Business Science Study Guide
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Questions and Answers

Which economic system is characterized by barter and minimal government intervention?

  • Command Economic System
  • Traditional Economic System (correct)
  • Free Market Economic System
  • Mixed Economic System

In a free market economic system, the government plays a significant role in determining prices.

False (B)

Name the four types of economic systems.

Traditional, Free Market, Command, Mixed

A __________ economic system involves government control over production and distribution.

<p>Command</p> Signup and view all the answers

Match the following economic systems with their characteristics:

<p>Traditional Economic System = Based on customs and is resistant to change Free Market Economic System = Prices fluctuate based on supply and demand Command Economic System = Controlled by the government and public ownership Mixed Economic System = Combines elements of free market and command systems</p> Signup and view all the answers

What is the second stage of an economic cycle?

<p>Recession (D)</p> Signup and view all the answers

During the recovery phase, economic activity begins to decline.

<p>False (B)</p> Signup and view all the answers

What characterizes a depression in the economic cycle?

<p>Persistent GDP decline, high unemployment, and low consumer spending</p> Signup and view all the answers

Which classification of business involves services like retail, healthcare, and banking?

<p>Tertiary Industry (B)</p> Signup and view all the answers

A private company's ownership is open to the general public.

<p>False (B)</p> Signup and view all the answers

What is the primary purpose of a business?

<p>To provide goods and services to society and make a profit.</p> Signup and view all the answers

The total value of all outstanding shares of a public company is called ______.

<p>market capitalization</p> Signup and view all the answers

What is a key characteristic of a sole trader?

<p>One person owns and runs the business (A)</p> Signup and view all the answers

Match the following types of legal structures with their descriptions:

<p>Sole Trader = Owned and run by one person, personally responsible for debts Partnership = Two or more people sharing profits and responsibilities Public Company = Shares listed on the stock market Franchise = Business model granting rights to sell a product/service</p> Signup and view all the answers

Businesses only have a financial impact and do not contribute to social aspects of communities.

<p>False (B)</p> Signup and view all the answers

Name one advantage of a State-Owned company.

<p>Provides essential services to the community.</p> Signup and view all the answers

What does Market Capitalization equal?

<p>Total number of Outstanding Shares X Current Market Price per Share (C)</p> Signup and view all the answers

Aims are the specific measurable outcomes a business aims to achieve.

<p>False (B)</p> Signup and view all the answers

What is the prime function of Sierra Nevada?

<p>Providing education</p> Signup and view all the answers

The study of how societies allocate their scarce resources is known as __________.

<p>economics</p> Signup and view all the answers

Match the following terms to their definitions:

<p>Goal = What a business wants to achieve Objective = Measurable outcomes a business aims for Aim = Broad goals of a business Mission Statement = Main purpose and goals of a business</p> Signup and view all the answers

Which of the following is an external business environment factor?

<p>Global economic trends (C)</p> Signup and view all the answers

Which of the following best describes the difference between needs and wants?

<p>Needs are essential for survival, and wants are not essential. (B)</p> Signup and view all the answers

Microeconomics analyzes the economy as a whole, focusing on inflation and GDP growth.

<p>False (B)</p> Signup and view all the answers

Inflation refers to an increase in purchasing power.

<p>False (B)</p> Signup and view all the answers

What does CPI stand for?

<p>Consumer Price Index</p> Signup and view all the answers

What are the two types of economy discussed?

<p>Microeconomy and Macroeconomy</p> Signup and view all the answers

GDP stands for __________.

<p>Gross Domestic Product</p> Signup and view all the answers

What happens to the quantity demanded as prices increase?

<p>The quantity demanded decreases. (D)</p> Signup and view all the answers

The law of supply states that as prices increase, the quantity supplied will decrease.

<p>False (B)</p> Signup and view all the answers

What defines an economic system?

<p>Allocation of resources and organization of economic activity.</p> Signup and view all the answers

Which economic system is characterized by limited specialization and is resistant to change?

<p>Traditional Economic System (C)</p> Signup and view all the answers

What defines a Free Market Economic System?

<p>Competition exists among businesses with private ownership. (C)</p> Signup and view all the answers

Which scenario can lead an economy into a depression?

