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Business 110

Introduction to Business

1 Value The relationship between the price of a good or a service and the benefits that it offers its customers
Business Any organization or activity that provides goods and services in an effort to earn a profit
Profit The money that a business earns in sals (revenue), minus expenses, such as the cost of goods, and the cost of salaries. [Revenue - Expenses = Profit/loss]
Loss When a business incurs expenses that are greater than its revenue
Entrepreneurs People who risk their time, money, and other resources to start and manage business
Standard of Living The quality and quantity of goods and services available to a population
Quality of Life The overall sense of well-being experienced by either an individual or a group
Nonprofits Business-like establishments that employ people and produce goods and services with the fundamental goal of contributing to the community rather than generating financial gain
Factors of Production Four fundamental elements -- natural resources, capital, human resources, and entrepreneurship -- that businesses need to achieve their onjectives
Business environment The setting in which business operates. The five key components are: economic environment, competitive environment, technological environment, social environment, and global environment
Speed-To-Market The rate at which a new product moves from conception to commercialization
Business Technology Any tools -- especially computer, telecommunication, and other digital products -- that businesses can use to become more efficient and effective
World Wide Web The service that allows computer users to easily access and share information on the internet in the form of text, graphics, video, apps, and animation
E-commerce Business transactions conducted online, typically via the internet
Demographics The measurable characteristics of a population. Demographic factors include population size and density, as well as specific traits such as age, gender, and race
Free Trade An international economic and political movement designed to help goods and services flow more freely across international boundaries
General Agreement on Tariffs and Trade (GATT) An international trade agreement that has taken bold steps to lower tariffs and promote free trade worldwide
2 Economy A financial and social system of how resources flow through society, from production, to distribution, to consumption
Economics The study of the choices that people, companies, and governments make in allocating society's resources
Macroeconomics The study of a country's overall economic dynamics, such as the employment rate, the gross domestic product, and taxation policies
Microeconomics The study of smaller economic units such as individual consumers, families, and individual businesses
Fiscal Policy Government efforts to influence the economy through taxation and spending
Budget Surplus Overage that occurs when revenue is higher than expenses over a given period of time
Budget Deficit Short fall that occurs when expenses are higher than revenue over a given period of time
Federal Debt The sum of all the money that the federal government has borrowed over the years and not yet paid
Monetary Policy Federal Reserve decision that shape the economy by influencing interest rates and the supply of money
Commercial Banks Privately owned financial institutions that accept demand deposits and make loans and provide other services for the public
Money Supply The total amount of money within the overall economy
Money Anything generally accepted as a medium of exchange, a measure of value, or a means of payment
M1 Money Supply Includes all currency plus checking accounts and traveler's checks
M2 Money Supply Includes all of M1 money supply plus most savings accounts, money market accounts, and certificates of deposits
Open Market Operations The Federal Reserve function of buying and selling government securities, which include treasury bonds, notes, and bills
Discount Rate The rate of interest that the Federal Reserve charges when it loans funds to banks
Federal Deposit Insurance Corporation (FDIC) A federal agency that insures deposits in banks that thrift institution for up to $250,000 per customer, per bank
Reserve Requirement A rule set by the Fed, which specifies the minimum amount of reserves (or funds) a bank must hold, expressed as a percentage of the bank's deposits
Economic System A structure for allocating limited resources
Capitalism An economic system -- Also known as the private enterprise or free market system -- based on private ownership, economic freedom, and fair competition
Pure Competition A market structure with many competitors selling virtually identical products, Barriers to entry are quite low
Monopolistic Compettition A market structure with many competitors selling differentiated products Barriers to entry are low
Oligopoly A market structure with only a handful of competitors selling products that can be similar or different Barriers to entry are typically high
Monopoly A market structure with one producer completely dominating the industry, leaving no room for any significant competitors Barriers to entry tend to be virtually insurmountable
Natural Monopoly A market structure with one company as the supplier of a product because the nature of that product make a single supplier more efficient than multiple, competing ones Most natural monopolies are government sanctioned and regulated
Supply The quality of products that producers are willing to offer for sale at different market prices
Supply Curve The graphed relationship between price and quantity from a supplier standpoint
Demand The quantity of products that consumers are willing to buy at different market prices
Demand Curve The graphed relationship between price and quantity from a customer demand standpoint
Equilibrium Price The price associated with the point at which the quantity demanded of a product equals the quantity supplied
Socialism An economic system based on the principle that the government should own and operate key enterprises that directly affect public welfare
Communism An economic and political system that calls for public ownership of virtually all enterprises, under the direction of a strong central government
Mixed Economies Economies that embody elements of both planned and market-based economic systems
Privatization The process of converting government-owned businesses to private ownership
Gross Domestic Product (GDP) The total value of all final goods and services produced within a nation's physical boundaries over a given period of time
Unemployed Rate The percentage of people in the labor force over age 16 who do not have jobs and are actively seeking employment
Business Cycle The periodic contraction and expansion that occur over time in virtually every economy
Contraction A period of economic downturn, marked by rising unemployment and falling business production
Recession An economic downturn marked by a decrease in the GDP for two consecutive quarters
Depression An especially deep and long-lasting recession
Recovery A period of rising economic growth and employment
Expansion A period of robust economic growth and high employment
Inflation A period of rising average prices across the economy
Hyperinflation An average monthly inflation rate of more than 50%
Disinflation A period of slowing average price increases across the economy
Deflation A period of falling average prices across the economy
Consumer Price Index (CPI) A measure of inflation that evaluates the change in the weighted-average price of goods and services that the average consumer buys each month
Producer Price Index (PPI) A measure of inflation that evaluates the change over time in the weighted-average wholesale prices
Productivity The basic relationship between the production of goods and services (output) and the resources needed to produce them (input) calculation via the following equation: output/input = productivity
3 Opportunity Cost The opportunity of giving up the second-best choice when making a decision
Absolute Advantage The benefit a country has in a given industry when it can produce more of a product than other nations using the same amount of resources
Comparative Advantage The benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries
Balance of Trade A basic measure of the difference in value between a nation's exports and imports, including both goods and services
Trade Surplus Overage that occurs when the total value of a nation's exports is higher than the total value of its imports
Trade Deficit Shortfall that occurs when the total value of a nation's imports is higher than the total value of its imports
Balance of Payments A measure of the total flow of money into or out of a country
Balance of Payments Surplus Overage that occurs when more money flows into a nation than out of that nation
Balance of Payments Deficit Shortfall that occurs when more money flows out of a nation than into that nation
Exchange Rate A measurement of the value of one nation's currency relative to the currency of other nations
Countertrade International trade that involves the barter of products for products rather than for currency
Foreign Outstanding (Also Contract Manufacturing) Contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production
Importing Buying products domestically that have been produced or grown in foreign nations
Exporting Selling products in foreign nations that have been produced or grown domestically
Foreign Licensing Authority granted by a domestic firm to a foreign firm for the rights to produce and market its product or to use its trademark/patent rights in a defined geographical area
Foreign Franchising A specialized type of foreign licensing in which a firm expands by offering businesses in other countries the right to produce and market its products according to specific operating requirements
Direct Investment (or Foreign Direct Investment) When firms either acquire foreign firms or develop new facilities from the ground up in foreign countries
Created by: amethystMT9611



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