Chapter 1 Study Guide
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Chapter 1: Introducing the Contemporary Business World
Business: an organization that seeks to earn profits by providing goods and
Profit: the money that remains (if any) after a business’s expenses are subtracted
from its revenues.
Expenses: the money a business spends producing its goods and services and
generally running the business; also referred to as “costs”.
Revenues: the money a business earns selling its products and services; also
referred to as sales.
Economic System: the way in which a nation allocates its resources among its
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; sometimes called
Capital: the funds needed to operate an enterprise.
Entrepreneur: 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 failure.
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
specialized knowledge of employees that is useful to a business and that helps it
achieve its goals.
Command Economy: an economic system in which government controls all or
most factors of production and makes all or most of the production decisions.
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