<p>Sustained decline in GDP for over six months. (B)</p> Signup and view all the answers

In which economic system does the government own and control the means of production?

<p>Command Economic System (C)</p> Signup and view all the answers

What is the main feature of a mixed economic system?

<p>A combination of free market and command economy elements. (C)</p> Signup and view all the answers

During which stage of the economic cycle does GDP reach its highest point?

<p>Prosperity (C)</p> Signup and view all the answers

What occurs during the recovery stage of the economic cycle?

<p>Economic activity starts to rebound. (D)</p> Signup and view all the answers

Which of the following options is NOT a characteristic of a Command Economic System?

<p>Prices are set by supply and demand. (C)</p> Signup and view all the answers

What is considered a primary industry?

<p>Farming and mining (C)</p> Signup and view all the answers

Which type of business structure is characterized by limited liability to its shareholders?

<p>Private company (A)</p> Signup and view all the answers

In which category do businesses like fast food chains typically fall?

<p>Franchise (C)</p> Signup and view all the answers

How do tertiary industries primarily contribute to the economy?

<p>By providing services (B)</p> Signup and view all the answers

What is the main purpose of businesses in society?

<p>To generate employment and economic growth (A)</p> Signup and view all the answers

Which of the following is a characteristic of a public company?

<p>Shares are listed on the stock market (D)</p> Signup and view all the answers

What distinguishes a sole trader from a partnership?

<p>Partnerships require a legal contract (D)</p> Signup and view all the answers

How is market capitalization defined?

<p>The total value of all outstanding shares of a public company (D)</p> Signup and view all the answers

What primary function does Sierra Nevada serve?

<p>Offering education (D)</p> Signup and view all the answers

How are objectives defined in a business context?

<p>Specific and measurable outcomes the business aims for (C)</p> Signup and view all the answers

Which of the following best describes external business environments?

<p>Factors outside a company's direct control that can impact its strategy (D)</p> Signup and view all the answers

What is the ultimate aim of a business?

<p>Achieving broad goals like profitability (B)</p> Signup and view all the answers

Which of the following factors is primarily studied in macroeconomics?

<p>Unemployment rates across a nation (D)</p> Signup and view all the answers

What does a company's mission statement typically convey?

<p>The unique aspects that differentiate it from competitors (A)</p> Signup and view all the answers

Which concept does microeconomics specifically focus on?

<p>The allocation of resources among individual units like households (C)</p> Signup and view all the answers

What distinguishes needs from wants?

<p>Needs must be met for survival; wants are desires that enhance life quality. (C)</p> Signup and view all the answers

How is market capitalization calculated?

<p>Total number of outstanding shares times current market price per share (D)</p> Signup and view all the answers

How does inflation affect purchasing power?

<p>Inflation decreases purchasing power as prices rise. (B)</p> Signup and view all the answers

What does CPI measure?

<p>The average change over time in prices paid by consumers. (A)</p> Signup and view all the answers

What indicates economic growth?

<p>An increasing GDP over a specific period indicates economic growth. (A)</p> Signup and view all the answers

What does the law of supply and demand describe?

<p>The balance between the amount producers offer and consumer willingness to buy. (A)</p> Signup and view all the answers

What happens to quantity demanded when prices increase?

<p>Quantity demanded decreases due to the inverse relationship. (C)</p> Signup and view all the answers

What characterizes an economic system?

<p>It determines resource allocation and economic activity organization. (B)</p> Signup and view all the answers

What is the relationship between supply and price?

<p>As price increases, supply typically increases. (D)</p> Signup and view all the answers

Flashcards

Business classification

Business organizations can be categorized by industry, legal structure, and size.

Industry Sector (Primary)

Extracts natural resources (e.g., farming, mining, fishing).

Industry Sector (Secondary)

Transforms raw materials to finished goods (e.g., manufacturing, construction).

Business Goal

What a business wants to achieve; its purpose.

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Business Objective

Measurable outcome a business wants to reach.

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Industry Sector (Tertiary)

Provides services to support the economy (e.g., retail, healthcare, banking).

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Mission Statement

A company's main purpose and goals; what makes it unique.

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Sole Trader

Business owned and run by one person; owner is personally liable for debts.

