Chapter 1 - Exploring the World of Business and Economics

In a capitalistic economy, what ensures that a firm will survive only if it serves its customers well by providing products and services that meet needs?

competition

the ultimate objective of every firm is to satisfy the needs of its:

customers

Cultural (or workplace) diversity

differences among people in a workforce owing to race, ethnicity, and gender

monetary policies

federal reserve's decisions that determine the size of the supply of money in the nation and the level of interest rate

consumer products

goods and services purchased by individuals for personal consumption

fiscal policy

government influence on the amount of savings and expenditures; accomplished by altering that tax structure and by changing the levels of government spending

What can productivity growth (economic performance) lead to?

higher unemployment rates

For a business to organize and be successful, which of the following four resources must it effectively combine and use?

human resources, material resources, informational resources, and financial resources

While the US economic system is rooted in laissez-faire capitalism, its government collects taxes and provides services, making the US a:

mixed economy

What are the 4 phases in the typical business cycle?

peak, recession, the trough, and recovery

What are the 4 basic management functions?

planning, organize, leading/motivating, controlling

factors of production

resources used to produce goods and services

competition

rivalry among businesses for sales to potential customers

sustainability

the ability to maintain or improve standards of living without damaging or depleting natural resources for present and future generations

productivity

the average level of output per worker per hour

perfect (or pure) competition

the market situation in which there are many buyers and sellers of a product, and no single buyer or seller is powerful enough to affect the price of that product

social media

the online interaction that allows people and businesses to communicate and share ideas, personal information, and info about products or services

Business

the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society's needs

E-business

the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society's needs through the facilities available on the Internet

unemployment rate

the percentage of a nation's labor force unemployment at any time

market price

the price at which the quantity demanded is exactly equal to the quantity suppled

equilibrium price

the price at which the quantity demanded is exactly equal to the quantity supplied

product differentiation

the process of developing and promoting differences between one's products and all competitive products

demand

the quantity of a product that buyers are willing to purchase at each of various prices

business cycle

the recurrence of periods of growth and recession in a nation's economic activity

Specialization

the separation of a manufacturing process into distinct tasks and the assignment of the different tasks to different individuals

Economics

the study of how wealth is created and distributed

Microeconomics

the study of the decisions made by individuals and businesses

Macroeconomics

the study of the national economy and the global economy

Free enterprise

the system of business in which individuals are free to decide what to produce, how to produce it, and at what price to sell it

Gross Domestic Product (GDP)

the total dollar value of all goods and services produced by all people within the boundaries of a country during a specified time period - usually a one-year period

national debt

the total of all federal deficits

Economy

the way in which people deal with the creation and distribution of wealth

recession

two or more consecutive three-month periods of decline in a country's GDP

Profit

what remains after all business expenses have been deducted from sales revenue

As the demand curve slopes downward from left to right, this shows which of the following statements is true?

As the price decreases, the quantity demanded increases

When considering the relationship between profits and business risks, which group of people is paid last?

Business owners

Conceptual skill

In order to perform management functions, a manager must possess the ability to think in abstract terms in order to see the "big picture."

economists generally define a recession as how many consecutive months periods?

Two or more

deflation

a general decrease in level of prices

inflation

a general rise in the level of prices

standard of living

a loose, subjective measure of how well off an individual or a society is, mainly in terms of want satisfaction through goods and services

Oligopoly

a market (or industry) in which there are few sellers

Monopoly

a market (or industry) with only one seller, and there are barriers to keep other firms entering the industry

monopolistic competition

a market in which there are many buyers along with a relatively large number of sellers who differentiate their products from the products of competitors

Domestic System

a method of manufacturing in which an entrepreneur distributes raw materials to various homes, where families process them into finished good to be offered for sale by the merchant entrepreneur

Consumer Price Index (CPI)

a monthly index that measures the changes in prices of a fixed basket of goods purchased by a typical consumer in an urban area

Entrepreneur

a person who risks time, effort, and money to start and operate a business

depression

a severe recession that lasts longer than a typical recession and has a larger decline in business activity when compared to a recession

federal deficit

a shortfall created when the federal government spends more in a fiscal year than it receives

Factory System

a system of manufacturing in which all the materials, machinery, and workers required to manufacture a product are assembled in one place

invisible hand

a term created by Adam Smith to describe how an individual's personal gain benefits others and a nation's economy

Stakeholders

all the different people or groups of people who are affected by an organization's policies, decisions, and activities

market economy

an economic system in which businesses and individuals decide what to produce and buy, and the market determines quantities sold and prices

Capitalism

an economic system in which individuals own and operate the majority of businesses that provide goods and services

command economy

an economic system in which the gov. decides what goods and services will be produced, how they will be produced, for whom available goods and services will be produced, and who owns and controls the major factors of production

service economy

an economy in which more effort is devoted to the production of goods

mixed economy

an economy that exhibits elements of both capitalism and socialism

Producer Price Index (PPI)

an index that measures prices that producers receive for their finished goods

supply

an item facilities production and operations but does not become part of a finished product