Introduction to Business Chapter 1 - Understanding Economic Systems and Business (Key Terms)

pure monopoly

A market structure in which a single firm accounts for all industry sales of a particular good or service and in which there are barriers to entry.

oligopoly

A market structure in which few firms produce most or all of the output and in which large capital requirements or other factors limit the number of firms.

perfect competition

A market structure in which large number of small firms sell similar products, buyers and sellers have good information, and businesses can be easily opened or closed.

monopolistics competition

A market structure in which many firms offer products that are close substitutes and in which entry is relatively easy.

cost-push inflation

Inflation that occurs when increases in production costs push up the prices of final goods and services.

demand-pull inflation

Inflation that occurs when the demand for goods or services is greater than the supply.

costs

Expenses incurred from creating and selling goods and services.

services

Intangible offerings of businesses that can't be held, touched, or stored.

savings bonds

Government bonds issued in relatively small denominations.

entrepreneurs

People who combine the inputs of natural resources, labr, and capital to produce goods or services with the intention of making profit or accomplishing a not-for-profit goal.

frictional unemployment

Short-term unemployment that is not related to the business cycle.

goods

Tangible items manufactured by businesses.

national debt

The accumulated total of all of the government's annual budget deficits.

productivity

The amount of goods and services one worker can produce.

technology

The application of science and engineering skills and knowledge to solve production and organizational problems.

Federal Reserve System

The central banking system of the United States.

economic system

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

knowledge

The combined talents and skills of the workforce.

federal budget deficit

The condition that occurs when the federal government spends more for programs than it collects in taxes.

full employment

The condition when all people who want to work and can work have jobs.

quality of life

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

fiscal policy

The government's use of taxation and spending to affect the economy.

revenue

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

profit

The money left over after all costs are paid.

circular flow

The movement of inputs and outputs among households, businesses, and governments; a way of showing how the sectors of the economy interact.

market structure

The number of suppliers in a market.

unemployment rate

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

equilibrium

The point at which quantity demanded equals quantity supplied.

risk

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

relationship management

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

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 by at various prices.

Factors or production

The resources used to create goods and services.

inflation

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

crowding out

The situation that occurs when government spending replaces spending by the private sector.

economics

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

demography

The study of people's vital statistics.

microeconomics

The subarea of economics that focuses on individual parts of the economy.

macroeconomics

The subarea of economics that focuses on the economy as a whole by looking at aggregate data for large groups of people, companies, or products.

Gross Domestic Product (GDP)

The total market value of all final goods and services produced within a nation's borders each year.

expansionary policy

The use of monetary policy by the Fed to increase, or loosen, the growth of the money supply.

contractionary policy

The use of monetary policy by the Fed to tighten the money supply by selling government securities or raising interest rates.

purchasing power

The value of what money can buy.

structural unemployment

Unemployment that is caused by a mismatch between available jobs and the skills of available workers in an industry or region; not related to the business cycle.

seasonal unemployment

Unemployment that occurs during specific seasons in certain industries.

cyclical unemployment

Unemployment that occurs when a downturn in the business cycle reduces the demand for labor throughout the economy.

business cycles

Upward and downward changes in the level of economic activity.

knowledge workers

Workers who create, distribute, and apply knowledge.

mixed economies

economies that combine several economic systems; for example, an economy in which the government owns certain industries but the others are owned by the private sector.

barriers to entry

factors that prevent new firms from competing equally with an existing firm.

capital

the inputs used to produce goods and services and get them to the customer.

strategic alliance

A cooperative agreement between companies; sometimes called a strategic partnership.

standard of living

A country's output of goods and services that people can buy with the money they have.

recession

A decline in GDP that lasts for at least two consecutive quarters.

monetary policy

A government's programs for controlling the amount of money circulating in the economy and interest rates.

demand curve

A graph showing the quantity of a good or service that people are willing to buy at various prices.

supply curve

A graph showing the quantity of good or service that businesses will make available at various prices.

communism

An economic system characterized by government ownership of virtually all resources, government control of all markets, and economic decision-making by central government planning.

socialism

An economic system in which the basic industries are owned either by the government itself or by the private sector under strong government control.

economic growth

An increase in a nation's output of goods and services.

consumer price index

An index of the prices of a "market basket" of goods and services purchased by typical urban consumers.

Producer Price Index (PPI)

An index of the prices paid by producers and wholesalers for various commodities.

not-for-profit organization

An organization that exists to achieve some goal other than the usual business goal of profit.

business

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

capitalism

an economic system based on competition in the marketplace and private ownership of the factors of production (resources); also known as the private enterprise system.