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Introduction to Business Unit 1 Chapter 2

Terms in this set (17)

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.
"Dismal Science" Thomas Malthus
That lugubrious economist who claimed humanity was trapped in a world where population growth would always strain natural resources and bring widespread misery.
"Invisible Hand" Adam Smith
A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all.
Capitalism
An economic system in which all or most of the factors of production and distribution are privately owned and operated for profit.
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.
Communism
An economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production.
Mixed Economics
Economic systems in which some allocation of resources is made by the market and some by the government.
Supply & Demand Curves
See figures 2.1, 2.2 and 2.3 on page 38
Market Equilibrium Point
When the supply and demand curves intersect, the market is in equilibrium. This is where the quantity demanded, and quantity supplied are equal.
Surplus & Shortage
Once you lower the price of your product, your product's quantity demanded will rise until equilibrium is reached. Therefore, surplus drives price down. If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, creating a shortage.
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.
Oligopoly Competition
A degree of competition in which just a few sellers dominate in the market.
Monopoly Competition
A degree of competition in which only one seller controls the total supply of a product or service and sets the price.
Gross Domestic Products (GDP)
The total value of final goods and services produced in a country in each year.
Unemployment Rate
The number of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks. (See figure 2.5 on page 47)
Consumer Price Index (CPI)
Monthly statistics that measure the pace of inflation or deflation.
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