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32 Cards in this Set
- Front
- Back
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profit = |
revenues - expenses what remains after a business's expenses have been subtracted from its revenues |
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The Factors of Production Resources |
used by firms to create goods and services 1 Natural Resources 2 Capital 3 Human Resources (Labour) 4 Entrepreneurs 5 Information resources |
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natural resources |
items used in the production of goods and services in their natural state including land, water, mineral deposits, and trees |
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capital |
the funds needed to operate an enterprise |
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entrepreneurs |
(people that have businesses) an individual who organizes and manages labour, capital and natural resources to produce goods and services to earn a profit, but who also runs the risk of failure |
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labour |
the mental and physical training and talents of people sometime called human resources |
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info resources |
info such as market forecasts, economic data and specialized knowledge of employees that is useful to a business and helps it achieve its goals |
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Market Economies |
an economic system in which individuals controls all or most factors of production and makes all or most production decisions Ex) Capitalism Mixed Economy |
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Command Economies |
an economic system in which government controls all or most factors of production and makes all or most production decisions ex) Socialism- Government owns and operates critical industries, utilities and major institutions. Individuals own non-critical businesses Communism Government owns and operates all industries It makes resource distribution decisions |
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Market Economies |
market is the mechanism for the exchange of goods and services Economic basis is supply and demand Ownership of the factors of production is open Buyers and sellers have freedom of choice Political basis is capitalism |
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Capitalism |
markets decide what when and for whom to produce (not gov.) Encourages entrepreneurship and the private ownership of the factors of production Encourages profit making as an incentive Operates under the concept of supply and demand |
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Mixed Market Economies |
combination of both command and market economies used globally because no country has a pure communist, socialist, or capitalist system privatization, deregulation and nationalization used |
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Privatization |
converting government firms into privately owned companies |
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Nationalization |
the conversion of private firms into government-owned firms |
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Deregulation |
reducing laws and government intervention |
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Private enterprise occurs in |
a market economy with little government restriction |
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Under Private enterprise system individuals can
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own property have freedom of choice have the freedom to earn profits have freedom to compete |
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Competition |
occurs when businesses fight for the same resources or customers in a particular market or industry |
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what does competition do? |
motivates business to operate efficiently forces business to make products better or cheaper |
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Perfect Competition |
a large number of small firms producing an identical product and none of the firms have the ability to influence price and its relatively easy to enter the industry |
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Monopolistic Competition |
a large number of firms producing a similar but distinctive (unique) product and the firms have some ability to influence price
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Oligopolya |
a small number of large firms producing similar products that have the ability to influence price and there are high barriers to entry prices gravitate toward a common “market price” |
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Monopoly |
one producer and source of supply unique product complete control over price no competitors |
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decisions about what to buy and sell are determined by |
supply and demand |
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supply |
willingness and availability of producers to offer a good or service for sale |
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demand |
willingness and availability of buyers to purchase a product or service |
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law of demand |
buyers will purchase more of a product as price drops |
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law of supply |
producers will supply more of a product as prices rise |
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demand and supply schedule |
assessment of the relationship between supply an demand |
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demand curve |
shows how many products will be demanded at different prices |
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supply curve |
shows how many products will be supplied at different prices |
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market price (equilibrium price) |
profit maximizing price quantity of goods demanded and quantity of goods supplied are equal |
