Chapter 1 and 2

Microeconomics

Focuses on individual parts of the economy, such as household or firms.

Circular flow

Inputs and outputs among households, businesses, and government.

fiscal policy

Government policy that attempts to manage the economy by controlling taxing and spending.

federal budget deficit

If the government spends more for programs (social services, education, defense) than it collects in taxes

producer price index

Measures the prices paid by producers and wholesalers for various commodities, such as raw materials, partially finished goods, and finished products.

seasonal unemployment

Occurs during specific times of the year in certain industries. Includes employees such as retail workers hired for the holiday shopping season, lettuce pickers in California, and restaurant employees in ski country during the summer.

demand-pull inflation

Occurs when the demand for goods and services is greater than the supply.

Communism

Opposite of capitalism, the government owns virtually all resources and controls all markets.

social investing

Some investors are limiting their investments to securities (e.g., stocks and bonds) that coincide with their beliefs about ethical and social responsibility

Macroeconomics

Study of the Economy as a whole. It looks at aggregate data for large groups of people, companies, or products considered as a whole.

political climate of a country

The amount of government activity, the types of laws it passes, and the general political stability of a government are three components of political climate

economic system

The combination of policies, laws, and choices made by its government to establish the systems that determine what goods and services are produced and how they are allocated.

unemployment rate

The rate that indicates the percentage of the total labor force that is not working but is actively looking for work.

Inflation

The situation in which the average of all prices of goods and services is rising

Economics

The study of how a society uses scarce resources to produce and distribute goods and services.

Capital

The tools, machinery, equipment, and buildings used to produce goods and services and get them to the consume (not money)

strategic alliances(also calledstrategic partnerships)

The trend toward forming these cooperative agreements between business firms is accelerating rapidly, particularly among high-tech firms. These companies have realized that strategic partnerships are more than just important—they are critical. Strategic alliances can take many forms. Some companies enter into strategic alliances with their suppliers, who take over much of their actual production and manufacturing. For example,Nike, the largest producer of athletic footwear in the world, does not manufacture a single shoe.

purchasing power

The value of what money can buy, function of inflation and income.

dynamic environment

This external business environment is composed of numerous outside organizations and forces that we can group into seven key subenvironments, asExhibit 1.4illustrates: economic, political and legal, demographic, social, competitive, global, and technological. Each of these sectors creates a unique set of challenges and opportunities for businesses.

factors of production

To provide goods and services, regardless of whether they operate in the for-profit or not-for-profit sector, organizations require inputs in the form of resources

knowledge workers

Today's competitive environment places a premium on knowledge and learning over physical resources.

cost-push inflation

Triggered by increased in production costs, such as expenses for material wages.

mixed economy

Use of more than one economic system. USA, Canada.

crowding out

When government takes more money from business and consumers (the private sector)

monopolistic competition

a market structure in which many companies sell products that are similar but not identical Many firms are in the market. • The firms offer products that are close substitutes but still differ from one another. • It is relatively easy to enter the market

Recession

a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

Ethics

a set of moral standards for judging whether something is right or wrong

ethical issue

a situation where someone must choose between a set of actions that may be ethical or unethical. For example, MartinShkreli, former CEO ofTuring Pharmaceuticals, raised the price of a drug used for newborns and HIV patients by more than5000percent, defending the price increase as a "great business decision."1 Few people would call that ethical behavior

human rights

certain rights—to life, to freedom, to the pursuit of happiness—are bestowed at birth and cannot be arbitrarily taken away. Denying the rights of an individual or group is considered to be unethical and illegal in most, though not all, parts of the world.

the quantity demanded equals the quantity supplied. This is the point of

equalibrium

Costs

expenses for rent, salaries, supplies, transportation, and many other items that a company incurs from creating and selling goods and services. For example, some of the costs incurred by Microsoft in developing its software include expenses for salaries, facilities, and advertising.

relationship marketing

focuses on customers

Utilitarianism

focuses on the consequences of an action taken by a person or organization. The notion that people should act so as to generate the greatest good for the greatest number is derived from utilitarianism. When an action affects the majority adversely, it is morally wrong. One problem with this philosophy is that it is nearly impossible to accurately determine how a decision will affect a large number of people.

Four types of unemployment

frictional, structural, cyclical, seasonal

The U.S. government has run budget deficits for many years. The accumulated total of these past deficits is

national debt

Four traditional factors of production are common to all productive activity

natural resources labor (human resources), capital, and entrepreneurship (sometimes knowledge)

Deontology

people should meet their obligations and duties when analyzing an ethical dilemma. This means that a person will follow his or her obligations to another individual or society because upholding one's duty is what is considered ethically correct.

some of the costs incurred by Microsoft in developing its software include expenses for salaries, facilities, and advertising. If Microsoft has money left over after it pays all costs it has

profit

code of ethics

provides employees with the knowledge of what their firm expects in terms of their responsibilities and behavior toward fellow employees, customers, and suppliers. Some ethical codes offer a lengthy and detailed set of guidelines for employees. Others are not really codes at all but rather summary statements of goals, policies, and priorities. Some companies have their codes framed and hung on office walls, included as a key component of employee handbooks, and/or posted on their corporate websites.

knowledge

refers to the combined talents and skills of the workforce and has become a primary driver of economic growth.

the government has instructed commercial banks to reduce their total debt by divesting some of their bond holdings. That's also why the Treasury created

savings bonds

A graph of the relationship between various prices and the quantities a business will supply is a

supply curve

goods

tangible items manufactured by businesses, such as laptops

commodity

that are useful inputs in their natural state are known as natural resources. They include farmland, forests, mineral and oil deposits, and water. Sometimes natural resources are simply called land, although, as you can see, the term means more than just land.

productivity

the amount of goods and services one worker can produce. Our ability as a nation to maintain and build wealth depends in large part on the speed and effectiveness with which we use technology—to invent and adapt more efficient equipment to improve manufacturing productivity, to develop new products, and to process information and make it instantly available across the organization and to suppliers and customers.

corportate social responsibility (CSR)

the concern of businesses for the welfare of society as a whole. It consists of obligations beyond those required by law or union contract.

full employment

the condition in which virtually all who are able and willing to work are employed.

