BUSINESS BASICSFinal

An entrepreneur is a risk-taker in search of profits.

COMMUNICATION = SUCCESS

LISTENING GAINS RESPECT

KNOWLEDGE IS POWER

WHAT YOU WISH YOU KNEW

YOU’RE GOING TO LEARN!!!!

Economics – study of how people seek to satisfy their needs and wants by making choices.

Needs – something that is necessary for survival (air, food, clothing, and shelter).

Wants – items that we desire, but are not essential to survival.

Goods – physical objects such as shoes, books, cars, etc.

CHAPTER 1: Vocabulary

Services – actions or activities that one person performs for another (barber, dentist, teacher, waitress).

Scarcity – all goods and services that we produce are scarce, it implies limited quantities of resources to meet unlimited needs.

Shortage – when producers will not or cannot offer goods and services at the current prices.

Surplus - In excess of what is needed or required

A need is a basic requirement for survival and includes food, water and shelter.

A want is a way of expressing a need. Since a variety of wants can satisfy a need, wants tend to be broader than needs.

THE BUSINESS FLOW

A market is a mechanism that allows buyers and sellers to exchange a certain economic product.

Factor Markets – are where productive resources are bought and sold.

Product Markets – are where producers sell their goods and services to consumers.

LANDThe entire material universe exclusive of people and their products

◦Everything physical (other than human beings) which is not the result of human effort is within the economic definition of land.

This concept thus includes not merely the dry surface of the earth, but all natural materials, forces and opportunities. The trees in a virgin forest are land; in a cultivated forest they are wealth.

LABOR

• **All human exertion in the production of wealth

• All who participate in production by their mental and/or physical effort are laborers in the economic sense. This would include their efforts, abilities and skills.

CAPITAL

Wealth used to produce more wealth, or wealth in the course of exchange.

A machine is wealth. If used to produce shoes or other wealth, the machine is wealth that is capital (capital good). So also would a merchant’s stock (inventory) of goods in trade be capital because the final exchange is not been completed.

PRODUCTION

• When all factors of production (land, labor, capital and entrepreneurship) are present, production, or the process of creating goods and services, can take place.

• Note!! Everything we produce require these factors. GDP –The total production of goods and services created within a country during a calendar year.

gross domestic product (GDP)

The Factors of ProductionAll the processes involved in making wealth and bringing it from its place of origin to the ultimate consumer. • Land • Labor •Capital •Entrepreneurship

A free enterprise economy is an economic system where businesses can operate competitively with minimal government regulations and consumers choose to purchase what they desire.

Standard of Living is the quality of life based on the possessions of the necessities and luxuries that make life easier.

Basic Business Concepts Goods – items that are economically useful or satisfies an economic want

Consumer Goods – used by individuals to satisfy personal needs

Capital Goods – Goods used to produce other goods (Machines and tools)

Services – work that is preformed for someone or an act of assistance

Consumer(s) – a person who uses a good or service

MARKET SYSTEM – interaction of buyers and sellers, determines prices of most goods and quantities purchases.

DEMAND – desire to buy something and the ability to pay for it.

LAW OF DEMAND – when prices go down, quantity demanded goes up…OR…when prices go down, the quantity demanded goes down.

DEMAND

DEMAND SCHEDULE – table listing quantities of goods purchased at given market prices (individual/ market)

DEMAND CURVE – graphic representation of a Demand Schedule

MORE ON DEMAND…

Value – worth that can be expressed in dollars

Utility – the capacity to be useful and provide satisfaction

Wealth – is the accumulation of products that are tangible, scarce, useful, and transferable from one person to another.

COSTS OF PRODUCTION THAT INCLUDE FIXED & VARIABLE1. FIXED COSTS – a cost that does not change no

matter how much of a good is produced (Rent, Property Taxes, Salaries)

2. VARIABLE COSTS – are costs that rise or fall depending on the quantity produced (Electricity & Heat)

3. TOTAL COST – Fixed Costs plus Variable Costs4. MARGINAL COST – additional cost of producing one

more unit of any product5. OPERATING COST – the cost of operating a facility,

such as a store or school.(Rent, utilities, inventory, advertising, salaries)

6. MARGINAL REVENUE – the additional income from selling one more unit of a good; sometimes = to price

PRODUCTION COSTS

Business growth occurs when a nation’s total output of goods and services increases over time.

Business productivity is a measure of the amount of output produced by a given amount of inputs during a specific period of time.

Human Capital is the sum of the skills, abilities, health, and motivation of people.

Government & Businesses can invest in human capital (labor) by providing education (training) and health care to improve the skill and motivation of its workers.

Every decision we make has its trade-offs or alternative choices. When you make an economic decision (a choice) opportunity cost are incurred.

Opportunity Cost The value of what you give up when you make a choice.

Opportunity Benefit The value of what you gain by making that choice.

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The fundamental economic problem facing all societies is Scarcity.

Scarcity is the condition that results for society not having enough resources to produce all the things people would like to have.

BUSINESS BASICS