Business and Society Exam 1

Revenue

The entire amount of income before any deductions are made

Profit

Total revenue minus total cost

Loss

When the cost of the business exceeds the revenue and profit

Stakeholders

All the people who stand to gain or lose by the policies and activities of a business

Entrepreneur

Someone who organizes a business venture and assumes the risk for it

Demographic

Concerning the general characteristics of a given population, including such factors as numbers, age, gender, birth and death rates, and so on.

Productivity

The amount of output you generate given the amount of input

Effectiveness

Producing the desired result

Efficiency

Producing goods and services using the least amount of resources.

What is meant by "huge risks often result in huge profits"?

The bigger the risk, the bigger the reward if it works. Cannot make a lot of money if you don't risk any.

What is "standard of living"? "Quality of life"? Are they related?

1) Refers to the amount of goods and services people can buy with the money they have 2) Refers to the general well-being of a society in terms of its political freedom, natural environment, education, healthcare, and other rewards that add to satisfaction. 3) Yes, money buys the goods and services for the community and it's well-being.

Non-Profit Organization

A business whose goal is to provide a service rather than to make a profit, such as the American Red Cross.

For-Profit Organization

Organizations that motivated to earn profits

What's the difference between a non-profit and a for-profit organization?

Non-Profits strive to make financial gains, but they use them to meet their social or educational goals rather than focusing on personal profit.

What are the benefits of being an entrepreneur? The risks or limitations?

1) Freedom to make your own business decisions, opportunity and wealth. 2) You do not have the benefits of paid vacation time, company car, health insurance, or day care. Must be provided by yourself. 3) As an entrepreneur, you could also fail.

What role do entrepreneurs play in the U.S. economy?

Play a major role. Stimulate the economy by supplying the public with goods and services.

The five factors of production that lead to wealth creation?

1) Land (or natural resources) 2) Labor/Workers 3) Capital (whatever is used in the production of goods) 4) Entrepreneurship 5) Knowledge

Which of the five factors of production does Drucker believe to be the most important?

Knowledge

What is the GDP? Per capita GDP?

1) It represents the total dollar value of all goods and services produced over a specific time period 2) The value of all goods and services produced in the country, divided by the population.

What are the five elements in the business environment?

1) Economic and legal 2) Technological 3) Competitive 4) Social 5) Global business

What can a government do to encourage entrepreneurship?

Allow private ownership of businesses, minimize spending and keep taxes and regulations to a minimum, minimize interference with the free exchange of goods and services, passing laws that enable business people to write enforceable contracts, establish a currency that's tradable in world markets, minimize corruption.

How does technology affect business?

Makes the job more productive, increases effectiveness and efficiency.

What is "e-commerce"?

The buying and selling of good over the internet.

What is "identity theft"?

The obtaining of an individual's personal information for illegal purposes.

Explain "business is becoming customer driven".

Based on what the consumers want: quality, low prices, great service.

How are companies using "empowerment" in their customer service process?

Giving employees responsibility, authority, freedom, training and equipment they need to respond quickly to customer requests.

Describe the impact the middle-age and elderly population has in the United States.

They are currently the wealthiest demographic in the US, represent a profitable market for companies involved in food service, transportation, entertainment, education, lodging, ect. Large spenders.
Also bad. Social security is depleting while the elderly population is rising, not enough SS money.

What are the BRIC countries? Why are these countries lumped together in this category? What impact do they have on the world economy?

Brazil, Russia, India, China. They're at a similar stage of newly advanced economic development. They're predicted to be very prominent economies by 2027.

What impact has the progress of agriculture and manufacturing had on the US economy? The service industry?

1) Farmers are more productive due to advances in farm equipment and technology. 2) Make up 70% of the US economy. Service sector has the largest area of increasing growth and employment.

Economics

The study of how society chooses to employ resources to produce goods and services and distribute them for consumption.

