Economics PI – Flashcards

Good - tangible, purchased for manual use Service - intangible, purchased for one to perform a task on behalf of the clientt

Capital Resources - assets, monetary value Human Resources - labor/management Natural Resources - raw materials

Economics is the study of meeting unlimited human wants and examining their behavioral patterns in regards to money based on various environmental, social, political, personal, and psychological factors. This includes strategy involved in various economic activities in order to attract consumers of the target market and generate more cash flow. Economic Activities: Production - creation of a good/service Distribution - making good/service available Consumption - usage of a good/service

Form Utility - configuration of product Place Utility - physical location Time Utility - timing of service Possession Utility - terms of ownership

Supply - availability of good/service Demand - public desire for good/service Law of Supply - price and supply are positively correlated because if it is more profitable and suppliers are more willing to produce/offer good/service Law of Demand - price and supply are negatively correlated because less people are willing to pay for said good/service Elasticity - sensitivity of supply/demand to increasingly subtle changes in price (high elasticity = sensitive to smaller changes in price, no elasticity = no change in supply/demand regardless of price) Market Equilibrium - price at which supply and demand are equal, correlates with equilibrium quantity, assessed by economists in order to avoid shortage or surplus Shortage - price too low, supply less than demand, not enough for every consumer Surplus - price too high, supply higher than demand, capital wasted on resources for things no one wants Factors Affecting Supply: Resource Price - negative correlation Related Product Price - negative correlation Number of Suppliers - positive correlation Technological Advancement - positive correlation Expected Future Prices - positive correlation Factors Affecting Demand: Substitute Price - positive correlation Complement Price - negative correlation Expected Future Prices - positive correlation Income - positive correlation (except for low-value) Population - positive correlation (except for low-value)

The price of a good or service is how much it costs per unit or time period. Based on factors affecting supply and demand in the current marketplace, the price determines a forecasted quantity supplied and demanded, allowing a business to determine what price to set in order to accomplish market equilibrium.

Businesses satisfy unlimited human wants by providing goods and services to society.

Operations - improving quality/efficiency Marketing - improving product appeal to consumers Finance - recording financial transactions to make recommendations, filing reports to banks and gov.

Manufacturer - takes raw material and creates product Distributor - makes product available to retailers Retailer - sells product to consumers Franchise - includes all 3 functions/models

Organizational design is the structure of a business or its activities, such as having a CEO and chief executives, followed by senior managers, managers, associates, and interns. It can be centralized (one decision-maker) or decentralized (multiple decision-makers).

Social Forces - approval of brand among society Technological Forces - adaptation to new technologies Economical Forces - business cycles Geopolitical Forces - legislation, international relations

Internal Factors: Core Competencies - strengths/weaknesses Goals/Objectives - envisioned accomplishments Values/Philosophy - beliefs on how to do business External Factors: Macro Trends - various environmental, geopolitical, and social trends Economic Dynamics - changes in economic principles of industry Competition - See PI #89

Business ethics include employees balancing their personal and professional responsibilities, as well as companies serving the interests of both their consumers and stakeholders.

Organizations have market-research specialists and economic analysts to analyze trends in the ever-changing market and make recommendations to the marketing and finance teams based on their findings.

Traditional - unregulated perfect competition Command - government monopolies Market - unregulated, various forms of competition Mixed - regulated, various forms of competition

Market economies are completely unregulated, meaning that there are few barriers to entry and startups can easily make contributions to society and profit.

A private enterprise is a type of business with no government regulation.

Supply/Demand - See PI #74 Competition - See PI #89 Global Environment - See PI #80 Expansion - into new markets (vertical integration) into various brands (horizontal integration)

Human Risk - possibility of loss caused by humans Economic Risk - unfavorable market conditions Natural Risk - natural disasters

Competition is the amount of businesses and differentiation among their goods and services within a certain market. Types of Competition: Monopoly - 1 business, no differentiation Oligopoly - few businesses, low differentiation Monopolistic Competition - many businesses, high differentiation Perfect Competition - many businesses, no differentiation Duopoly - 2 dominant suppliers Collusion - classified suppliers (e.g. government weapons suppliers) Cartel - association of suppliers with high prices and low competition

There are government agencies and legislation to impose regulations on business activities, but businesses can influence political decision-makers.

