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Chapter One
Understanding Economic Systems & Business
| Question | Answer |
|---|---|
| What is a business? | An organization that earns a profit by providing goods and services customers want |
| What are goods? | Tangible products that can be seen and touched |
| What are services? | Intangible activities that cannot be touched or stored |
| What is revenue? | Money a business earns from selling goods or services |
| What are costs? | Expenses a business pays to operate (rent, wages, supplies, etc.) |
| What is profit? | Money left after all coasts are paid Profit = Revenue - Costs |
| What is risk? | The chance of losing time, money, or failing to meet goals |
| What is a not-for-profit organization? | An organization that exists to achieve a mission instead of earning profit |
| What is standard of living? | The amount of goods and services people can buy with their income |
| What is quality of life? | Overall well-being based on health, education, life expectancy, and happiness |
| What are the five factors of production? | Natural Resources, Labor, Capital, Entrepreneurship, and Knowledge |
| What are natural resources? | Resources from nature like land, forests, oil, and water |
| What is labor? | Human workers who produce goods and services |
| What is capital? | Tools, machines, equipment, and buildings used to reduce goods and services |
| What is entrepreneurship? | Organizing resources and taking risks to start and manage a business |
| What is knowledge as a factor of production? | Workers' skills, education, and experience |
| What is the internal environment? | People inside the business (owners, managers, employees, customers) |
| What are the external environment factors? | Technological, Economic, Political/Legal, Demographic, Social, Competitive, and Global |
| What are demographics? | Statistics about people such as age, gender, race, and location |
| What are social factors? | People's values, lifestyles, attitudes, and ethics |
| What is technology? | The use of sciences and engineering to solve problems and improve production |
| What is productivity? | The amount of goods and services one worker can produce |
| What is economics? | The study of how society uses scarce resources |
| What is an economics system? | The way a country decides what to produce, how to produce it, and gets it |
| What is capitalism? | Private ownership with little government control |
| What is communism? | Government owns businesses and controls production |
| What is socialism? | Government owns major industries while some businesses remain private |
| What is a mixed economy? | A combination of capitalism and socialism |
| What is macroeconomics? | The study of the economy as a whole |
| What is microeconomics? | The study of households, businesses, and individual markets |
| What are the three macroeconomic goals? | Economic Growth, Full Employment, and Price Stability |
| What is GDP? | Gross Domestic Product: The total value of all final goods and services produced in one year |
| What is economic growth? | An increase in the production of goods and services |
| What is a recession? | A decline in GDP |
| What is GDP? | Gross Domestic Product: the total value of all final goods and services produced in one year |
| What is economic growth? | An increase in the production of goods and services |
| What is a recession? | A decline in GDP |
| What is recovery? | The period after a recessiion when the economy begins growing again |
| What is full employment? | Jobs are available for everyone willing and able to work |
| What is the unemployment rate? | The percentage of people actively looking for work who do not have jobs |
| What is frictional unemployment? | Temporary unemployment while changing jobs |
| What is structural unemployment? | Jobs disappear because workers skills no longer match available jobs |
| What is cyclical unemployment? | Unemployment caused by recessions |
| What is seasonal unemployment? | Unemployment that occurs during certain seasons |
| What is inflation? | A general increase in prices over time |
| What is purchasing power? | The amount of goods and services money can buy |
| What is demand-pull inflation? | Inflation caused when demand is greater than supply |
| What is cost-push inflation? | Inflation caused by rising production costs |
| What is CPI? | Consumer Price Index: Measures prices consumers pay |
| What is PPI? | Producer Price Index: Measures prices producers pay |
| What is monetary policy? | Government control of the money supply and interest rates |
| Who manages monetary policy? | The Federal Reserve (The Fed) |
| What is expansionary monetary policy? | Increases money supply, lowers interest rates, and stimulates the economy |
| What is contractionary monetary policy? | Decreases money supply, raises interest rates, and slows the economy |
| What is fiscal policy? | Government decisions about taxes and spending |
| What is a federal budget deficit? | When government spending is greater than tax revenue |
| What is the national debt? | The total of all past federal budget deficits |
| Law of Demand | As price increases, demand decreases |
| What is supply? | The amount producers are willing to sell at different prices |
| Law of Supply? | As price increases, supply increases |
| What is equilibrium? | The point where supply equals demand |
| What causes demand to increase? | Higher income, More buyers, Better preferences, Higher substitute prices, and Expected future price increases |
| What causes supply to increase? | Better technology, Lower production costs, More suppliers, and Lower taxes |
| What is perfect competition? | Many businesses selling similar products with easy entry |
| What is a monopoly? | One business controls the entire market |
| What is monopolistic competition? | Many businesses selling similar but different products |
| What is an oligopoly? | A few large businesses control most of the market |
| What is relationship management? | Building strong relationships with customers and suppliers |
| What is supply chain management? | Managing relationships with suppliers |
| What is relationship marketing? | Building long-term relationships with customers |
| What is a strategic alliance? | A partnership between businesses to gain a competitive advantage |
| Profit Formula | Profit=Revenue-Costs |
| Five Factors of Production | Natural Resources, Labor, Capital, Entrepreneurship, and Knowledge |
| Three Macroeconomic Goals | Economic Growth, Full Employment, and Price Stability |
| Four Economic Systems | Capitalism, Communism, Socialism, and Mixed Economy |
| Four Market Structures | Perfect Competition, Monopoly, Monoplpolistic Competition, and Oligopoly |
| Five Factors of Production | Natural Resources, Labor, Capital, Entrepreneurship, and Knowledge |
| Three Macroeconomic Goals | Economic Growth, Full Employment, and Price Stability |
| Four Economic Systems | Capitalism, Communism, Socialism, and Mixed Economy |
| Four Market Structures | Perfect Competition, Monopoly, Monoplpolistic Competition, and Oligopoly |
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