Chapter 1
Business: An organization that seeks to earn profit by providing a good or a service
Profit: The money that remains after a business’s expenses are subtracted from its revenues
Expenses: The money a business spends producing its good/service and generally while running
the business
Revenue: The money a business earns selling’s its product/service
Economic System: the way in which a nation allocates its resources among the citizens
Factors of Production: the resources used to produce goods and services
1) Labour: the mental and physical training and talents of people; human resources
2) Capital: the funds needed to operate an enterprise
3) Entrepreneurs: individuals who organize and manage labour, capital and natural resources
to produce goods
4) Natural resources: items used in the production of good and services in the natural state
5) Information resources: information such as market forecasts, economic data and
specialized knowledge of employees that helps achieves goals
Types of economics systems:
Command economy: an economics system in which government controls all or most factors of
production and make all or most economics decisions
Communism: economy which government controls all industries
Socialism: economy where government owns major businesses but smaller ones are privately
owned
Market economies: an economic system in which individuals control all or most jobs and make
all/most economic decisions
Market: a mechanism for exchange between the buyers ad sellers of a particular good or service
Capitalism: market economy offering private ownerships of the factors of production and of
profits from business activity
Mixed market economy: economic system with elements of both a command economy and a
market economy – typical of most nations
Privatization: the transfer of activities from the government to the public sector
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