Introduction To Business Chapter 1

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The Economic Environment

wants

Things you wish you could have

needs

Necessary wants; in order to survive.

profit

The amount. of money left over after a business has paid for the cost of producing its goods & services

business cycle

Movement of the economy from one condition to another and back again

competition

The rivalry among businesses to sell their goods and services to consumers

demand

The amount of a good or service that consumers are able and willing to buy at various possible prices during a specified time period.

economic resources

The means through which goods and services are produced

goods

Tangible products that we can see and touch. Used to satisfy our wants and needs.

gross domestic product (GDP)

Total dollar value of all final goods and services produced in a country during a single year

market economy

Economic system in which businesses and individuals are free to make their own decisions as they buy and sell in the marketplace.

scarcity

The condition that results from society not having enough resources to produce all the things people would like to have

services

Activities that are consumed at the same time they are produced

supply

The amount of a good or service that businesses are able and willing to sell at various prices during a specified time period.

capitalism

economic system where private individuals own and control means of production with very little government interference

profit motive

The desire to work hard and be creative to earn a higher profit.

natural resources

Raw materials supplied by nature that come from the earth, the water, or the air and are used to produce goods.

human resources

People who work to produce goods and services

capital resources

The tools, equipment, and buildings that are used to produce goods and services

economic decision making

The process of choosing which wants, among several options, will be satisfied.

productivity

The measurement of the number of items produced per worker

inflation

A sustained increase in the general level of prices for goods and services

deflation

A sustained decrease in the general level of prices for goods and services

prosperity

A period in which most people who want to work are working, businesses produce goods and services in record numbers, wages are good, and the rate of GDP growth increases

recession

A period in which demand begins to decrease, businesses lower production, unemployment begins to rise, and GDP growth slows.

depression

An economic downturn marked by decreasing business activity, rising unemployment, and falling prices and wages.

recovery

The phase in which unemployment begins to decrease, demand for goods and services increases, and GDP begins to rise again

standard of living

A measure of quality of life based on the amounts and kinds of goods and services a person can buy

quality of life

The overall satisfaction and enjoyment a person gets from life

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