DECA: Economics, Economics PI – Flashcards

In economic terms, goods are tangible items that have monetary value and satisfy your needs and wants (such as cars and clothing). Services are intangible items (meaning you cannot physically touch them) that have monetary value and satisfy your needs and wants. Services involve a task, such as cooking food or repairing a computer.

A resource is any item that can be used to produce goods and services. Natural resources include anything that comes from nature. Human resources are people, the work they do, and the skills they possess. Capital resources include materials used in the production of goods and services. All of these economic resources are limited. The basic economic problem is how to meet unlimited wants with limited resources. This gap is a condition called scarcity.

Economics deals with the production, distribution and consumption of goods and services. Specifically, economic systems deal with the way a country provides for the needs and wants of its citizens. Economic systems help countries to make decisions about how to use its resources.

Economic activities include: manufacturing, buying, selling, transporting and investing. The resources of a nation will help determine which economic activities should be pursued.

Utility refers to the added value of a product. There are five types of utility. Form Utility: This type of utility involves using raw materials to make a finished product. Place Utility: This type of utility involves having the product where the customer wishes to buy the product. Time Utility: This type of utility involves having the product available when the customer wishes to buy the product. Possession Utility: The exchange of a product for money is known as possession utility. Information Utility: Information utility involves communicating with the customer.

In a market-oriented economy like in the United States, supply and demand determine the prices and quantities of goods and services produced. Supply is the amount of goods and services producers are willing to make and sell. Demand is the willingness and ability of consumers to buy goods and services. Supply and demand interact in the marketplace resulting in a state of equilibrium, surplus, or shortage. The law of supply states that price and quantity supplied move in the same direction (a direct relationship). Thus, as price increases, the amount of goods and services supplied increases. Conversely, the law of demand states that as price increases, the amount desired by consumers will decrease (an inverse relationship). When the amount of a product/service being supplied equals the amount being demanded, equilibrium exists in the marketplace at that price. If, however, there is more supply than demand for a product a surplus exists, potentially leading to lower prices. A shortage exists when demand exceeds supply, a condition that can lead to rising prices.

Price is the value in money placed on a good or service. One function of price is that it can affect the value that a customer places on an item. Price helps establish a company's or product's image—many customers use price as a gauge to make judgments about products and companies. Another function of price is that it can give a competitive edge. Thirdly, the price of an item is part of the business' end goal of making a profit.

There are six general business activities. Generating ideas is an important activity in that businesses must remain competitive with other firms. Businesses also need to raise capital to finance their operations. Another important business activity is employing and training human resources. Businesses buy and sell goods and services. Marketing is a group of activities that provide and distribute the goods and services wanted and needed by a business' customers. Another activity is that businesses must maintain records to track performance and make decisions.

Many businesses must rely on resources beyond the borders of the U.S. to remain competitive. The overall economy is also reliant on a global marketplace. Foreign trade provides many goods that would otherwise be unavailable or too costly. Likewise, foreign consumers help support businesses in the U.S. by buying goods made here. Several factors affect the environment of the global marketplace including geography, culture, economic development, and political or legal concerns. Trade barriers, such as quotas, tariffs, and embargoes, are formal political actions that can affect international trade. Informal trade barriers can also be found due to cultural differences among nations.

A number of factors affect the business environment, therefore it is important to research the industry and understand the surrounding economy. Industry trends and patterns of change in areas such as sales growth and government regulation should be considered. Understanding the competition will help you plan a strategy of success. Barriers to entry in an industry may exist, such as a dominant competitor, economies of scale, and customer brand loyalty. Other industry factors include threats from substitute products, supply sources, and technology. A critical area to analyze is the demographics of your business environment, including number of companies, annual revenues, and average number of workers employed. Assessing the competition includes looking at market share and analyzing the position of your company relative to others in the marketplace.

