Exploring Business Chapter 1

Questions asked by economists

1. What goods and services should be produced to meet consumers needs? In what quantity? When should they be produced? 2. How should goods be produced? 3. Who should receive the goods and services produced?

Deflation

A decrease in the level of prices

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 from entering the industry

Monopolistic Competition

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

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

Depression

A severe recession that lasts no longer than a typical recession and has a larger decline in business activity when compared to a recession

Invisible hand

A term created by Adam smith to describe how an individual's personal gain benefits others and a nations economy

Capitalism

An economic system in which individuals own or operated the majority of businesses that provide goods and services

Command economy

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

Producer price index (PPI)

An index that measures prices that producers receive for the finished goods

Business

Any activity that provides goods or services to consumers for the purpose of making profit.

Legal Monopolies

Arises when a company received a patent giving it exclusive use of an invented project or process

Example of perfection competition

Commercial fishermen brings his fish to the local market, he has little control over the price he gets and must accept the going market price

The system with the highest level of government control

Communism

Marketing

Consists of everything that a company does to identify customers needs and designs products to meet those needs

Monetary policy is used to

Control the money supply and interest rates

Marketer

Develops the benefit and feature of products

Competition

Dictates how goods and services will be allocated

Betty Vinson

Director of management of worldcom

External forces that influences business activities

Economy, government, consumer trends, and public pressure to act as good corporate citizens

Monetary policy

Federal reserves decisions that determine the size of the supply of money in the nation and the level of interest rates

Consumer productions

Goods and services purchased by individuals for personal consumption

Two types of business

Goods, services

Fiscal policy

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

Economic Goals

Growth, high employment, and price stability

Federal Reserve System "FED"

Has the power the control money, supply and interest rates

Factors of production

Land, labor, capital, entrepreneurship

Laissesz faire

Leaving things alone

Functional areas of business

Management, operations, marketing, accounting, and finance.

Accounting

Measuring,summarizing and communicating financial and managerial information

Capital

Needed for production process (equipment, buildings, vehicles, cash)

Responsible for assuring that products are of high quality

Operations manager

Main participants of business

Owners, employees, and customers.

Strong economy

People have more money to eat out at places where food standards are monitored by a government agency

Tangible

Perceptible by touch

Types of competition

Perfect competition, monopolistic competition, oligopoly, and monopoly

Economic systems are divided into

Planned systems, and free market systems

Finance

Planning for, obtaining, and managing a company's funda

Financial accountant

Prepare financial statements to help users both inside and outside of the organization asses financial strength of the company

Managerial accountant

Prepare information su had as reports on the cost of materials used for the production process. Internal use only

General phases of the business cycle

Prosperity, recession, depression, recovery

Land and natural resources

Provide needed raw material

Entrepreneurship

Provides skill and creativity needed to bring other resources together to produce a good or service to be sold to a marketplace

Natural Monopolies

Public utilities

Mixed market economy

Relies on both markets and the government to allocate resources

Management

Responsible for planning, organizing, staffing, directing and controlling company's resources.

Managers

Responsible for the work performance of others

Economist

Study the interactions between household and businesses and look at the ways in which the factors of production are combined to produce the goods and services people need

Free market system

The economic system in which most businesses are owned and operated by individuals

Planned system

The government exerts control over the allocation and distribution of all or some goods and services

Communist economy

The government owns all or most enterprises

Resources

The inputs to produce outputs

Perfect competition

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

Unemployment eate

The percentage of a nations labor force unemployed at any time

Operations manager

The person who designs and oversees the transformation of resources into goods or services

Equilibrium Price

The price at which the buyers are willing to purchase the amount the sellers are willing to sell

Market 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 ones products and all competitive products

Demand

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

Supply

The quantity of a product that producers are willing to sell at each value of various prices

Central planning by the government dictates

The questions asked by economist

Business cycle

The reoccurrence of periods of growth and recession in a nations economic activity

Inflation

The rise in the level of peoces

Economics

The study of production, distribution, and consumption of goods and services

National debt

The total amount of money owed by the federal government

Gross domestic product (GDP)

The total value of all goods and services produced by all people within the boundaries of a country during a one year period

Labor

Transforms raw materials into goods or services

Operations

Transforms resources (labor, materials , money) into products

Intangible

Unable to be touched or grabbed

Full employment

When 95% of those wanting to work are employed

Price stability

When the average of the prices for goods and Services either doesn't change or had changed very little

Deficit

When the government spends more money than it takes in

Surplus

When the government takes in more money in a given year than it spends