appliances
Services
INTANGIBLE products that can't be held in your hand such as education, health care, insurance, recreation, travel, and tourism
Entrepreneur
a person who risks time and money to start and manage a business
Revenue
total amount of money business takes in during a given period by selling goods and services.
profit minus costs
Profit
amount of money a business earns above and beyond what it spends for salaries and other expenses
Loss
when a business expenses are more than its revenues
Risk
chance an entrepreneur takes of losing time and money on a business that may not prove profitable
Standard of living
amount of goods and services people can buy with the money they have
Stakeholders
all the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address
customers, employees, stockholders, suppliers, dealers, people in community, etc
Outsourcing
contracting with other companies to do some or all of the functions of a firm like its production or accounting tasks; has had serious consequences in some states where jobs have been lost to overseas competitors
Nonprofit organization
an organization whose goals do not include making a personal profit for its owners or organizers but strive to use financial gains to meet social or educational goals
5 factors of production
resources used to create wealth
1) land or natural resources
2) labor
3) capital (machines, tools, buildings, anything used in production of goods)
4) entrepreneurship
5) knowledge
technology
everything from phones and copiers to computers, mobile, devices, medical imaging, and various software programs and apps that make business processes more effective, efficient, and productive
effectiveness
producing the desired result
efficiency
producing goods and services using the least amount of resources
productivity
amount of output you generate given the amount of input
e-commerce
buying and selling of goods over Internet
database
electronic storage file for information
identity theft
obtaining of individual's personal information such as social security and credit card number for illegal purposes
empowerment
giving frontline workers the responsibility, authority, freedom, training, and equipment they need to respond quickly to customer requests
demography
statistical study of human population with regard to its size, density, and other characteristics such as age, race, gender, and income
climate change
movement of temperature of the planet up or down over time
greening
trend toward saving energy and producing products that cause less harm to the environment
economics
study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals
macroeconomics
part of economics study that looks at the operation of a nation's economy as a whole
microeconomics
part of economics study that looks of the behavior of people and organizations in particular markets
resource development
study of how to increase resources and to create the conditions that will make better use of those resources
neo-Malthusians beliefs
Thomas Malthus
believe that there are too many people in the world and that the solution to poverty is radical birth control , including forced abortions and sterilization
Adam Smith and the Wealth of Nations
Smith envisioned creating more resources so that everyone could become wealthier. He believed freedom was vital to the survival of any economy, especially the freedom to own land or property and to keep the profits from working the land or running a busin
invisible hand
phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all
capitalism
economic system in which all or most of the factors of production and distribution are privately owned and operated for profit
state capitlaism
combination of freer markets and some government control i.e. China
4 basic rights of free-market capitalism
1) right to own private property
2) right to own a business and keep all that business's profits
3) right to freedom of competition
4) right to freedom of choice
FDR believed in 4 additional freedoms that were essential to economic success. What were they?
1) Freedom of speech and expression
2)Freedom to worship in your own way
3) Freedom from want
4) Freedom from fear
free market
market in which decisions about what and how much to produce are made by the market - by buyers and sellers negotiating prices for goods and services
supply
quantity of products that manufacturers or owners are willing to sell at different prices at a specific time
demand
quantity of products that people are willing to buy at different prices at a specific time
market price
price determined by supply and demand. price toward which market will trend
perfect competition
degree of competition in which there are many sellers in a market and one is large enough to dictate the price of a product.
sellers' products appear to be identical such as apples, corn, and potatoes.
no true example of perfect tompetition
monopolistic competition
degree of competition in which a large number of sellers produce very similar products that buyers nevertheless perceive as different.
hot dogs, sodas, computers, T-shirts.
product differentiation, advertising, branding, packaging are key
oligopoly
degree of competition in which just a few sellers dominate the market.
tobacco, gas, automobiles.
few sellers because initial investment required to enter business is often tremendous.
