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What are the Origins
What are the Origins of a Business Venture?
| Term | Definition |
|---|---|
| wants | things we wish we could have that usually add to the comforts of life; satisfied more often to those with additional income |
| needs | things required for survival; food, clothing, shelter |
| competition | the battle between businesses for consumers that purchase similar products |
| goods | a product that can be physically weighed and measured; tangible |
| services | professional know how that is purchased and used at the time of purchase; intangible |
| consumer | anyone or anything that uses resources, establishes demand for goods and services in the market economy |
| producer | establishes supply of goods and services in a market economy to meet consumer demand |
| business | any activity where goods and services are bought and sold in order to make a profit |
| marketplace | any place where goods and services are bought and sold in order to make a profit |
| resources | anything that can be used to produce or purchase a good or service |
| opportunity cost | the value of the alternative way to use your available resources that you did not choose to utilize |
| trade off | when faced with choices, individuals, businesses, and governments must make one choice over another |
| profit | SALES - EXPENSES; the motive for entrepreneurs to start a business |
| command economy | an economy in which the government answers all of the economic questions for its society and expects the benefits of all production; communism |
| traditional economy | an economy with no entrepreneurial spirit where processes are passed on from generation to generation with little change |
| market economy | an economy, also known as free enterprise or capitalism, where the three economic questions are answered by the demand of consumers and the supply of goods and services by producers |
| mixed economy | referred to commonly as socialism, and reflects the government taking a more active role in how business is conducted. Major industries utilized by a majority are influenced by government but other industries are left to the marketplace. |
| price | the amount that the consumer is willing to pay and the amount the producer is willing to accept for goods and services |
| factors of production | known as the economic resources until they are used to make a product or provide a service |
| human resouces | people expending their mental and physical energy to produce in exchange for a wage (pay); labor |
| natural resources | raw materials that can be used for production of goods and services that occur in nature |
| capital resources | land, buildings, equipment, and tools used in the process of producing goods and services |
| economics | the study of how a society uses its available resources to provide for the wants and needs of its citizens |
| supply | the amount of goods and services provided by producers at various prices |
| law of supply | indicates that the greater the price and the greater the profit of an item being produced, more of that item will be produced |
| demand | the amount of goods and services demanded by consumers at various prices |
| law of demand | indicates that the lower the price of an item (assuming reasonable quality), the more of that item a consumer will purchase |
| scarcity | there is a limited amount of resources for each society to use in deciding what needs and wants will be satisfied |
| equilibrium (market) price | the point as which the amount demanded equals the amount supplied and a market price for that good or service is created |
| business cycle | naturally occurring movement in a market economy from one phase to another as economic conditions accelerate (increase) and decelerate (decrease) |
| prosperity | a phase of the business cycle promoting high productivity and output (GDP), low unemployment, and high demand and inflation |
| recession | a phase of the business cycle where productivity and output slows, thereby requiring fewer workers so unemployment goes higher, demand and supply decrease moderating inflation |
| recovery | a phase of the business cycle indicated by increasing demand for goods and services, lowering unemployment rate, and a gradual increase in productivity and output |
| depression | a phase in the business cycle resulting in very low output/productivity, extremely high unemployment, and deflation of prices due to little demand for goods and services from consumers |
| gross domestic product | measure of productivity of workers; the dollar value of all final goods and services produced in a country in a given year. Sum total of consumer spending, business spending, government spending, and exports minus imports |
| inflation | a general increase in the prices of goods and services; normally a sign that demand for goods and services is high |
| deflation | a general decrease in the prices of goods and services; normally a negative sign for the economy as demand for goods and services is low |
| consumer price index | used to measure the percentage of inflation during a time period. Calculated by dividing the amount of price increase by the original price and multiplying that answer by 100 |
| GDP per capita | considered a more accurate indicator of productivity than Gross Domestic Product since it measures productivity per citizen. Gross Domestic Product divided by the country's population |
| personal income | earned and unearned money that a person gains from selling his or her mental and physical abilities in the form of labor |
| retail sales | measurement in a market economy reported by businesses that also reflects the amount of consumer spending in the form of what people are buying, how much they are buying, and from whom they are buying |
| borrowing activities | measurement to track how much credit is being utilized by consumers and businesses in a market economy. while credit can help spur economic growth if used responsibly, too much credit can be viewed negatively |
| savings and investment activities | measurement tracking what percentage of incomes are being saved or invested by consumers instead of spending disposable income. How are consumers balancing each? |
| budget deficit | when a business spends more money in expenses than it brings into the company as revenue |
| budget surplus | when a business brings in more revenue from operations than it spends |
