Aggregate Output
the total quantity of goods and services produced by an economic system during a given period
Balance of Trade
the economic value of all the products that a country exports minus the economic value of the products it imports
Business
organization that provides good or services to earn profits
Business Cycle
short-term pattern of economic expansions and contractions
Capital
funds needed to create and operate a business enterprise
Capitalism
system that sanctions the private ownership of the factors of production and encourages entrepreneurship by offering profits as an incentive
Communism
political system in which the government owns and operates all factors of production
Competition
vying among businesses for the same resources or customers
Consumer Price Index (CPI)
a measure of the prices of typical products purchased by consumers living in urban areas
Demand
the willingness and ability of buyers to purchase a good or service
Demand and Supply Schedule
assessment of the relationships among different levels of demand and supply at different price levels
Demand Curve
graph showing how many units of a product will be demanded (bought) at different prices
Depression
a prolonged and deep recession
Domestic Business Environment
the environment in which a firm conducts its operations and derives its revenues
Economic Environment
relevant conditions that exist in the economic system in which a company operates
Economic Indicators
a statistic that helps assess the performance of an economy
Economic System
a nation's system for allocating its resources among its citizens
Entrepreneur
individual who accepts the risks and opportunities involved in creating and operating a new business venture
External Environment
everything outside an organization's boundaries that might affect it
Factors of Production
resources used in the production of goods and services labor, capital, entrepreneurs, physical resources, and information resources
Fiscal Policies
policies used by a government regarding how it collects and spends revenue
Global Business Environment
the international forces that affect a business
GDP Per Capita
gross domestic product divided by total population
Gross Domestic Product (GDP)
total value of all goods and services produced within a given period by a national economy through domestic factors of production
Gross National Product (GNP)
total value of all goods and services produced by a national economy within a given period regardless of where the factors of production are located
Inflation
occurs when widespread price increases occur throughout an economic system
Information Resources
data and other information used by businesses
Labor (Human Resources)
physical and mental capabilities of people as they contribute to economic production
Law of Demand
principle that buyers will purchase (demand) more of a product as its price drops and less as its price increases
Law of Supply
principle that producers will offer (supply) more of a product for sale as its price rises and less as its price drops
Market
mechanism for exchange between buyers and sellers of a particular good or service
Market Economy
economy in which individuals control production and allocation decisions through supply and demand
Market Price (Equilibrium Price)
profit-maximizing price at which the quantity of goods demanded and the quantity of good supplied are equal
Mixed Market Economy
economic system featuring characteristics of both planned and market economies
Monetary Policies
policies used by a government to control the size of its money supply
Monopolistic Competition
market or industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors
Monopoly
market or industry in which there is only one producer that can therefore set the prices of its products
National Debt
the amount of money the government owes its creditors
Natural Monopoly
industry in which one company can most efficiently supply all needed goods or services
Nominal GDP
GDP measured in current dollars or with all components valued at current prices
Oligopoly
market or industry characterized by a handful of (generally large) sellers with the power to influence the prices of their products
Perfect Competition
market or industry characterized by numerous small firms producing an identical product
Physical Resources
tangible items that organizations use in the conduct of their businesses
Planned Economy
economy that relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions
Political-Legal Environment
the relationship between business and government
Private Enterprise
economic system that allows individuals to pursue their own interests without undue governmental restriction
Privatization
process of converting government enterprises into privately owned companies
Productivity
a measure of economic growth that compares how much a system produces with the resources needed to produce it
Profits
difference between a business's revenues and its expenses
Purchasing Power Parity
the principle that exchange rates are set so that the prices of similar products in different countries are about the same
Real GDP
GDP adjusted to account for changes in currency values and price changes
Recession
a period during which aggregate output, as measured by GDP, declines
Shortage
situation in which quantity demanded exceeds quantity supplied
Socialism
planned economic system in which the government owns and operates only selected major sources of production
Sociocultural Environment
the customs, mores, values, and demographic characteristics of the society in which an organization functions
Stability
condition in which the amount of money available in an economic system and the quantity of goods and services produced in it are growing at about the same rate
Stabilization Policy
government economic policy intended to smooth out fluctuations in output and unemployment and to stabilize prices
Standard of Living
the total quantity and quality of goods and services people can purchase with the currency used in their economic system
Supply
the willingness and ability of producers to offer a good or service for sale
Supply Curve
graph showing how many units of a product will be supplied (offered for sale) at different prices
Surplus
situation in which quantity supplied exceeds quantity demanded
Technological Environment
all the ways by which firms create value for their constituents
Unemployment
the level of joblessness among people actively seeking work in an economic system