product differentiation and advertising are key
monopoly
degree of competition in which only one seller controls the total supply of a product or service, and sets the price
socialism
an economic system based on the premise that some, if not most basic businesses should be owned by the government so that profits can be more evenly distributed among the people.
entrepreneurs often run smaller businesses and individuals are often taxed r
brain drain
the loss of the best and brightest people to other countries
communism
an economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production.
intrudes further into the lives of people than socialism does.
government has no way of knowing what to produ
free market economies
economic systems in which the market largely determines what goods and services get produced, who gets them, and how the economy grows; capitlaism
command economies
economic systems in which the government largely decides what goods and services will be produced, who will get them, and how the economy will grow; socialism and communism
mixed economies
economic systems in which some allocation of resources is made by the market and some by the government; capitalist towards socialism, socialist towards capitalism
gross domestic product (GDP)
total value of final goods and services produced in a country in a given year
gross output (GO)
measure of total sales volume at all stages of production; almost twice the size of GDP and is considered a better indicator of the business cycle and more consistent with economic growth theory; it shows that consumer spending is the effect, not the caus
unemployment rate
number of civilians at least 16 years old who are unemployed and tried to find a job within the prior 4 weeks
inflation
general rise in prices of goods and services over time; persistent increase in level of consumer prices or a persistent decline in purchasing power of money, caused by an increase in available currency and credit beyond the proportion of goods and service
frictional unemployment
refers to those people who have quit work because they didn't like the job, boss or working conditions and who haven't yet found a new job.
also refers to those people who are entering the labor force for the first time (new graduates or those returning f
structural unemployment
unemployment caused by restructuring of firms or by a mismatch between the skills or location of job seekers and the requirements of available jobs
cyclical unemployment
occurs because of a recession or a similar downturn in the business cycle
seasonal unemployment
occurs when demand for labor varies over the year, as with the harvesting of crops
disinflation
situation in which price increases are slowing (the inflation rate is declining)
deflation
situation in which prices are declining; occurs when countries produce so many goods that people cannot afford to buy them all ( too few dollars chasing too many goods)
stagflation
situation when economy is slowing but prices are going up anyhow
consumer price index (CPI)
monthly statistics that measure the pace of inflation or deflation
core inflation
CPI minus food and energy costs; since costs of food and energy have been going up rapidly, inflation measure reported are actually lower than real costs
producer price index (PPI)
index that measure prices at the wholesale level
recession
two or more consecutive quarters of decline in the GDP; prices fall, people purchase fewer products, and businesses fail; brings high unemployment, increased business failures, and an overall drop in living standards
depression
severe recession usually accompanied by deflation
fiscal policy
federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending;
high taxes to slow economy
national debt
sum of government deficits over time
Keynesian economic theory
theory that a government policy of increasing spending could stimulate the economy in a recession
monetary policy
management of the money supply and interest rates by the Federal Reserve Bank;
raising and lowering of interest rates;
when economy is booming, Fed raises interest rates to make money more expensive borrow and slow economy;
when economy in recession, Fed
True or False: An economist is examining how consumers in the automobile market have responded to recent price increases by car manufacturers. He is examining a microeconomic situation.
True. Microeconomics examines the economic behavior of consumers and organizations in particular markets.
True or False: History shows that free-market capitalism leads to a fair and equitable distribution of wealth.
False. In many nations, capitalism has led to an unequal distribution of wealth. In fact, some businesspeople have sought personal gain through the exploitation of workers. Examples of this sort of exploitation include child labor, sweatshops employing im
True or False: A major distinction between capitalism and socialism concerns the distribution of income.
True. Under capitalism, self-interest is the driving force, so people must be rewarded for what they produce. This can result in unequal distribution of income. Under socialism, the emphasis is on a more equal distribution of income, so those earning more
True or False: Although changes in the CPI provide interesting insights into the overall performance of the economy, these changes have little practical impact on the lives of ordinary people.