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Partnership

Business with two or more owners who share profits and liabilities (e.g., law, accounting).

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Prime Function

A business's core activity.

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Microeconomics

Study of individual economic units like households, firms, and industries.

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Market Capitalization (Market Cap)

Total value of a public company's outstanding shares.

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Macroeconomics

Study of the entire economy as a whole.

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Business Importance

Businesses create jobs, generate wealth, encourage innovation and contribute to communities.

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External Business Environment

Factors outside a business that affect its operations.

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Market Cap Calculation

Calculated by multiplying outstanding shares by the current price per share.

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Needs

Essential items for survival and basic well-being.

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Wants

Desires that enhance life quality but aren't necessary for survival.

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Inflation Rate

The rate at which prices of goods and services rise over time.

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CPI

Consumer Price Index: Measures average change in consumer prices.

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GDP

Gross Domestic Product: Total value of goods and services produced.

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Demand

Consumer willingness to buy goods and services at a specific price.

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Supply

Producers' willingness to offer goods and services at a specific price.

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Law of Supply and Demand

Describes the relationship between price, supply and demand.

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Traditional Economic System

An economic system based on customs and traditions, often passed down through generations. Barter is common, and there's limited specialization and change.

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Free Market Economic System

An economic system where competition drives businesses to provide the best products and services at lower prices. Prices change based on supply and demand.

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Command Economic System

An economic system where the government controls production and distribution, making all decisions.

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Mixed Economic System

An economic system combining elements of free market and command economies.

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Prosperity (Economic Cycle)

A stage of the economic cycle characterized by increasing economic activity, rising employment, and growing consumer spending.

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Recession (Economic Cycle)

A period of economic decline, with falling GDP, job losses, and decreased consumer spending.

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Depression (Economic Cycle)

A severe recession lasting for more than six months, marked by significant declines in GDP, high unemployment, and reduced business activity.

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Recovery (Economic Cycle)

A period following a recession where economic activity starts to rebound, leading to expansion. Government intervention through fiscal or monetary policy often plays a role.

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What is a business?

An organization that provides goods or services to society to make a profit.

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Business Classification: Industry Sector

Categorizes businesses based on the type of goods or services they provide, divided into primary, secondary, and tertiary.

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Business Classification: Legal Structure

Defines the legal relationship between the business owners and the business itself, including sole trader, partnership, private company, public company, franchise, and state-owned companies.

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Private Company

A business with limited ownership to approved shareholders, responsible for all debts. Often favored by families seeking control.

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Public Company

A business with shares listed on the stock market, accessible to a wide range of investors, often large and global.

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What is a company's goal?

A company's goal is its desired outcome or accomplishment. It defines the specific purpose the business wants to achieve.

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What is a company's aim?

A company's aim represents its broad and overarching objective. It outlines the general direction the business wants to take.

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What is a company's objective?

A company's objective is a measurable outcome that the business seeks to achieve. It provides a specific and quantifiable target.

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What is a company's mission statement?

A company's mission statement articulates its primary purpose and goals. It also highlights what distinguishes the business from its competitors.

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What is a company's prime function?

A company's prime function defines its core activity. It represents the main business operation that the company engages in.

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What is economics?

Economics is the social science that studies how societies use their limited resources to fulfill their unlimited wants and needs.

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What is Microeconomics?

Microeconomics focuses on individual economic units, like households, firms, and industries, examining their decisions about resource allocation, production, and consumption.

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What is Macroeconomics?

Macroeconomics analyzes the economy as a whole, studying factors like inflation, unemployment, and economic growth. It focuses on issues impacting entire nations or regions.

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Needs vs. Wants

Needs are essential for survival (food, water, shelter) while wants are desires that improve life quality (luxury car, designer clothes).

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Consumer Price Index (CPI)

Measures average changes in prices paid by consumers for goods and services, used to assess inflation.

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Gross Domestic Product (GDP)

Total value of goods and services produced in a country during a specific period.

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Economic Systems

Determine how resources are allocated, wealth is created, and economic activity is organized.

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Traditional Economy

An economic system based on customs and traditions passed down through generations. It involves bartering, limited specialization, and resistance to change, with little government intervention.