Ethics are guidelines for good behavior, based on knowing the difference between right and wrong. Behaving ethically means being truthful, fair, open, and mindful of the law. In marketing, business ethics involves a company's efforts to protect individual consumers and society as a whole. Businesses must keep consumers informed and protected against fraud and deceit, and they must not produce unsafe goods. Another ethical consideration for marketers is price gouging, or pricing products unreasonably high. In sales, ethical issues to be aware of concern bribes, kickbacks, and high pressure tactics. Businesses must behave ethically in management, as well, including personnel and accounting issues. The standards of ethics within a business are in large part determined by the owner's principles and values. Remember, people do not all share the same ethical values. As a result, businesses should create a clear policy on ethics standards.

Organizations adapt to today's markets by using tools like SWOT Analysis and environmental scans to identify ways the business can improve. A SWOT Analysis assesses a company's strengths and weaknesses and the opportunities and threats that surround it. An environmental scan is an analysis of outside information that may have an impact on an organization. A business is constantly engaged in the process of renewal when they choose to use this data.

An economic system, or economy, is the way a nation provides for the needs and wants of its people. It defines how a country will use its resources to produce and distribute goods and services. Four types of economic systems exist: traditional, market, command, and mixed. A traditional economy determines the use of its resources based on the cultural or religious traditions that have been used for generations. Mostly small, developing nations use this type of economy today. In a market economy, there is no government involvement in the decision making process regarding economic resources. The marketplace determines what, how, and for whom goods will be produced. A command economy is a system in which a nation's government makes all of these economic decisions. The government also controls the factors of production in this system. No country, however, is a purely traditional, market, or command economy. There are always influences that make it somewhat mixed.

In a private enterprise system, the three basic economic questions—what goods/services will be provided, how, and by whom—are answered by individuals and businesses, not by government. Individuals and organizations own and control the economic resources, including natural, human, and capital goods used to produce goods and services. Private enterprise is characterized by a number of qualities, including the following: Ô Businesses are free to choose what they wish to produce, how to produce them, and what price they will charge Ô Individuals and businesses are free to own, use, buy, and sell private property Ô Government control in private enterprise is limited Ô Competition exists and is encouraged by government Ô Businesses are motivated by the ability to make and maintain a profit Ô Prices are important in making the supply and demand system work correctly. Ô Individuals and enterprises are free to set their own financial goals, including the ability to choose what kind of work they would like to do

Profit is the monetary return a business' owner receives for taking the risk of investing in the business. In simple terms, profit equals income less expenses. More specifically, there are two types of profit: gross profit and net profit. Gross profit is the money left over after the cost of goods is subtracted from income from sales. Net profit is the money left over after operating expenses are subtracted from gross profit. Factors that affect profit include demand for the good/service, expenses, prices, the economy, and chance. To try to increase profit, a business can increase worker efficiency, increase sales, and/or decrease expenses.

Risk is the possibility of incurring a loss. Economic risks are those that can result in a financial loss. Pure risk is one that presents the chance of loss but no opportunity for gain. Speculative risks offer the chance to either gain or lose. Some risks are controllable, while others are not. Likewise, you can insure some risks while others cannot be insured. To manage risks, they can be avoided, transferred, insured, or assumed.

Competition is the struggle among businesses for customers. As an essential component of the free enterprise system, competition forces businesses to produce quality goods at reasonable prices. Competition also encourages businesses to develop new products, enhance or improve existing products, and expand product selection in order to attract new customers. Businesses compete in two ways: price and nonprice competition. Price competition assumes that, with all other considerations being equal, a customer will buy the lowest-priced product. Nonprice competition is where businesses compete on factors such as product quality, business location and reputation, customer service, and payment or financing options available. A monopoly exists when there is no competition in the market for a particular good or service. Monopolies are not permitted in a free enterprise system.

The government serves as both a protector and a regulator of business in a free market economy. It serves to protect business property, enforce contracts and settle disagreements through the courts, and collect taxes on the products business sell. As a regulator, government enacts and enforces laws to prohibit certain behaviors, control business activities, and require certain standards. Examples of such laws include laws to control monopolies, set product safety standards, and regulate prices. The government also serves the following purposes to society through intervention in business: Provide public goods, Improve public welfare, Protect public health, Stabilize the economy, Protect specific businesses or industries, Conserve the environment, Protect consumers, Preserve competition, and Regulate workplace conditions. Government agencies have been set up to monitor such business activities, including the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC).