False. Changes in the CPI indicate whether the economy is experiencing inflation, disinflation, or deflation. For example, a significant increase in the CPI indicates that prices of a wide variety of consumer goods are rising. Moreover, changes in the CPI
True or False: If the government wants to jump-start the economy resulting in more consumer spending, it will raise taxes.
False. When the government raises taxes, the result is a tightening of consumer and business spending, which has the tendency of slowing the economy. This draws money away from the private sector.
True or False: The Fed is concerned that the economy is growing too rapidly. Given these concerns, it is likely to pursue policies to restrict the supply of money and raise interest rates.
True. When the Fed wants to slow down the economy it will restrict the money supply and increase interest rates to reduce the amount of borrowing.
Adam Smith believed that countries would prosper if businesspeople were free to start and run their own businesses. Businesspeople would make a profit by providing the goods, services and ideas that others in the economy wanted, and they would hire others
invisible hand.
Adam Smith believed that self-interest would lead profit-seeking entrepreneurs to produce goods and services wanted by consumers, and to hire others to grow their businesses. This would prove to be social and economic gain for the entrepre
When the market price of a good is below the equilibrium price, and all other determinants are unchanged:
A) the quantity demanded will exceed the quantity supplied.
B) the supply curve will be to the right of the demand curve.
C) a surplus will exist in
A) the quantity demanded will exceed the quantity supplied.
At the equilibrium price, quantity supplied equals quantity demanded. However, as price falls the quantity demanded of a product tends to increase, while the quantity supplied decreases. The resu
The market price of apples is currently rising. In a free-market economy, the most likely explanation of this price change is that:
A) the government has decided to set a higher price so that firms competing in the market make an adequate profit.
B) there
B) there is a shortage in the market for apples.
In a free market, prices are the result of the interaction of supply and demand. Market prices tend to rise when there is a shortage (i.e. when the quantity demanded exceeds the quantity supplied), and fall
Which of the following people would tend to favor a communist economy?
A) John wants to live in a country with low marginal tax rates.
B) Robin wants to live in a country that encourages rapid economic growth.
C) Liz wants to live in a country where the g
C) Liz wants to live in a country where the government makes almost all of the economic decisions.
Communism is an economic and political system in which the state makes almost all economic decisions and owns almost all the major factors of production.
The next wave of marketable innovations may involve new ways to produce and conserve energy. If we can turn new technology into marketable products and services that produce energy to run our businesses and homes, the U.S. could see a surge in output of g
A) gross domestic product
GDP is the measure of the value of a nation's total output of final goods and services over a given year.
One reason the CPI is monitored very closely by government, businesses, and workers is that:
A) it indicates whether we are running a budget surplus or a deficit.
B) some wages, interest rates, tax rates, and government benefits are tied to changes in the
B) some wages, interest rates, tax rates, and government benefits are tied to changes in the value of the CPI.
As a measure of inflation, the CPI is an index which is often used to determine cost of living increases in wages, salaries, interest rates, and
Emily recently quit her job at a major corporation because she saw little chance for advancement. Although she is still searching for a new position, Emily believes the economy is healthy and she hears that several firms are hiring people with her qualifi
C) an example of frictional unemployment.
Frictional unemployment refers to job seekers who are entering the labor market for the first time (or after a long absence) or are temporarily between jobs. Workers who are frictionally unemployed typically have
While scanning the movies section in your local online newspaper, you click on the business section by mistake. While you're there, you quickly scan a report that says government spending will again exceed tax revenues in the current year. This means that
A) total national debt is likely to increase.
When its tax revenues fall short of its expenditures, the federal government runs a deficit. Since the national debt is the sum of all deficits, running another deficit will increase the debt.
In one of his weekly broadcasts, the Federal Reserve Chairman remarked that inflation had begun to tick upward. However, unemployment in the U.S. was still quite high and economic growth had slowed. With short-term interest rates close to 0 (zero), the Ch
C) monetary; fiscal
Monetary policy is the responsibility of the Federal Reserve Bank and the open market committee. Fiscal policy involves raising and lowering taxes. It is the responsibility of Congress to pass legislation, which affects the amount of t
True or False: The only real purpose of a business is to make money for entrepreneurs.
