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BUS2000 Exam 1
| Term | Definition |
|---|---|
| business | provide goods and services while earning a profit Any activity that seeks to provide goods and services to others while operating at a profit |
| risk | losing time and money on a business The chance an entrepreneur takes of losing time and money on a business that may not prove profitable. |
| standard of living | what people can buy with money they have |
| nonprofit organization | not seeking profit |
| quality of life | broader than standard of living (- (e.g., political freedom, environment, education, safety, amount of leisure, and rewards that add to the satisfaction and joy that other goods and services provide) |
| stakeholders | Anyone affected by a business - Balance business against societal concerns |
| outsourcing | obtain (goods or a service) from an outside or foreign supplier, especially in place of an internal source. |
| corporation | 1. Ownership divided into shares of stock 2. Separate legal entity organized under state ____ law 3. Limited liability |
| goods | Tangible products such as computers, food, clothing, cars, and appliances. |
| services | Intangible products (i.e., products that can't be held in your hand) such as education, health care, insurance, recreation, and travel and tourism. |
| Entrepreneur | A person who risks time and money to start and manage a business |
| Loss | When a business's expenses are more than its revenues |
| factors of production | land, labor, capital, entrepreneurship, knowledge |
| Business environment | the surrounding factors that either help or hinder the development of businesses (five envs/elements) |
| Economic and Legal Environment | element of bus environment 1. Freedom of ownership 2. Contract laws 3. Elimination of corruption 4. Tradable currency 5. Minimum taxes and regulation |
| Tech environment | element of bus env -Info tech - databases (amazon, Business to customer, business to business) - Bar codes (tracking different products) - internet -Innovate new products and ideas (Consciousness quantum system) -Increase productivity |
| competitive environment | element of bus env -Customer service (Exceeding customers expectations) -Stakeholder recognition -Employee service (Empowerment) -Concern for the environment |
| social environment | -Diversity -Demographic changes -Consumer trends (Conserve and save, Shopping online, Social media, Global preferences and taste, Highly educated consumers) -Family changes |
| global business environment | the international forces that affect a business i. As businesses expand to global markets, new jobs will be created ii. Rapid changes create a need for continuous |
| effectiveness | producing the desired result |
| efficiency | producing goods and services using the least amount of resources |
| productivity | The amount of output you generate given the amount of input (e.g., hours worked) key indicator of economy The more you can ____ in any given period, the more money you're worth to companies |
| empowerment | giving frontline workers the responsibility, authority, freedom, training, and equipment they need to respond quickly to customer requests |
| greening | the trend toward saving energy and producing products that cause less harm to the environment |
| Economics | The study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals |
| Macroeconomics | The part of economics study that looks at the operation of a nation's economy as a whole. (e.g. inflation, interest rates) |
| microeconomics | The part of economics study that looks at the behavior of people and organizations in particular markets. |
| resource development | the study of how to increase resources (say, by getting oil and gas from shale and tar sands) and create conditions that will make better use of them (like recycling and conservation) |
| invisble hand | A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all. - As we improve, the economy will as well. |
| Adam Smith and the Creation of Wealth (Wealth of Nations 1776) | ______ ______ believed that: Freedom was vital to any economy's survival. Freedom to own land or property and the right to keep the profits of a business is essential. People will work hard if they believe they will be rewarded. |
| Capitalism | An economic system in which all or most of the factors of production and distribution are privately owned and operated for profit. -US -Japan -Canada UK |
| Four basic rights of capitalism | 1. The right to own private property 2. The right to own a business and keep all that business's profits 3. The right to freedom of competition 4. The right to freedom of choice |
| state capitalism | a combination of freer markets and some government control |
| Benefits of Free Markets | Allows open competition among companies, must provide high-quality products at fair prices Gives opportunities for poor people to work their way out of poverty Encourages business to be more efficient they can successfully compete on price and quality |
| Limitations of free markets | Business owners and managers make more money and have more wealth than lower-level workers The old, disabled, or sick can't manage a business, others may not have the talent or the drive Some people will let greed dictate how they act |
| Supply | The quantity of products that manufacturers or owners are willing to sell at different prices at a specific time. |
| demand | The quantity of products that people are willing to buy at different prices at a specific time. |
| Market Price (Equilibrium Price) | the price determined by supply and demand |
| perfect competition | the degree of competition in which there are many sellers in a market, and none is large enough to dictate the price of a product. |
