Chapter 1

1. List the definitions of 20 key terms in Chapter 1 and show them as a table
(stakeholders, outsourcing, standard of living, quality of life ...)

Key terms Definition

Business is any activity that seeks to provide goods and services to others
while operating at a profit
Business is constantly changing, and along with those changes come
environment opportunities
Climate change is the movement of the temperature of the planet up or down over
time. There are some who remain unconvinced of the dangers of
global warming
Database The scanner at the checkout counter identifies the price but can also
put all your purchase information into a database, an electronic
storage file for information
Demography is the statistical study of the human population with regard to its
size, density, and other characteristics such as age, race, gender, and
income
E-commerce is the buying and selling of goods online. There are two major types
of e-commerce transactions: business-to-consumer (B2C) and
business-to-business (B2B)
Empowerment To meet the needs of customers, firms must give their frontline
workers—for example, office clerks, front-desk people at hotels,
and salespeople—the responsibility, authority, freedom, training,
and equipment they need to respond quickly to customer requests.
They also must allow workers to make other decisions essential to
producing high-quality goods and services. The process is called
empowerment
Entrepreneur is a person who risks time and money to start and manage a
business
Factors of seemed to contribute to wealth: 1. Land (or natural resources). Land
production and other natural resources are used to make homes, cars, and other
products. 2. Labor (workers). People have always been an
important resource in producing goods and services, but many
people are now being replaced by technology. 3. Capital. This
includes machines, tools, buildings, or whatever else is used in the
production of goods. It might not include money; money is used to
buy factors of production but is not always considered a factor by
itself. 4. Entrepreneurship. All the resources in the world have little
value unless entrepreneurs are willing to take the risk of starting
businesses to use those resources. 5. Knowledge. Information
technology has revolutionized business, making it possible to
quickly determine wants and needs and to respond with desired
goods and services
Goods are tangible products such as computers, food, clothing, cars, and
appliances
Greening Saving energy and producing products that cause less harm to the
environment, such as solar energy, is called greening
Identity theft is the obtaining of individuals’ personal information, such as Social
 Security and credit card numbers, for illegal purposes
Loss occurs when a business’s expenses are more than its revenue
Nonprofit is an organization whose goals do not include making a personal
organization profit for its owners or organizers
Outsourcing means contracting with other companies (often in other countries)
to do some or all of the functions of a firm, like its production or
accounting task
Productivity is the amount of output you generate given the amount of input,
such as the number of hours you work
Profit is the amount of money a business earns above and beyond what it
spends for salaries and other expenses needed to run the operation
Quality of life refers to the general well-being of a society in terms of its political
freedom, natural environment, education, health care, safety,
amount of leisure, and rewards that add to the satisfaction and joy
that other goods and services provide
Revenue is the total amount of money a business takes in during a given
period by selling goods and services
Risk is the chance an entrepreneur takes of losing time and money on a
business that may not prove profitable
Services are intangible products (i.e., products that can’t be held in your
hand) such as education, health care, insurance, recreation, and
travel and tourism
Stakeholders are all the people who stand to gain or lose by the policies and
activities of a business and whose concerns the business needs to
address
Standard of refers to the amount of goods and services people can buy with the
living money they have
Technology means everything from phones to computers, mobile devices,
medical imaging machines, robots, the Internet, social media, and
the various software programs and apps that make business
processes more effective, efficient, and productive. Effectiveness
means producing the desired result.

2. What are the five factors of production? Which ones seem to be the most important
for creating wealth?
• Land
• Labor
• Capital
• Entrepreneurship
• Knowledge
What makes rich countries rich today is a combination of entrepreneurship and the effective
use of knowledge.
3. What are the five elements of the global business environment?
Economic Environment: This includes factors like economic growth, inflation rates,
exchange rates, and overall economic stability. Businesses must navigate different economic
conditions in various countries.

Political Environment: This encompasses government policies, political stability, and

regulations that can affect how businesses operate internationally. It includes trade policies,
taxation, and political risk.

Sociocultural Environment: This involves the cultural norms, values, demographics, and
social trends in different countries. Understanding cultural differences is crucial for
marketing and management practices.

Technological Environment: This covers the technological advancements and innovations

that impact how businesses operate. This includes access to technology, digital infrastructure,
and the rate of technological change in different regions.

Legal Environment: This includes the laws and regulations that govern business operations,
such as labour laws, environmental regulations, and intellectual property rights. Compliance
with local laws is essential for successful international operations.

CHAPTER 2
1. List the definitions of 30 key terms in Chapter 2 and show them as a table
(Macroeconomics, Resource development, Invisible hand, Capitalism, Supply, Demand,
Equilibrium Point, Socialism Business cycles,...)

