The Business Dimension of Europe Chapter 1

Organizations that provide goods and services that are then sold to earn profits

The difference between business's revenues and its expenses

Using the opportunity to improve goods/services when others are doing inefficiently or incompletely. Or then provide goods/services when there's a need and no one else is supplying them.

• produce the goods/serv that we consume
• creat jobs
• creat innovations
• provide opportunities for new businesses
• healthy businesses contribute to the quality of life and standard of living of people
• taxes help to support governments

All businesses, regardless of their size, location, or mission, operate within a larger external environment - everything outside and org's boundaries that might affect it (e.g political-legal env, economic env, global business env, technological env, socio-cultural env, domestic business env)

The env in which a firm conducts its operations and derives its revenues (tuletab aastatulu). Businesses seek to be close to their customers,to build strong relationships with suppliers and to distinguish themselves from their competitors.

The international forces that affect a business. Such as international trade agreement, international econimic condition, political unrest, cultural differences etc)

all the ways by which firms create value for their constituents (koostisosadele).E.g human knowledge, work methods, physical equipment, electronics, telecommunication etc.

the relationship between business and government

The customs, mores and democraphic characteristics of society in which an organ. functions. Determines which kind of goods/ services and business conduct a certain society values and accepts.

The existing economic condistions in which a company operates.

It is a nation's system for distributing resources among its citizens, both individuals and organizations.

(this is a basic difference between economic systems in countries) Resources used in the production of goods/ services - labour, capital, entrepreneurs, physical resources and information resources.

=Human resources, is the physical and intellectual contributions people make in economic production.

Obtaining and using labour and other resources requires capital. Capital needed to start a new business and then keep it running and growing.

A person who accepts the risks and opportunities entailed (kaasnevad)in creating and operating a new business.

Are the tangible (kombatav) things that organizations use to conduct their business. E.g natural resources, raw materials, offices, storage, production facilities & other equipment

Data and other informtion used by businesses. E.g market forecasts, economic data..

• 1. Planned economy (Communism)
• 2. Market economy (Capitalism)
• 3. Mixed market economy (Socialism)
• 4. Privatization

Relies on a centralized government to control all or most factors of production. Makes all or most production and allocation (määramine/paigutus) decisions.

Individual producers and consumers control the production and alloctaion by creating combinations of supply and demand.

It is  system in which the government owns and operates all factors of production.

• It is a mechanism for exchange between buyers and sellers of a particular good or service.
• Market economy= produsers and consumers are free to selll and buy what they choose.

A system that allows/ sanctions the private ownership of the factor of production and encourages entrepreneurship by offering profits as an incentive (ajendusel/lisatasu).

Has characteristics of both planned and market economies

From planned economy to market economy in continuum. The process of converting government enterprises into privately owned companies.

It is only a partially planned system (has the mixed market economy) in which the government owns and operates only major industries (banking, transportation, oil/ steel producers and not clothing stores, restaurants)

The willingness and ability of buyers to purchase a product.

Buyers will purchase (demand) more of a product when as its price drops and less as its price increases

The willingness and ability of producers to to offer a good or service for sale.

Producers will offer (supply) more of a product for a sale as its price rises and less of a product as its price drops.

The assessment of the relationships among different levels of demand and supply at different price levels.

(Based on the schedule info) Shows how many products will be bought at different prices.

(Based on the schedule info) Shows how many products will be supplied at different prices.

The price at which the quantity of goods demanded and the quantity of goods supplied are equal.

A situation in which the quantity supplied exceeds the quantity demanded.

The quantity demanded will be greater than the quantity supplied.

• Economic system that allows individuals to pursue their own interests with minimal government restriction. 4 elements:
• 1. private property rights
• 2. freedom of choice
• 3. profits
• 4. competition

Businesses vie for the same resources or customers.

• 1.perfect competition
• 2.monopolistic cosmopolitan
• 3.oligopoly
• 4.monopoly

• Small firms - large number of firms
• 1. no single firm is powerful enough to influence the price of its product =>prices determined by supply/demand
• 2. products identical
• 3.easy to enter and leave the market
• 4. buyers/sellers aware of others prices

• may be large and small - many firms, but fewer than in the perf comp.
• 1. quite easy to enter and leave the market
• 2. products are similar
• 3. some control over prices

• Quite large firms - just a few firms
• 1. entry of competitiors is difficult and large capital is needed
• 2. more control over strategies that in the mon. comp., but the actions of one firm clearly afftects the other firms (so the other follow one's decisions)
• 3. some control over prices
• 4. products similar or different

• one big firm - no competitors (one dominates)
• 1. regulated by the government
• 2. no competing goods/services
• 3. conciderable control over prices

Industry in which one company can most sufficiently supply all goods and services

A statistic that helps assess the performance of an economy (strenghtening, weakening or remaining stable)

A short-term pattern of economic expansions and contractions

• 1. Aggregate output: the total quantity of goods/services produced by an economic system during a given period
• 2. Standard of living: the total quantity and quality of goods/services people can buy with the currency used in their economic system.

GDP is the total value of all goods and services produced within a given period by a national economy through domestic factors of production

=Gross National Product= the total value of all goods/ sevrices produced by a national economy within a given period reardless of where the factors of production are located.

=GDP per person= dividing total GDP by the total population

Gross domestic product (GDP) adjusted to account for changes in currency values and prices.

Gross domestic product (GDP) measured in current dollars or with all components valued at current prices.

= Purchasing Power Parity= the principle that exchange rates are set so that the prices of similar products in different countries are about the same. The Big Mac Index

A measure of economic growth that compares how much a system produces with the resources needed to produce it.

• 1. Balance of trade: the economic value of all the products that a country exports minus the economic value of all products it imports
• positive- exports more that imports
• negative (trade deficit)- imports more than exports

2. National debt: the amount of money the government owes its creditors

A condition in which the amount of money available in an economic system and the quantity of goods/services produced in it are growing at about the same rate.

The value of money decreases: ppl have to spend more money on the same quantity of products.

=Consumer Price Index= measure the prices of typical products purchased by consumers in urban areas.

The level of joblessness among ppl actively seeking work in an economic system

(First the aggregate output will be checked) A period during which aggregate output, as measured by Real GDP, declines.

A prolonged and deep recession

• 1. Fiscal policy: policies used by a government regarding how it collects and spends revenues (e.g taxes)
• 2. Monetary policy: policies used by a government to control the size of its money supply (e.g. to lend/ injects money)
• + Stabilization Policy: government economic policy to smooth out fluctuations in output and unemployment and to stabilize prices.