Foundations of Business Chapter 1

marketing intermediaries

Best Buy and Walmart are examples of this

monetary policies

Federal Reserve's decisions that determine the size of the supply of money in the nation and the level of interest rates

deflation

a general decrease in the 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 society is, mainly in terms of what satisfaction through goods and services

oligopoly

a market (or industry) in which are few sellers

monopoly

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

domestic system

a method of manufacturing in which an entrepreneur distributes raw materials to various homes, where families process them into finished goods 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

loss

a negative profit which results when a firm's expenses are greater than its sales revenue

entrepreneur

a person who risks time, effort, and invests 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

barter

a system of exchange in which goods or services are traded directly for other goods or services without using money

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 individuals 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

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 government decides what 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 services than 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 process that producers receive for their finished goods

wealth

anything of value

sustainability

creating and maintaining the conditions under the humans and nature can exist in productive harmony while fulfilling the social, economic, and other requirements of present and future generations

laissez-faire

describes Smith's capitalistic system and implies that there should be no government interference in the economy. "let them do"

cultural (or workplace) diversity

differences among people in a workforce owing to race,ethnicity, and gender. The ability to work well with many types of people in the workplace.

market economy (free-market economy)

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

Adam Smith is the father of communism and advocated a classless society. T or F

false

Fiscal policy determines the level of interest rates. T or F

false

For a business to be organized, it must combine four types of resources, workers, natural resources, capital, and ownership. T or F

false

The majority of small business firms are successful at the end of ten years. T or F

false

Under communism, individual consumers determine what will be produced. T or F

false

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 the tax structure and by changing the levels of government spending

material resources

include raw materials used in manufacturing processes as well as buildings and machinery. Ex: Mrs Fields Cookies

monopolistic competition

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

4 kinds of resources a business need to be organized

material, human, financial, and informational

financial resources

money required to pay employees, purchase materials, and generally keep the business operating

business

organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society's needs. Refers to all such efforts within a society

human resources

people who furnish their labor to the business in return for wages

4 types of competition

perfect, monopolistic, oligopoly, monopoly

product differentitation

process of developing and promoting differences between one's products and all competitive products: distinguishing Colgate from Crest toothpaste

factors of production

resources used to produce goods and services

competition

rivalry among businesses for sales to potential customers

2 types of economic systems

socialism and communism Examples of command economy

information resource

tells the managers of the business how effectively the other three resources are being combined and used

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 information about products or services

unemployment rate

the percentage of a nations labor force unemployed at any time

market price

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

demand

the quantity of a product that buyers are willing to purchase at each of various prices. The relationship b/w prices and the quantities purchased by buyers.

supply

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

business cycle

the recurrence of periods of growth and recession in a nations economic activity

specialization

the separation of a manufacturing process into distinct tasks and the assignment of the different tasks to different tasks to different individuals. The process of separating work into distinct tasks.

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 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

A business cycle consists of four states: peak, recession, trough, and recovery. T or F

true

Hewlett-Packard Corporation and Dell Computer use product differentiation in the marketplace. T or F

true

If a firm's sales revenues exceed its expenses, the firm has earned a profit. T or F

true

The equilibrium price means that the supply and demand for a product are in balance. T or F

true

The ultimate objective of business firms should be to satisfy the needs of their customers. T or F

true

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