Quality of life

the general level of human happiness based on such things as life expectancy, educational standards, health, sanitation, and leisure time.

Stakeholders

the individuals or groups to whom a business has a responsibility. The stakeholders of a business are its employees, its customers, the general public, and its investors.

pure monopoly

the market structure in which a single firm accounts for all industry sales of a particular good or service.

revenue

the money a company receives by providing services or selling goods to customers.

standard of living

the output of goods and services people can buy with the money they have.

Entrepreneurs

the people who combine the inputs of natural resources, labor, and capital to produce goods or services with the intention of making a profit or accomplishing a not-for-profit goal. These people make the decisions that set the course for their businesses; they create products and production processes or develop services. Because they are not guaranteed a profit in return for their time and effort, they must be risk-takers. Of course, if their companies succeed, the rewards may be great.

risk

the potential to lose time and money or otherwise not be able to accomplish an organization's goals.

supply

the quantity of a good or service that businesses will make available at various prices.

Demand

the quantity of a good or service that people are willing to buy at various prices. The higher the price, the lower the quantity demanded, and vice versa.

microeconomic

the study of how households and firms make decisions and how they interact in markets

Demography

the study of people's vital statistics, such as their age, gender, race and ethnicity, and location. Demographics help companies define the markets for their products and also determine the size and composition of the workforce. You'll encounter demographics as you continue your study of business.

Gross Domestic Product (GDP)

the total market value of all final goods and services produced in a country for a given time period

strategic giving

ties philanthropy and corporate social responsibility efforts closely to a company's mission or goals and targets donations to the communities where a company does business.

frictional unemployment

unemployment that occurs when people take time to find a job. Not related to business cycle.

structural unemployment

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

cyclical unemployment

unemployment that rises during economic downturns and falls when the economy improves

4 types of market structures

1. Perfect Competition 2. Monopolistic Competition 3. Oligopoly 4. Monopoly

examples of crowding out

1. The government spends more on public libraries, and individuals buy fewer books at bookstores. 2. The government spends more on public education, and individuals spend less on private education. 3. The government spends more on public transportation, and individuals spend less on private transportation.

Oliography

A degree of competition in which just a few sellers dominate the market A few firms produce most or all of the output. • Large capital requirements or other factors limit the number of firms.

perfect competition

A large number of small firms are in the market. • The firms sell similar products; that is, each firm's product is very much like the products sold by other firms in the market. • Buyers and sellers in the market have good information about prices, sources of supply, and so on. • It is easy to open a new business or close an existing one.

Capitalism

Also known as Private enterprise system, based on competition in the marketplace and private ownership of the factors of production (resources). In a competitive economic system, a large number of people and businesses buy and sell products freely in the marketplace.in pure capitalism, all the factors of production are owned privately, and the government does not try to set prices or coordinate economic activity.

business cycle

Alternating periods of economic expansion and economic recession

Socialism

An economic system in which the basic industries are owned by the government or by the private sector under strong government control. Controls critical, large scale industries such as transportation, communications, and utilities. Smaller businesses may be privately owned.

economic growth

An increase in a nations output of goods and services

legal rights

Certain rights are guaranteed by the government and its laws.

Consumer Price Index

an index of the cost of all goods and services to a typical consumer

not-for-profit organizations

an organization that exists to achieve some goal other than the usual business goal of profit. Charities such as Habitat for Humanity, the United Way, the American Cancer Society, and the World Wildlife Fund are not-for-profit organizations, as are most hospitals, zoos, arts organizations, civic groups, and religious organizations.

business

an organization that strives for a profit by providing goods and services desired by its customers.

Supply Chain Management

builds strong bonds with suppliers

barriers to entry

business practices or conditions that make it difficult for new firms to enter the market

Demandis the quantity of a good or service that people are willing to buy at various prices. The higher the price, the lower the quantity demanded, and vice versa. A graph of this relationship is called a

demand curve

Two types of inflation

demand pull and cost push

corporate philanthropy

includes cash contributions, donations of equipment and products, and support for the volunteer efforts of company employees. Recent statistics suggest U.S. corporate philanthropy exceeds more than $19 billion annually.

Services

intangible offerings of businesses that can't be held, touched, or stored. Such as physicians, lawyers, hairstylists, car washes, and airlines.

Technology

is the application of science and engineering skills and knowledge to solve production and organizational problems

The number of suppliers in a market defines the

market structure

Justice

what is fair according to prevailing standards of society. We all expect life to be reasonably fair. You expect your exams to be fair, the grading to be fair, and your wages to be fair, based on the type of work being done

relationship management

which involves building, maintaining, and enhancing interactions with customers and other parties to develop long-term satisfaction through mutually beneficial partnerships.