Term Definition
macroeconomics The part of economics study that looks at the
operation of a nation’s economy as a whole.
microeconomics The part of economics study that looks at the
behavior of people and organizations in
particular markets
resource development The study of how to increase resources and to
create the conditions that will make better use
of those resources.
invisible hand A phrase coined by Adam Smith to describe
the process that turns self-directed gain into
social and economic benefits for all
capitalism An economic system in which all or most of
the factors of production and distribution are
privately owned and operated for profit.
state capitalism A combination of freer markets and some
government control
supply The quantity of products that manufacturers
or owners are willing to sell at different prices
at a specific time.
demand The quantity of products that people are
willing to buy at different prices at a specific
time
market price The price determined by supply and demand
perfect competition The degree of competition in which there are
many sellers in a market and none is large
enough to dictate the price of a product.
monopolistic competition The degree of competition in which a large
number of sellers produce very similar
products that buyers nevertheless perceive as
different
oligopoly A degree of competition in which just a few
sellers dominate the market
monopoly A degree of competition in which only one
seller controls the total supply of a product or
service, and sets the price.
socialism An economic system based on the premise
that some, if not most, basic businesses
should be owned by the government so that
profits can be more evenly distributed among
the people.
brain drain The loss of the best and brightest people to
other countries
communism An economic and political system in which
the government makes almost all economic
decisions and owns almost all the major
factors of production
free-market economies Economic systems in which the market
largely determines what goods and services
get produced, who gets them, and how the
economy grows.
command economies Economic systems in which the government
largely decides what goods and services will
be produced, who will get them, and how the
economy will grow.
mixed economies Economic systems in which some allocation
of resources is made by the market and some
by the government
gross domestic product (GDP) The total value of final goods and services
produced in a country in a given year
gross output (GO) A measure of total sales volume at all stages
of production
unemployment rate The percentage of civilians at least 16 years
old who are unemployed and tried to find a
job within the prior four weeks
inflation A general rise in the prices of goods and
services over time
disinflation A situation in which price increases are
slowing (the inflation rate is declining).
deflation A situation in which prices are declining
stagflation A situation when the economy is slowing but
prices are going up anyhow.
consumer price index (CPI) Monthly statistics that measure the pace of
inflation or deflation
core inflation CPI minus food and energy costs
producer price index (PPI) An index that measures the change in prices
at the wholesale level.
business cycles The periodic rises and falls that occur in
economies over time
recession Two or more consecutive quarters of decline
in the GDP
depression A severe recession, usually accompanied by
deflation
fiscal policy The federal government’s efforts to keep the
economy stable by increasing or decreasing
taxes or government spending.
Keynesian economic theory The theory that a government policy of
increasing spending and cutting taxes could
stimulate the economy in a recession.
national debt The sum of government deficits over time.
 monetary policy The management of the money supply and
interest rates by the Federal Reserve Bank.

2. What led to the emergence of socialism?

The uneven in distribution between the rich and poor
3. What are the benefits and drawbacks of socialism?
 Benefits:
The major benefit of socialism is supposed to be social equality. Ideally it comes about
because the government takes income from wealthier people, in the form of taxes, and
redistributes it to poorer people through various government programs. Free education
through college, free health care, and free childcare are some of the benefits socialist
governments, using the money from taxes, may provide to their people. Workers in socialist
countries usually get longer vacations, work fewer hours per week, and have more employee
benefits (e.g., generous sick leave) than those in countries where free-market capitalism
prevails.
 Drawback:
Socialism promises to create more equality than capitalism, but it takes away some of
businesspeople’s incentives. For example, when socialist Francois Hollande became president
of France, the top tax rate reached 75 percent, with many citizens paying over 70 percent.
This caused many innovators, creative thinkers, doctors, lawyers, business owners, and others
who earned a lot of money to leave France. This loss of the best and brightest people to other
countries is called a brain drain.
4. What are the characteristics of a mixed economy?
 Social and Economic Goals: Private ownership of land and business with government
regulation. Government control of some institutions (e.g., mail). High taxation for
defense and the common welfare. Emphasis on a balance between freedom and
equality
 Motivation of Workers: Incentives are similar to capitalism except in government
owned enterprises, which may have fewer incentives.
 Control over Markets: Some government control of trade within and among nations
(trade protectionism).
 Choices in the Market: Similar to capitalism, but scarcity and oversupply may be
caused by government involvement in the market (e.g., subsidies for farms).
 Social Freedoms: Some restrictions on freedoms of assembly and speech. Separation
of church and state may limit religious practices in schools.
5. What are Key Economic Indicators (KEI)? Please provide a list of KEI as a table.

Term Definition
gross domestic product (GDP) The total value of final goods and services
produced in a country in a given year
unemployment rate The percentage of civilians at least 16 years
old who are unemployed and tried to find a
job within the prior four weeks
Inflation and Price Indexes Price indexes help gauge the health of the
economy by measuring the levels of
inflation, disinflation, deflation, and
stagflation. Inflation is a general rise in the
prices of goods and services over time.