| monopolistic competition | The degree of competition in which many sellers produce very similar products that buyers nevertheless perceive as different. |
| price | _______ tells companies how much of a product they should produce. If something is wanted but hard to get, the ____ will rise until more products are available. |
| Oligopoly | A market structure in which a few large firms dominate a market the initial investment required to enter the business often is tremendous. Initial investment usually very large, like aircraft |
| Monopoly | A degree of competition in which only one seller controls the total supply of a product or service, and sets the price |
| Socialism | An economic system based on the premise that some, if not most, basic businesses should be owned by the government so that profits can be more evenly distributed among the people. |
| Benefits of socialism | Social equality 1. Govt will take income from wealthier people through taxes and redistribute it to poorer people through various govt programs 2. Free education through college 3. Free healthcare and childcare are other forms |
| Limitations of socialism | Takes away incentives from businessmen Brain drain Results in fewer inventions and less innovation those who come up with new ideas won't receive as much reward as they would in a capitalist system |
| Brain Drain | The loss of the best and brightest people to other countries. |
| Communism | an economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production. intrudes further into the lives of people than socialism does. |
| command economy | exists when the govt largely determines what goods and services get produced, who gets them, and how the economy grows. Socialism and communism are variations on this economic system |
| Gross Domestic Product (GDP) | the total value of final goods and services produced in a country each year ---> USA is still the largest ____ |
| Gross Output (GO) | A measure of total sales volume at all stages of production - Considered a better indicator of the business cycle and more consistent with economic growth theory 2x size of GDP -shows that consumer spending is the effect, not the cause, of prosperity |
| unemployment rate | refers to the percentage of civilians at least 16 yrs old who are employed and tried to find a job within the prior four weeks |
| Price indexes | help gauge the health of the economy by measuring the levels of inflation, disinflation, deflation, and stagflation. |
| Inflation | general rise on the prices of goods and services over time - the federal reserve tries to hold inflation to 2% -_____ today is around 8.5% |
| Disinflation | Occurs when price increases are slowing (the inflation rate is declining) |
| Deflation | -A situation when prices are declining -Occurs when countries produce so many goods that people cannot afford to buy them all (too few dollars are chasing too many goods) |
| Stagflation | A situation when the economy is slowing but prices are going up anyhow. |
| Consumer Price Index (CPI) | i. Monthly statistics that measure the pace of inflation or deflation ii. Core inflation = ___ - food and energy costs iii. Using a basket of key products purchased dairy (milk, gas, bread) then compare the prices with those from several years ago |
| Producer Price Index (PPI) | An index that measures prices at the wholesale level. |
| Business cycles | the periodic rises and falls that occur in economies over time |
| Recession | Phase of long-term business cycle two or more consecutive quarters of decline in the GDP in a ___, prices fall, people purchase fewer products, and businesses fail. brings high unemployment, increased business failures, an overall drop in living stand |
| Depression | Phase of long-term business cycle severe recession, usually accompanied by deflation |
| recovery | Phase of long-term business cycle occurs when the economy stabilizes and starts to grow - eventually leads to an economic boom, starting the cycle all over again |
| fiscal policy | The federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending. |
| Ways to influence the economy | - Stabilizing the economy through fiscal policy - Using monetary policy to keep economy growing 1. When the economy is booming, the Fed tends to raise interest rates 2. When economy is in a recession, the fed tends to decrease interest rates |
| National Debt | The sum of government deficits over time. |
| Keynesian economic theory | theory that a govt policy of increasing spending could stimulate the economy in a recession |
| monetary policy | the management of the money supply and interest rates by the Federal Reserve |
| privately held corporation | 1. No public investment 2. Fewer stockholders 3. Not regulated by SEC 4. Ex. Facebook was a ______ corporation until may 2012, raising 15 bill of outside investment funds |
| publicly held corporation | 1. Allows public investment 2. More stockholders 3. Regulated by sec 4. _______ held corporation trades on: § NYSE § NASDAQ § OTC |
| Importing | buying products from another country -The US is the largest _____ country |
| Exporting | selling products to another country |
| free trade | The movement of goods and services among nations without political or economic barriers. |
| comparative advantage | A country should sell to other countries those products that it produces most efficiently & buy from other countries those products that it cannot produce as effectively or efficiently. i.e. Saudi Arabia sell oil and buy wood products. |
| absolute advantage | A country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries. i.e. South Africa—diamonds; ginkgo tree in Thailand |
| balance of trade | The total value of a nation's exports compared to its imports over a particular period. |
| Trade Surplus (Favorable) | occurs when the value of a country's exports exceeds that of its imports |