| national debt | sum of all the budget deficits of a country. US currently at over $19.3 trillion |
| interest rates | the rate at which interest will be calculated on borrowed money. Higher interest rates will slow borrowing, while lower interest rates will encourage borrowing |
| mortgage rate | the rate of interest charged on a home loan |
| T-Bill rate | the rate of interest earned and paid on a short term federal government debt |
| Treasury Bond rate | the rate of interest earned and paid on a long term federal government debt(US) |
| prime rate | the interest rate that a financial institution will offer only to its "best" customers |
| discount rate | the interest rate that the Federal Reserve bank will loan money to its member banks |
| bonds | methods used by governments and corporations to raise capital (money) for operations. |
| corporate bond | debt issued by a corporation to raise capital for expansion, new capital resources, etc. |
| government bonds | debt issued by a government to raise money for its operations, federal, state, or local |
| stocks | sold by a corporation to raise capital for expansion or other business expenses, whereby the corporation is selling part of its ownership to the shareholder |
| economic questions | each society (or business) must use its available and accessible resources to answer: What do we produce? How do we produce it? Who will share in what we produce? Different economies create different answers. |
| domestic business | businesses that process and sell only within their national borders |
| international business | business that is produced, processed, and/or sold across national borders. companies operating in multiple countries are referred to as multinational companies. |
| absolute advantage | a distinct quality in the favor of the manufacturer or service provider that enables it to outproduce its competitors and operate more efficiently |
| comparative advantage | a slight advantage in the favor of the manufacturer or service provider that enables it a competitive advantage versus multiple competitors |
| imports | goods and materials purchased from other countries and brought into the purchaser's country for sale or further processing |
| exports | goods and materials produced in the home country and sold to other countries |
| balance of trade | comparing the $ amount of imports of a country with the $ amount of exports from that country. When exports > imports, it is considered favorable. When imports > exports, it is considered unfavorable |
| balance of payments | measuring the actual money that is flowing from one country into another from investment, tourism, etc. Considered favorable when money received exceeds money spent, and unfavorable when money spent exceeds money received. |
| foreign exchange market | locations where one country's currency can be exchanged for the currency of another country |
| exchange rates | the amount that one country's currency will trade versus the value of another country's currency. each country's currency maintains a value versus the currency of other countries |
| influences on international relationships | companies must become educated about the cultures, business practices, geography, and products of countries it wishes to do business in |
| cultural influences | may include religion, family relationships, gestures, and what businesses in a chosen country find acceptable practice |
| geography | countries must understand the terrain of the country and how it will affect doing business there. How close is it to a seaport, river, or is it surrounded by mountains that could impede travel |
| economic development | does the available infrastructure of the country allow the company to succeed in business there. Does the country have a reliable electrical grid, internet capability, modern roads, airports and shipping facilities? |
| political stability | will the countries political position remain advantageous and stable toward American business? Is the country subject to sudden change in government and new laws that could disrupt operations? |
| free trade agreements | signed agreements between the governments of countries that enable importing and exporting of goods between them without barriers (tariffs, quotas, or embargoes) |
| free trade zones | areas of a country,usually near seaports, that enable a country who is exporting goods to use a location to store, assemble, and reload goods without penalty. Provides local jobs and possibly fees when the goods leave the zone. |
| common markets | countries agreeing to operate as one and allow businesses to operate within the market freely |
| franchising | an alternative to building brick and mortar operations in a foreign country, whereby the parent company sells its business plan to the franchisee for a fee and the franchise must operate completely according to the plan |
| licensing | the parent of a particular trademark, logo, or process allows the placement of its intellectual property on the product produced for a fee. Another alternative to bricks and mortar operations |
| joint venture | a business agreement between 2 or more companies that remain separate businesses, but work together on a project with each bringing what it does best to the process |
| tariff | a tax imposed on imported goods that raises the price of that good, so that comparable industries within that country can better compete with the imported goods. a barrier to free trade between countries. |
| quota | a limit on the amount of a product that one country will import from another country. a barrier versus free trade. |
| embargo | one country refuses to buy any imports from another country due to displeasure with that country's policies or a policy of wartime. a barrier to free trade |
| World trade Organization (WTO) | international organization that settles trade disputes and enforces free trade agreements between members. |
| World Bank | international organization; its main purpose is to provide funds in the form of loans for less developed countries to increase its infrastructure and bring the standard of living of its citizens up |
| International Monetary Fund (IMF) | an international organization that maintains an orderly system for exchange rates among nations, thereby lessening the chance that one nation can deliberately manipulate the value of their currency and gain a competitive advantage |
Created by:
rudolph.beukes
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