Business and Economics: Key Concepts and Principles
Test 1 Study Guide: Chapter 1
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What is a risk?
A risk is the potential for loss or negative outcomes from decisions made in business.
What are efficiency and effectiveness?
- Efficiency: Doing tasks with minimal waste.
- Effectiveness: Achieving desired goals and outcomes.
What are the different resources of a business?
- Human Resources: Skills and labor of employees.
- Financial Resources: Funds for operations.
- Physical Resources: Tangible assets like equipment.
- Intellectual Resources: Knowledge and patents.
- Technological Resources: Tools and systems for production.
- What are profit, revenue, and loss?
- Revenue: Total income from sales.
- Profit: Revenue minus expenses.
- Loss: When expenses exceed revenue.
- What is the standard of living? What is the quality of life?
- Standard of Living: Economic well-being measured by income and material goods.
Merits and demerits of global business
Merits: Access to larger markets, cost efficiency, technology sharing.
Quality of Life: Overall well-being, including health and happiness.
Demerits: Intense competition, cultural challenges, and complexity in management.
What is intellectual capital?
Intellectual capital consists of knowledge, skills, and relationships that contribute to a business’s competitive advantage.
- Factors of production:
- Land: Natural resources.
Labor: Human effort.
Capital: Financial and physical assets.
What is entrepreneurship?
Entrepreneurship is the drive to innovate and take risks.
Who is an entrepreneur?
An entrepreneur is someone who identifies opportunities and takes risks to create and manage a business.
- What is manufacturing and service?
- Manufacturing: Production of tangible goods.
- Service: Provision of intangible products or experiences.
Chapter 2 Study Guide
- What is economics? Microeconomics and macroeconomics?
Economics is the study of how individuals and societies allocate scarce resources to satisfy unlimited wants.
Microeconomics focuses on individual consumers and businesses, analyzing decisions and market behavior.
Macroeconomics studies the economy as a whole, including national income, inflation, and unemployment.
- Who is the father of economics? Why?
Adam Smith is known as the father of economics due to his seminal work, The Wealth of Nations (1776), where he introduced concepts such as the invisible hand and free markets, emphasizing the benefits of individual self-interest in promoting economic prosperity.
- What is Socialism? Capitalism? Communism? Mixed economy? Features? Advantages and disadvantages?
- Socialism: An economic system where the government owns and controls key industries.
Advantages: Reduces inequality, provides basic needs.
Disadvantages: Can limit individual freedoms and economic incentives.
- Capitalism: An economic system characterized by private ownership and free markets.
Advantages: Encourages innovation and efficiency.
Disadvantages: Can lead to inequality and market failures.
- Communism: A political and economic ideology advocating for a classless society where all property is publicly owned.
Advantages: Aims for equality and eliminates class distinctions.
Disadvantages: Often leads to authoritarian regimes and inefficiencies.
- Mixed Economy: Combines elements of capitalism and socialism, featuring both private and government control.
Advantages: Balances efficiency with social welfare.
Disadvantages: Can create bureaucratic inefficiencies.
- What is an Oligopoly? Monopolistic competition? Perfect competition? Monopoly?
- Oligopoly: A market structure dominated by a few large firms, leading to limited competition (e.g., airlines, telecommunications).
- Monopolistic Competition: Many firms compete with differentiated products, allowing for some pricing power (e.g., restaurants, clothing brands).
- Perfect Competition: A theoretical market structure with many firms selling identical products, resulting in no pricing power (e.g., agricultural products).
- Monopoly: A market structure where a single firm dominates, controlling the entire supply of a product (e.g., utility companies).
- What are the four different types of unemployment? Examples? When do they happen?
- Frictional Unemployment: Short-term unemployment during transitions (e.g., recent graduates seeking jobs).
- Structural Unemployment: Mismatch between skills and job requirements (e.g., workers replaced by automation).
- Cyclical Unemployment: Resulting from economic downturns (e.g., layoffs during a recession).
- Seasonal Unemployment: Occurs due to seasonal changes in demand (e.g., agricultural workers during off-seasons).
Chapter 3 Study Guide
What is exporting?
Exporting is selling domestically produced goods and services to foreign markets.
What is dumping?
Dumping is selling products in a foreign market for a lower price than in the home country or below production costs to gain a competitive advantage.