| trade surplus (unfavorable) | Occurs when the value of a country's imports exceeds that of its exports. |
| balance of payments | The difference between money coming into a country (from exports) and money leaving the country (from imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment. |
| Favorable balance of payments | The goal is to have more money flowing into a country than out of it. |
| Unfavorable balance of payments | When more money flows out of a country than into it. |
| Dumping | Selling your products in a foreign country at lower prices than those charged in your own producing country. ______ is prohibited by federal laws. In recent years, China and Brazil have been penalized for _________ steel in the United States. |
| Licensing | strategy where the licensor allows a foreign company the licensee to produce its product in exchange for a royalty can benefit a firm by Gaining revenues it couldn't make w/o it Spending little or no money to produce or market their product |
| Franchising | A contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product or service in a given territory in a specified manner. |
| contract manufacturing | foreign company's production of private-label goods to which a domestic company then attaches its own brand name or trademark Allow a company to experiment in a new market without incurring heavy start-up costs such as building a manufacturing plant |
| Joint Venture | A partnership in which two or more companies (often from different countries) join to undertake a major project. |
| Benefits of joint ventures | Shared technology and risk. Shared marketing and management expertise. Entry into markets where foreign companies are often not allowed unless goods are produced locally. |
| strategic alliance | Long-term partnership between two or more companies established to help each company build competitive market advantages. Don't typically share costs, risks, management or profits. ___provide broad access to markets, capital, and technical expertise. |
| Foreign Direct Investment (FDI) | The buying of permanent property and businesses in foreign nations. |
| foreign subsidiary | A company owned in a foreign country by another company, called the parent company. |
| Primary advantage of foreign subsidiary | Parent company maintains complete control over its technology or expertise. |
| Primary disadvantage of foreign subsidiary | Must commit funds and technology within foreign boundaries. |
| multinational corporation (MNC) | An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management |
| Forces Affecting Trade in global markets | sociocultural forces, economic and financial forces, legal and regulatory forces, and physical and environmental forces |
| sociocultural forces | To be involved in global trade, you must be aware of the cultural differences among nations, including. Social structures Religion Manners and customs Values and attitudes Language Personal communication |
| Economic and Financial Forces | Exchange rate, high/low value of the dollar, floating exchange are _________ and ________ financial forces |
| exchange rate | The value of one nation's currency relative to the currencies of other countries. |
| High value of the dollar | — Dollar is trading for more foreign currency; foreign products become cheaper |
| Low value of the dollar | Dollar is trading for less foreign currency; foreign goods become more expensive |
| floating exchange rate | Currencies float in value depending on the supply and demand for them in the global market |
| trade protectionism | The use of government regulations to limit the import of goods and services. Advocates of _____________ most often UNIONS, believe it allows domestic producers to survive, grow, and produce jobs. - tariffs, import quotas, embargos - WTO, NAFTA etc. |
| tariff | tax imposed on imports |
| Protective tariff | import taxes |
| revenue tariff | raise money for govt |
| import quota | a limit on the number of products in certain categories that a nation can import |
| embargo | import or export of a certain product, or the stopping of all trade with a particular country. Political disagreements can lead to ______ E.g. the U.S. ________ against Iran and Venezuela |
| World Trade Organization (WTO) | An independent entity of 164 member nations whose purpose is to oversee cross-border trade issues and global business practices; headquartered in Geneva. |
| General Agreement on Tariffs and Trade (GATT) | a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions |
| North American Free Trade Agreement (NAFTA) | Agreement that created a free-trade area among the United States, Canada, and Mexico; passed in 1993. |
| United States-Mexico-Canada Agreement (USMCA) | Replace NAFTA; ratified in 2020 Create level playing field for U.S. workers with improved rules. Modernize & strengthen food and agriculture trade in North America. Support modern economy. New overall regulatory practices |
| Central American Free Trade Agreement (CAFTA) | Agreement that created a free-trade zone with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua; signed into law in 2005. |
| Outsourcing | Process whereby one firm contracts with other companies to do some or all of its functions. U.S. firms have ________ payroll functions, accounting, and manufacturing for years. |
| Capital | This includes machines, tools, buildings, or whatever else is used in the production of goods. It may not include money; money is used to buy factors of production but is not always considered a factor by itself. |
| mixed economy | economies exist where some allocation of resources is made by the market and some by the government. |
| free market economy | exist when the market largely determines what goods and services get produced, who gets them, and how the economy grows. (another way of saying capitalism) |
Created by:
yesmaam11