Macroeconomics

Studies the overall operation of a nations economy

Microeconomics

The branch of economics that studies the economy of consumers or households or individual firms

Capitalism

An economic system based on private ownership of capital

Inflation

A general and progressive increase in prices

Disinflation

A reduction in the rate of inflation

Deflation

A contraction of economic activity resulting in a decline of prices

Stagflation

A period of slow economic growth and high unemployment (stagnation) while prices rise (inflation)

Brain Drain

Large-scale emigration by talented people.

What is the concept behind Grameen Bank? What are microcredits? Who has benefited from this bank?

1) Giving very small loans to impoverished people. 2) Small loans. 3) Underprivileged clients.

What is Thomas Malthus' theory of economics?

Too many people in the world, the food will run out.

What is happening with the population growth in the industrialized countries of the world? With the developing countries?

1) Too slow, not enough young people to care for the elderly. 2) Growing too fast, leading to greater poverty and unrest.

Who is Adam Smith and what is his theory of economics?

Wrote The Wealth of Nations in 1776. Believed freedom was vital to the survival of any economy, people also need incentives to work hard.

What is the "invisible hand"?

Phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all.

What are ways that a small business can positively impact their communities?

Bring business to the community, jobs, goods, services and ideas.

What is capital? Four countries that have capitalism?

The US, England, Australia, Canada.

Four foundations of capitalism are...

1) The right to own private property. 2) Right to own a business and keep all it's profits 3) Right to freedom of competition 4) Right to freedom of choice

Which President added more "freedoms" as essential to economic success? What were the freedoms?

Roosevelt
1. Freedom of speech and expression.
2. Freedom to worship in your own way.
3. Freedom from want.
4. Freedom from fear.

How are prices determined?

Free market

Define and describe "supply".

Number of products owners are willing to sell at a different price

Define and explain "demand".

Number of products that people are willing to buy at different prices at a specific time

Define and explain the "equilibrium point".

Determined by supply and demand, is the negotiated price

What is "market price"?

Negotiated price

Describe the benefits and limitations of "free markets", open competition:

Decisions about what goods and services get produced who gets them and how the economy grows

What are the benefits and consequences of "Socialism"?

Benefit: social equality. Consequence: the loss of people to other countries.

What are the benefits and limitations of "Communism"?

Makes all economic decisions, limits religions and jobs

Free-market economies" are:

What goods and services get produced who gets them and how the economy grows

Command economies" are:

Socialism and communism are variations on this economic system

Mixed economies" are:

Economic systems which some location of resources is made by the govt and some market

What is the largest employer in the U.S. today?

Government

Key economic indicators:

1) Gross domestic product
2) Unemployment rate
3) Price indexes

What is the GDP? Why is it important to know this? What impacts the GDP?

Gross domestic product. Because its between two different countries. The economy

What is the unemployment rate? How is it determined?

12.9 the percentage of civilians at least 16-years-old who are unemployed and tried to find a job within the prior four weeks.

The four types of unemployment:

1) Frictional
2) Structural
3) Cyclical
4) Seasonal

Explain: "the higher the productivity, the lower the costs of producing goods and services" (p. 48):

The more goods produced, the cheaper things would be.

Explain" "high productivity can lead to high unemployment" (p. 48):

The technology being made will take the jobs of people

Why it is that an influx of machinery and technology not increase productivity in the service industry?

Just adds to the quality doesn't output a worker

The Business Cycle:

1) Economic boom
2) Recession
3) Depression
4) Recovery

What are the ways the federal government tries to keep the economy stable through "Fiscal Policy"?

1) to slow the economy the government will: __draw money away from the sector 2) to "jump start" the economy the government will increase

What is the "national deficit" and the "national debt"?

The amount of money the federal government spends

Define and explain the "Keynesian economic theory".

The theory that the gov't policy of increasing spending and cutting taxes should stimulate the economy in recession

What is "The Fed"? How do they control money in the U.S. through "Monetary Policy"?

1) when the economy is booming they increase interest rates
2) when the economy needs stimulating they decrease interest rates