How Business and Economics Work

Define what is a business?

• An organization that strives for a profit by providing goods and services desired by its customers.

• The inputs, such as tools, machinery, equipment, and buildings, used to produce goods and services and get them to the customer.

• Factors, such as technological or legal conditions, that prevent new firms from competing equally with an existing firm.

Define what is capitalism?

• Inflation that occurs when increases in production costs push up the prices of final goods and services.

• The movement of inputs and outputs among households, businesses, and governments; a way of showing how the sectors of the economy interact.

• An economic system based on competition in the marketplace and private ownership of the factors of production (resources); also known as the private enterprise system.

Define what is communism?

• An economic system characterized by government ownership of virtually all resources, government control of all markets, and economic decision-making by central government planning.

• The movement of inputs and outputs among households, businesses, and governments; a way of showing how the sectors of the economy interact.

• The combination of policies, laws, and choices made by a nation’s government to establish the systems that determine what goods and services are produced and how they are allocated.

What is an economic system?

• People who combine the inputs of natural resources, labor, and capital to produce goods or services with the intention of making a profit or accomplishing a not-for-profit goal.

• The combination of policies, laws, and choices made by a nation’s government to establish the systems that determine what goods and services are produced and how they are allocated.

• The total market value of all final goods and services produced within a nation’s borders each year.

What is economics?

• People who combine the inputs of natural resources, labor, and capital to produce goods or services with the intention of making a profit or accomplishing a not-for-profit goal.

• The use of monetary policy by the Fed to increase, or loosen, the growth of the money supply.

• The study of how a society uses scarce resources to produce and distribute goods and services.

What are the factors of production?

• The government’s use of taxation and spending to affect the economy.

• The resources used to create goods and services.

• The use of monetary policy by the Fed to increase, or loosen, the growth of the money supply.

Define a mixed economy

• An index of the prices paid by producers and wholesalers for various commodities, such as raw materials, partially finished goods, and finished products.

• A government’s programs for controlling the amount of money circulating in the economy and interest rates.

• Economies that combine several economic systems; for example, an economy where the government owns certain industries but others are owned by the private sector.

In capitalism, what happens to the ownership of a business?

• Businesses are privately owned with minimal government ownership or interference.

• Government owns all or most enterprises.

• Private ownership of land and businesses but government control of some enterprises. The private sector is typically large

Who controls the market in communism?

• Complete freedom of trade. No or little government control.

• Complete government control of markets.

• Some markets, such as nuclear energy and the post office, are controlled or highly regulated.

What is the worker incentive in communism?

• Strong incentive to work and innovate because profits are retained by owners.

• No incentive to work hard or produce quality products.