DSST Introduction to Business key terms

The condition in which human wants exceed the limited resources available to satisfy them. It forces individuals, businesses, and governments to make choices about how to allocate resources.

The value of the next best alternative given up when a choice is made. It measures what a decision-maker sacrifices, not just the money spent.

The basic inputs used to create goods and services: land (natural resources), labor, capital, and entrepreneurship. Their availability and cost shape what an economy can produce.

The interaction between how much sellers offer at each price and how much buyers will purchase. Their balance determines market price and quantity exchanged.

The price at which the quantity buyers want equals the quantity sellers offer. At this point there is neither a shortage nor a surplus in the market.

A measure of how strongly quantity demanded responds to a change in price. Demand is elastic when buyers are very responsive and inelastic when they buy nearly the same amount regardless of price.

The total market value of final goods and services produced within a country during a period, usually a year. It is the most common broad gauge of an economy's size and growth.

The recurring pattern of expansion and contraction in an economy's overall activity. Its phases are expansion, peak, recession or contraction, and trough.

A sustained rise in the general level of prices, which reduces the purchasing power of money. Central banks often raise interest rates to restrain it.

Actions by a central bank to influence the money supply and interest rates, aiming at stable prices and sustainable growth. Tools include open market operations, reserve requirements, and the discount rate.

Government use of taxation and spending to influence the economy. Expansionary policy raises spending or cuts taxes; contractionary policy does the reverse to cool inflation.

The shortfall that occurs when a government spends more in a period than it collects in revenue. Persistent deficits accumulate into a national debt.

The difference between a country's exports and imports of goods and services over a period. A surplus means exports exceed imports; a deficit means the opposite.

A record of all economic transactions between a country and the rest of the world, including trade, investment, and transfers. It has a current account and a capital and financial account.

The principle that a country gains from trade by specializing in goods it can produce at a lower opportunity cost than trading partners, even if it is less efficient at everything.

The ability of one producer or country to make more of a good with the same resources than another producer can. It differs from comparative advantage, which drives beneficial trade.

A tax imposed on imported goods, usually calculated as a percentage of value or a fixed amount per unit. Tariffs raise revenue and shield domestic producers from foreign competition.

A government limit on the quantity of a particular good that may be imported or exported during a period. It restricts supply and typically raises domestic prices.

An official government ban on trade with a specific country or in a specific product. It is used as a political or economic pressure tool.

The price of one currency expressed in another currency. Movements in it change the cost of imports and the competitiveness of exports.

A business owned and operated by one person, who keeps all profits and bears unlimited personal liability for debts. It is the simplest and most common form of business ownership.

A business owned by two or more people who share profits, losses, and management duties under an agreement. General partners face unlimited liability; limited partners risk only their investment.

A legal entity separate from its owners that can own property, sign contracts, and be sued. Ownership is divided into shares, and shareholders normally have limited liability.

A legal protection that caps an owner's financial loss at the amount invested in the business. It encourages investment by shielding personal assets from business debts.

The condition in which an owner is personally responsible for all business debts and obligations. Creditors may pursue the owner's personal assets beyond the amount invested.

An arrangement in which a franchisee pays fees and royalties to a franchisor for the right to sell its branded products and use its proven business system.

A written document describing a venture's product, market, operations, and financial projections. It guides the founder and is used to attract lenders and investors.

Equity financing provided to young, high-growth companies in exchange for ownership stakes. Investors accept high risk in hopes of large returns when the business succeeds.

A U.S. federal agency that advises, trains, and helps small firms obtain loans and government contracts. It does not usually lend directly but guarantees loans made by partner lenders.

An independently owned and operated firm that is limited in size and revenue, as defined by government standards for its industry. Such firms employ a large share of the private workforce.

The management function of setting objectives and deciding in advance how to reach them. It produces strategies, budgets, and schedules that guide later organizing, leading, and controlling.

The management function of arranging resources and tasks into a structure of departments, authority, and reporting lines. It clarifies who does what and who reports to whom.

The management function of measuring actual performance against standards and correcting deviations. It closes the loop that begins with planning.

The number of subordinates who report directly to one manager. A wide span yields a flat structure; a narrow span creates more layers of management.

The systematic process of gathering information about the duties, tasks, and requirements of a job. Its outputs, job descriptions and specifications, underpin recruiting and compensation.

A written summary of a position's duties, responsibilities, working conditions, and reporting relationships. It is used to advertise openings and to set performance expectations.

A formal, periodic evaluation of an employee's work against established standards. Results inform pay decisions, promotion, training needs, and discipline.

The process of inspecting and testing outputs to ensure they meet specified standards. It focuses on detecting defects, often at the end of a production step.

A company-wide approach that seeks continuous improvement by involving every employee and focusing on customer requirements. It emphasizes prevention of defects rather than inspection after the fact.

Managing the quantities of raw materials, work in process, and finished goods so that supply meets demand without excessive holding costs. Techniques include economic order quantity and just-in-time systems.

A production and inventory method in which materials arrive only as needed for the next step. It reduces storage costs but leaves little buffer against supply disruptions.

The set of controllable elements a firm blends to reach its target market, commonly summarized as product, price, place, and promotion. Each element must reinforce the others.

Dividing a broad market into smaller groups of buyers with similar needs or characteristics. A firm then targets the segments it can serve best.

The specific group of customers a business decides to serve with its marketing efforts. Choosing it guides product design, pricing, distribution, and advertising.

The stages a product passes through: introduction, growth, maturity, and decline. Marketing strategy and pricing usually change at each stage.

The sales volume at which total revenue equals total cost, so the business earns neither profit nor loss. It is found by dividing fixed costs by contribution per unit.

An expense that stays the same in total regardless of how much the business produces or sells in the short run, such as rent or insurance. It contrasts with costs that vary with output.

An expense that changes in total in direct proportion to the volume of output or sales, such as raw materials or sales commissions.

A financial statement listing a firm's assets, liabilities, and owners' equity at a single point in time. Assets always equal liabilities plus equity.

A financial statement showing revenues, expenses, and the resulting profit or loss over a period. It reports operating results rather than financial position.

Resources a business owns or controls that have measurable value and are expected to provide future benefit, such as cash, inventory, equipment, and receivables.

Debts and obligations a business owes to outsiders, such as loans, accounts payable, and taxes due. They appear on the balance sheet alongside owners' equity.

A share of ownership in a corporation that entitles the holder to a portion of profits and, often, voting rights. Stockholders' liability is normally limited to their investment.

The process of identifying potential losses, measuring their likelihood and impact, and choosing how to handle them through avoidance, reduction, transfer, or retention.

A contract in which an insurer, for a premium, agrees to compensate the policyholder for specified losses. It transfers risk from an individual or firm to a pool of many policyholders.

The amount a policyholder pays, usually periodically, to keep an insurance policy in force. It reflects the risk insured and the coverage limits chosen.

The portion of a covered loss that the policyholder must pay before the insurer pays anything. A higher deductible usually lowers the premium.

An organized set of people, procedures, and technology that collects, processes, and distributes information to support managerial decisions and operations.

An organized collection of related data stored so that it can be easily accessed, managed, and updated. It reduces duplication and supports reporting and analysis.

An interactive information system that helps managers analyze data and compare alternatives for semi-structured problems. It complements routine transaction processing and reporting.