Tax policy is regulated by the Internal Revenue Service (IRS) government agency. The funds are used to improve public services such as transportation, education, and infrastructure. Donations are often tax-deductible. Types of Taxes: Income Tax - percentage of any income paid to IRS Payroll Tax - withheld by employer to pay to IRS Sales Tax - percentage of commodity price paid to IRS Excise Tax - seller pays percentage of revenue to IRS Property Tax - percentage of loan paid to IRS

Productivity is a quantitative measure of the ratio of outputs to inputs. When productivity is lower than necessary, inflation occurs due to more input (resources) resulting in less output (money), decreasing each individual unit of money's value.

Division of labor ensures that a business can complete multiple tasks at once, allowing it to remain competitive and thereby increasing its productivity, resulting in more outputs per input.

Organized labor unions often strike against a business for increased rights, such as higher wages.

The law of diminishing returns states that the greater the number of inputs, the less outputs each individual input will produce unless other factors are manipulated (e.g. more employees, each one is less productive; more time, more procrastination, etc.)

The more consumer spending a business has, the higher its profits are likely to be, making it an effective economic indicator of the company's profitability.

Inflation decreases the value of money, meaning that the business's assets are constantly becoming less and less valuable.

A nation's GDP is a quantitative measure representing the total monetary value of all goods and services produced within a country's borders over a period of time. It can be used as a measure of a nation's wealth.

The higher the unemployment rate, the worse the economy of a country does. It serves as an indicator of poor economic conditions that cause high rates of unemployment, but also causes economic issues of its own. Types of Unemployment: Structural - low demand for job skills Frictional - job transition (e.g. college grads, retirement) Cyclical - caused by business cycles (e.g. GDP change) Causes of Unemployment: surplus of skills (causes structural) more recent college grads than there are jobs (causes frictional) GDP decrease, bear market, etc. (causes cyclical)

Interest rate fluctuations influence consumer/business spending, inflation, and recessions. Relationships between Interest Rates and Economy: Consumer/Business Spending - negatively correlated Inflation - negatively correlated Recession - positive correlated (when set too high)

A business cycle is a series of fluctuations including growth, peak, and recession. Actions During Phases of Business Cycle: Growth - invest more Recession - withdraw investments

Global trade occurs through the transport of goods internationally. Import/export law differs from country to country and must be abided by.

Globalization allows businesses to promote its products over the Internet and work with other businesses around the globe. However, there is increased competition from foreign companies.

Inflation rates, interest rates, public debt, political stability, recession, and speculation cause fluctuations in a currency's value.

Businesses should not offend people of any culture. When marketing, businesses should tailor their promotional strategies to fit the area's culture, in ways such as using models of that race or using a certain language in ads.

Marketing strategies should be appropriate to the cultural and social norms of an area, such as making area-specific products that people are more likely to purchase.

Electronic communication, such as email and social media can allow businesses to market their products to a global audience and negotiate partnerships with foreign companies.

When trade alliances, or treaties governing commerce between multiple countries, are enacted, businesses should adapt their operations, marketing, and production to fit the new terms.

Political standpoints and biases can lead proponents and opponents to be persuaded or dissuaded from purchasing a company' product.

Complex terrain can make distribution of products to these areas difficult, forcing businesses to decide whether it is worth expending resources to distribute products to these areas.

If a nation is an opponent of another, inhabitants of that nation may be reluctant to purchase from vendors of those opposing nations.

A country's economic stability can play a role in the affordability of products, meaning that businesses may have to change prices accordingly or shift away from certain markets altogether.

Bribery wastes money (estimated 5% of GDP) and decreases efficiency while increasing inequality.

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