Business: An organization that seeks to earn profits by providing goods and services.
Profit : The money that remains after a business’s expenses are subtracted from its
Expenses: The money a business spends producing its good and services and generally
running the business. Also referred as “costs.”
Revenues: The money a business earns selling its products and services. Also referred to
Economic system: The way in which a nation allocates its resources among its citizens.
Factors of Production: The resources used to produce goods and services: labour, capital,
entrepreneurs and natural resources
Labour: The mental and physical training and talents of people (aka human resource).
Capital: The funds needed to operate an enterprise.
Entrepreneurs: 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
Natural Resources: Items used in the production of goods and services in their natural
state, including land, water, mineral deposits and trees.
Information Resources: Information such as market forecasts, economic data, and
knowledge of employees that is useful to a business and that helps it achieve its goals.
Command Economies: An economic system in which government controls all or most
factors of production and makes all or most production decisions.
Market Economies: An economic system in which Individuals control all or most factors
of production and make all or most decisions.
Communism: A type of command economy in which the government owns and operates
www.notesolution.com Socialism: Gov’t owns and operates the main industries; individuals own and operate less
Market : A mechanism for exchange between the buyers and sellers of a particular good or
Capitalism: A kind of market economy offering private ownership of the factors of
production and of profits from business activity.
Mixed Market Economy: An economic system with elements of both a command economy
and a market economy. Individuals own MAORITY of the factors of production and most
Privatization: The transfer of activities from the government to the public sector.
Deregulation: A reduction in the number of laws affecting business activity.
Revenue taxes: taxes whose main purpose is to fund govn’t services and programs
Progressive Revenue Tax: Taxes levied at a higher rate on higher-income taxpayer and
at a lower rate on lower- income taxpayers
Regressive Revenue Taxes: Taxes that cause poorer people to pay a higher percentage of
income than richer people pay.
Restrictive taxes: Taxes levied to control certain activities that legislators believe should
Demand: The willingness and ability of buyers to purchase a product or service.
Supply: The willingness and ability of producers/ sellers to offer a good or service for sale.
The Law of Demand: Buyers will demand more of a product when $ is low, and less when
$ is high
The Law of Supply: Producers will supply more of a product for sale when the $ is high
and less when $ is low
Demand and Supply Schedule: Assessment of the relationships between different levels
of demand and supply at different $ levels
Demand curve: Graph showing how many units of a product will be demanded at different
Supply curve: Graph showing how many units of a product will be supplied at different $
www.notesolution.com Market/ Equilibrium Price: Profit- maximizing price at which the quantity of goods
demanded and the quantity of goods supplied are equal
Surplus: Situation in which quantity supplied exceeds quantity demanded
Shortage: Situation in which quantity demanded exceeds quantity supplied
Private enterprise: An economic system characterized by private property rights, freedom
of choice, profits and competition
Competition: The vying among businesses in a particular market or industry to best
satisfy consumer demands and earn profits.
Perfect Competition: A market or industry characterized by a very large number of small
firms producing an identical product so that none of the firms has any ability to influence
Monopolistic Competition: A market or industry characterized by a large number of
firms supplying products that are similar but distinctive enough from one another to give
firms some ability to influence price.
Oligopoly: A market or industry characterized by a small number of very large firms that
have the power to influence the price of their product and/ or resources.
Monopoly: A market or industry with only one producer, who can set the price of its
product and or resources.
Natural Monopoly: A market or industry in which having only one producer is most
efficient because it can meet the entire