Taxes are payments you make to the government for services they provide. The U.S. tax system is based on the idea that everyone should contribute their fair share, that tax laws should be clear and simple, and that the tax system should be flexible. Tax dollars are spent on a number of things including public education and libraries, military defense and law enforcement, transportation costs, and fire protection to name a few. Income tax is calculated as a percentage of the taxable income you earn on the job. Social Security, or FICA, tax is used so that workers can receive benefits upon retirement. Sales tax is a percentage of the price of an item that a person pays when they buy something. Estate and inheritance taxes are taxes on wealth, which are collected after a person has died. Property tax is the main source of money for many local governments, and is based on the value of property such as land and buildings.

Productivity is defined as the output per worker hour that is measured over a set period of time, such as a week, month or year. Higher productivity increases profits. Businesses can increase their productivity by investing in new equipment, technology or facilities, providing additional training to staff or increasing the responsibilities of workers.

Productivity is the measure of worker output over a given period of time. Specialization and division of labor are important elements to increasing productivity. The theory behind this is that work can be completed faster and more efficiently when workers specialize in a certain area of production. An assembly line is an example of specialization and division of labor. Automation is the use of machines to do the work of people. It can cut production time, reduce errors, and simplify procedures, leading to greater overall productivity of the business.

A labor union is a group of workers who have joined together for the common purpose of improving the terms and conditions under which they work. Unions are formed to obtain higher wages, better benefits, and improved working conditions. When laborers organize, they are able to increase their bargaining power with business management. Two main types of unions exist today—industrial unions, made up of workers employed in the same industry, and craft/trade unions, which are groups of workers with similar skills. The AFL-CIO is the federation for nearly all labor unions, although some very large unions are independent of the federation. Labor union contracts are created through a negotiation process called collective bargaining, involving union officials and company representatives. If an agreement cannot be reached, pressure strategies may be imposed by either side, including strikes, picketing, and boycotts by union members or lockouts, injunctions, and strikebreakers by management. Several advantages and disadvantages exist for both sides in organized labor. Workers gain individual dignity, fair treatment, protection, and fringe benefits. However, they must pay union dues, support union decisions, and face hardships during strikes. Businesses benefit by having security regarding wages, benefits, and working conditions as well as having the union assist in recruiting and training employees. Businesses, though, face increased costs in wages and benefits, have limited control in personnel matters, and loss of production in the event of a strike.

The change in total product output that results from hiring one more worker is called the marginal product. Diminishing returns is experienced when the number of workers being utilized causes output to increase at a decreasing rate. In other words, utilizing too many workers may actually cause production to decrease.

Consumer spending is also called consumption, and it includes all spending by households on durable goods, nondurable goods, and services. Consumer spending is one variable used to calculate Gross Domestic Product, along with investment, government spending, and net exports. The amount of money actually available for consumer spending is called disposable personal income. Consumer spending, then, is one measure of the overall health of an economy.

Gross Domestic Product (GDP) is the output of goods and services produced by labor and property located within a country. GDP is one measure of a nation's productivity, or the output of workers in a given period of time. GDP is made up of several elements: private investment, government spending, personal spending, net exports of goods, and change in business inventories. Two types of GDP are nominal GDP and real GDP. Nominal GDP is stated in the price levels in which the GDP was measured; real GDP is the nominal GDP adjusted for changes in prices. Calculate GDP as follows: add private business spending, government spending, and personal spending. Then either add a trade surplus or subtract a trade deficit, and either add expanding inventories or subtract shrinking inventories. A similar measure to GDP is Gross National Product. GNP is the total dollar value of goods and services produced by a nation, including those produced outside of its own territory by its own citizens.