False. Businesses don't just make money for entrepreneurs. Businesses provide all of us with necessities such as food, clothing, housing, medical care, and transportation, as well as other goods and services that make our lives easier and better.
True or False: The amount of profit or loss earned by a business can be found by subtracting the firm's expenses from its revenues.
True. Revenues minus expenses = profits.
True or False: Political freedom, quality education, access to health care, and a clean environment are all factors that contribute to an improved quality of life.
True. The quality of life focuses on the general well-being of a society, and includes factors such as freedom, security, leisure time, and other factors beyond the goods and services people can buy with their incomes.
True or False: Nicki has joined with several other investors to form a new company that sells foot-care products to consumers over the Internet. Nicki has invested in a B2C e-commerce company.
True. B2C companies specialize in selling goods to consumers over the Internet.
True or False: Businesses use demographic studies to understand where people live, their lifestyles, and what they are likely to buy.
True. Demography is the statistical study of the human population to learn its size, density and characteristics. Since many goods and services appeal to customers with specific demographic characteristics (such as age or income), studying demographic tre
True or False: Demographic trends suggest that businesses will benefit from offering flexible work schedules, elder care, and child care to help employees balance the demands of job and family.
True. The increase in the number of single parent families is a powerful demographic trend. Successful organizations will adjust and accommodate these changes in their social environment
True or False: The current Social Security system will ensure that the young people of today will have Social Security benefits in the future when they retire.
False. The current Social Security system means that today's workers pay for today's retirees. To date this has worked since there are more workers supporting each retiree. However, soon, less money will be coming into Social Security than will be going o
True or False: In most industries, the only producers that pose a serious threat to U.S. manufacturers are those in Japan and Western Europe.
False. Producers in countries like China and India have become major U.S. competitors. For example, Lenovo, a Chinese firm, recently bought IBM's PC unit.
True or False: One of the problems with globalization is that distribution systems and communication systems lack efficiency.
False. Distribution systems and communication systems have improved dramatically, and have contributed toward world trade.
True or False: Historically jobs lost in one sector of the economy have been replaced by increased employment opportunities in other sectors.
True. The history of our nation's economy shows that as jobs were lost in agriculture earlier in the last century, displaced farm workers were often able to find employment in the growing manufacturing sector. More recently, declines in manufacturing empl
True or False: Dee Duction is a financial planner who helps people find ways to save for retirement and lower their taxes. Dee is employed in the service sector of the economy.
True. The service sector produces intangible goods. Financial planning is one type of service.
Last year, Adventure Enterprises reported revenues of $24 million while its total expenses were $10 million. Based on this information, Adventure reported:
A) profits of $14 million.
B) profits of $34 million.
C) losses of $14 million.
D) losses off $34 m
A) profits of $14 million.
Profits are found by subtracting costs and expenses from revenues, so Adventure Enterprises profits are $24 million - $10 million = $14 million
The standard of living for a nation's people depends mainly on:
A) the quality of the natural environment.
B) how much political freedom they have.
C) their income and the prices of the goods and services they buy.
D) the amount of labor and capital avail
C) their income and the prices of the goods and services they buy.
The standard of living of a country refers to the amount of goods and services people can buy with the money they have.
Leanne owns a nursery. The trucks, handcarts, and forklift she purchased for the business are called __________ investments.
A) natural resources
B) intangible resources
C) current asset
D) capital
D) capital
As a factor of production, capital includes tools, machinery, equipment, such as the trucks, hand carts, and forklift machines mentioned in this question.
Which of the following is an advantage of utilizing technology?
A) Technology increases the cost of production.
B) Technology reduces the need for a marketing plan.
C) Productivity increases.
D) Management becomes isolated from the demands of stakeholders
C) Productivity increases.
Technology is everything from phones to software programs that make businesses more efficient and productive. Productivity is the amount of output you generate given the amount of input.