54 terms

Marketing and the Economy

STUDY
PLAY
economy
Organized way a nation provides for the wants/needs of its people
scarcity
the difference between wants/needs and available resources; forces everyone (nations and people) to make economic choices
resources
All things used in the production of goods and services
factors of production
economic resources land, labor, capital, and entrepreneurship
land
everything contained in the earth or found in the seas; natural resources used for raw materials for making goods and creating services
labor
all the pople who work
capital
money to start and operate a business; factories, office buildings, computers, and tools are capital resources
infrastructure
part of capital resources; the physical development of a country; roads, ports, bridges, utilities, telecommunications, etc.
entrepreneurship
the skills of people who are willing to invest their time and money to run a business
3 Questions Economies must Answer
What to produce? How to produce? For whom?
surplus
when supply exceeds demand
Market economy
in a pure market economy there is no government involvement in economic decisions
Command economy
also called a Planned Economy; government answers questions and controls the factors of production; A central authority plans and controls what is produced and distributed
Traditional Economy
economy where people follow traditions and customs; Habits, traditions, and rituals answer the basic questions of what, how and whom
Mixed economy
a market-based economic system in which the government is involved to some extent
communism
ex: Cuba, North Korea, China
economic and political system based on a single-party government ruled by a dictator
socialism
gov't tries to reduce differences between the rich and poor; lots of gov't assistance social service programs; key industries run by gov't; ex: Germany, Great Britain, Canada, France
capitalism
democratic government; marketplace competition and private ownership = free enterprise; ex: US, Japan
Privatization
process of selling government businesses to privately owned individuals or companies
Nationalization
takeover of property or resources by the government
Characteristics of Free Enterprise System
freedom of ownership, competition, risk, profit, supply and demand
supply
the relationship between the amount of a good or service that businesses are willing and able to make available and the price
demand
the relationship between the amount of a good or service that consumers are willing and able to purchase and the price
market price/equilibrium
point at which supply and demand intersect
Developing Economy
mostly poor with little industrialization
productivity
output per worker per hour measured over a defined period of time; specialization increases productivity
Gross domestic product (GDP)
output of goods and services produced by labor and property located within a country
inflation
rising prices; 1-5% is stable; 10% hurts an economy; CPI is used to measure inflation; controlling inflation is one of govt major goals through interest rates
Gross National Product (GNP)
goods and services produced by a nation, including goods produced abroad by a country's citizens and companies
Consumer Price Index (CPI)
measures the change in price of goods over time of 400 retail goods/services used by the average household; includes food, housing, utilities, transportation, and medical care
Unemployment rate
% of labor force that is unemployed
business cycle
recurring changes in economic activity
Expansion
Prosperity - stage when the economy is flourishing/growing; It is a period when the level of business activity surges and gross domestic product (GDP) expands until it reaches a peak; unemployment low, consumer confidence and spending is high
Recession
economic slowdown beginning immediately after the economy reaches a peak; businesses reduce workers; consumer confidence and spending are low, little demand, production decreases, businesses have less $ to invest; must last more than a few months
Depression
deep and long-lasting recession; nearly impossible to find a job, many businesses forced to shut down, very high unemployment; results in poverty
Recovery
renewed economic growth following a recession; GDP begins to increase; reduced unemployment; increase in demand for goods and services; increase in consumer spending; moderate expansion of businesses
shortage
when demand exceeds supply
trough
signifies the end of a recession; low point in the business cycle, transition from recession to recovery, economy stops slowing and begin to see signs of recovery
free enterprise
encourages individuals to start and operate their own business in a competitive system without government involvement
freedom of ownership
personal property (cars, homes, land, etc.) and business ownership and intellectual property (patent, trademark, copyrights)
competition
struggle for customers
Price Competition
Competition that focuses on the sale price of a product.
Non-price Competition
Competition based on factors that are not related to price - focus on quality, service, location and reputation
risk
potential for loss or failure
profit
money earned from conducting business after all costs and expenses have been paid
monopoly
exclusive control over a product or means of producing it
public sector
government financed agencies such as education, military, social security, medicare, etc.
private sector
business not associated with the government
economic utility
Amount of satisfaction person receives from consumption of particular product or service
form utility
changing raw materials into usable goods
place utility
having a product where customers can buy it
time utility
having a product available at a certain time of year or a convenient time of day
possession utility
exchange of a product for money; retailers may accept cash, check, credit, paypal, or finance the purchase using installment plans or layaway
information utility
involves communicating with the consumer; salespeople provide information as well as the product's package/label displays information

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