There are three main impacts of lingering unemployment on an economy: efficiency, inequality, and discouraged workers. Unemployment is inefficient in that it wastes human resources. It leads to inequality because those with the least experience tend to lose their jobs first, which are usually minorities and the young. Lastly, unemployed people tend to get discouraged about themselves and their abilities, and may give up their search for work. Unemployment is an important indicator of the overall strength of an economy. The higher the unemployment rate, the greater the chances of an economic slowdown. Likewise, the lower the unemployment rate, the greater the chances of an economic recovery. When more people are working, more people are spending money and paying taxes to help the economy grow.

Inflation refers to rising prices; it is an indicator of the stability of an economy. A low level of inflation (between 1 and 5 percent per year) is considered good because it indicates a stable economy. Higher levels of inflation are harmful to businesses. Rising prices cause consumers to spend less, slowing the overall economy. Inflation also leads to higher wages. A high level of inflation may cause wages to increase beyond what businesses can afford to pay, which can lead to layoffs and downsizing. Interest rates rise in periods of inflation. Rising interest rates mean that borrowing money becomes more expensive. Businesses are, thus, less likely to borrow money to expand their operations. With inflation, the value of a dollar decreases so businesses and individuals cannot buy as much with the same dollar as they could before. Inflation can be helpful to individuals and businesses who are borrowers. Those who borrow at a fixed rate of interest can repay the debt with dollars that are worth less, which makes their repayments smaller than they would have been without inflation.

Interest rates are determined by supply and demand. As saving and investing increase the money supply, interest rates tend to decrease. Likewise, more borrowing is likely to raise interest rates. Interest rate fluctuations can have an impact on stock purchases because as the cost of money changes, company profits can increase or decrease.

A business cycle is a series of recurring changes in economic activity. Four phases make up a business cycle: expansion, recession, trough, and recovery. During expansion, the economy is flourishing. It is a good time for businesses to start up or expand due to the increased output of goods and services. Recession is a time of economic slowdown lasting at least two quarters. Companies reduce their output during a recession, and consumers have less money to spend on goods and services. A prolonged recession is called a depression. A trough is the low point in a business cycle. It marks the beginning of the transition from recession/depression to recovery when signs of economic growth are near. In the recovery phase, demand increases and businesses respond by hiring more workers and supplying more goods.

Improvements in technology, communication, production, and distribution methods have enhanced the global business environment. Information exchange can be nearly instantaneous. The movement of raw materials and finished goods can be cone more quickly and easily. Trade agreements among nations and regions of the world reduce restrictions on trade. These factors allow for lower-cost production and more access to consumers than ever before. Corporations are often forced to compete multinationally, and their decision making must adjust to reflect a global marketplace. Companies invest in international business ventures for a number of reasons, including: expanding their markets, increasing their operating efficiency and reducing costs, reducing political and legal hurdles they might otherwise face in other countries, diversifying their operations, and gaining greater return on their investments. Multinational business is not without difficulties to overcome. Businesses must consider language and cultural differences. Also, there are differences in the stability of the government that might result in political risks. Different economic philosophies may lead to more or less government influence on business in a particular country. In addition, businesses have to deal with different monetary systems with fluctuating values among global currencies.

An exchange rate is the value of one currency in terms of another, and they are established on the foreign exchange market. This is a series of interconnected entities that exchange currencies, including businesses, banks, and governments. The exchange rate for a country's currency is determined by the supply and demand for that currency. This is impacted by foreign trade. The difference in the value of a country's imports and exports affects supply and demand, which affects exchange rates. For instance, if the U.S. is importing more goods than it is exporting, it will need to convert more U.S. dollars to other currencies. By doing so, the demand for other currencies increases and the exchange rate for U.S. dollars increases.

Multinational business is not without difficulties to overcome. Businesses must consider language and cultural differences. Also, there are differences in the stability of the government that might result in political risks. Different economic philosophies may lead to more or less government influence on business in a particular country. In addition, businesses have to deal with different monetary systems with fluctuating values among global currencies. Doing business in other countries often means taking a different approach to business relationships and management practices, and even different ethical beliefs.

Good is a tangible thing you can feel and touch (Fruits, Toys and Cars) where as a service is an action that is preformed (Doctor, Mailman, Landscaper)

Economic resources are the factors used in producing goods or providing services. In other words, they are the inputs that are used to create things or help you provide services. Economic resources can be divided into human resources, such as labor and management, and nonhuman resources, such as land, capital goods, financial resources, and technology.

Economics is the social science that studies economic activity to gain an understanding of the processes that govern the production, distribution and consumption of goods and services in an economy.

The place utility can be created by a business activity that is a food distribution company.

When the supply is higher than the demand, the item is cheaper because there is enough to go around. When the supply is lower than the demand there becomes a limited supply factor making the price go up because scarcity.

Price acts as a signal for shortages and surpluses which help firms respond to changing market conditions

Business is the backbone of society and helps provide lifestyle for all classes of life.

OPERATIONS -Operations includes every activity needed to manufacture a product or provide a service. FINANCE -The bottom line: Money makes business possible. When approached carefully, finance activities build a foundation for a company's security, ensuring future operations. MARKETING -Without customers for its products or services, a company can't stay afloat, making marketing another crucial business activity. Marketing activities go beyond merely creating ads that entice customers. Instead, marketing activities are intimately connected with a company's products and services.

Direct Sales Franchise Model Freemium Model Subscription Model.

The manner in which a management achieves the right combination of differentiation and integration of the organization's operations, in response to the level of uncertainty in its external environment. Subdivision Functional Unit

The combination of internal and external factors that influence a company's operating situation.

The business environment can include factors such as: clients and suppliers; its competition and owners; improvements in technology; laws and government activities; and market, social and economic trends.

A written set of guidelines issued by an organization to its workers and management to help them conduct their actions in accordance with its primary values and ethical standards.

Companies and marketing teams stay up to date on current trends and social events to keep their advertising relevent

Traditional Economic System -Goods are bought and sold based on beliefs Command Economic Systems -the next step up from a traditional economy.

Small businesses diversify market economy by claiming small parts of market share which may appeal to a more specific demographics and consumers. Small businesses/entrepreneurships impact market economies greatly because of many reasons such as: -providing jobs -offering a variety of goods and services to consumers -innovating goods and services -creating and attracting competition -stimulating demand -providing tax revenue to government -providing income for the community.

business or industry that is managed by independent companies or private individuals rather than by the state.

-Sales Prices -Materials cost fluctuation -Labor price changes -Inventory method changes

The probability of loss inherent in an organization's operations and environment (such as competition and adverse economic conditions) that may impair its ability to provide returns on investment.

Competition is when multiple organizations are all going after the same objective.

In many countries government facilitates many aspects of business like minimum wages, corporate taxes, and tariffs for trade.

Tax is the amount of money that the government takes for the funding and sustaining of the country or state.

Productivity is the amount of effective output exerted and its lack of malfunction.

Specialization is important because it means that the person is precisely trained at their job so there is less malfunction and everything is more efficient. Division also gives people specific jobs like in a conveyor belt template.

Unions An association of workers united as a single, representative entity for the purpose of improving the workers' economic status and working conditions through collective bargaining with employers.

if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield.

If consumer spending up it is a generally good thing and reflects a better economy state as people are most likely earning more and values are rising for housing and other markets.

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When prices are inflated for a long period of time it can be very straining on the pockets of consumers.

The monetary value of all the finished goods and services produced within a country's borders in a specific time period

Having to many unemployed people means more government subsidy reliance.

When interest rates go up people earn a bigger return on their deposited money and investments.

is the downward and upward movement of levels of gross domestic product (GDP) and refers to the period of expansions and contractions in the level of economic activities (business fluctuations) around its long-term growth trend.

Global trade is the trade around the world of products that are more efficiently produced elsewhere.

Globalization impacts businesses buy providing new ideas that come from around the world.

Exchange rates are the rates at which a countries money is worth to another country.

Cultural sensitivity is"the knowledge and interpersonal skills that allow providers to understand, appreciate, and work with individuals from cultures other than their own.