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Free Market Economy

An economic system driven by competition, where businesses strive to offer the best products and services at the lowest prices. Prices are determined by supply and demand, and individuals own and control the means of production.

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Command Economy

An economic system where the government centrally plans and controls all aspects of production and distribution. All economic decisions are made by the government, which owns and controls the means of production.

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Mixed Economy

An economic system that combines elements of free market and command economies, balancing government intervention with private enterprise and market forces.

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Economic Cycle: Prosperity

A phase of the economic cycle characterized by increasing economic activity, rising employment, and growing consumer spending. It marks the peak of economic expansion.

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Economic Cycle: Recession

A period of economic decline characterized by falling GDP, job losses, and decreased consumer spending. It signifies a downturn in the economy.

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Economic Cycle: Depression

A severe recession lasting for more than six months, characterized by significant declines in GDP, high unemployment, and reduced business activity. It marks a prolonged and severe downturn.

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Economic Cycle: Recovery

A period after a recession where economic activity starts to rebound, leading towards expansion. Government intervention through fiscal or monetary policy often plays a role.

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Study Notes

Business Science Study Guide

  • A business is an organization that provides goods and services to society to make a profit.

  • Businesses are categorized by industry sector, legal structure, and size.

  • Industry Sectors:

    • Primary: Extracts natural resources (farming, mining, fishing)
    • Secondary: Transforms raw materials into finished goods (manufacturing, construction)
    • Tertiary: Provides services (retail, healthcare, banking, education)

  • Businesses are important because they:

    • Create jobs and wealth, leading to economic growth
    • Develop new products and services, fostering innovation
    • Contribute to communities and have a social impact

  • Legal Structures:

    • Sole trader: Owned by one person, owner is personally responsible for debts
    • Partnership: Two or more people share profits and are jointly responsible for debts; typically in professions like law, accounting, and medicine.
    • Private company: Ownership limited to approved shareholders; popular for family businesses seeking control.
    • Public company: Shares listed on the stock market, accessed by a broader range of investors.
    • Franchise: Business model where a franchisor grants a franchisee the right to sell its product/service.
    • State-owned company: Owned and controlled by the government; provides essential services.

  • Market Capitalization (Market Cap): Total value of all outstanding shares (number of shares x current market price per share)

  • Goals: Specific, distinct purposes of a business, for example, increasing student numbers.

  • Aims: Broad goals, for example, making a profit.

  • Objectives: Measurable outcomes a business strives to achieve, for example, number of students in 2024 compared to 2023.

  • Mission Statement: Statement of a company's purpose and goals.

  • Prime Function: The main activity of a business.

  • Economics: The social science of how societies allocate scarce resources to fulfill unlimited needs & wants.

  • External Business Environments: Factors outside a company's direct control that affect operations, performance, and strategies (political, economic, social, technological, ethical)

  • Microeconomics: Examines individual economic units (households, firms, industries); focuses on resource allocation, production, and consumption.

  • Macroeconomics: Studies the overall economy, considering factors like inflation, unemployment, GDP growth, interest rates, and consumer spending.

  • Needs: Essential items for survival (food, water, shelter)

  • Wants: Desires that enhance quality of life, influenced by personal preferences.

  • Inflation Rate: The rate at which the level of prices for goods and services increases over a period of time.

  • CPI (Consumer Price Index): Measurement of average change in consumer goods prices over time, used to assess inflation.

  • GDP (Gross Domestic Product): Total value of all goods and services produced in a country.

  • Demand: Quantity of goods/services consumers are willing to buy at specific prices.

  • Supply: Quantity of goods/services producers are willing to provide at specific prices

  • Law of Supply and Demand: Relationship between supply and demand, determining equilibrium price

  • Economic Systems: Method by which resources are allocated & wealth is created.

    • Traditional: Based on custom and tradition, resistance to change.
    • Free Market: Based on competition & prices set by supply/demand.
    • Command: Centrally planned by government.
    • Mixed: Combines free market & command principles.

  • Stages of Economic Cycle:

    • Prosperity
    • Recession
    • Depression
    • Recovery

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Study Guide GAC 012 Units 1 & 2 PDF

Description

Explore the fundamentals of business science including the various industry sectors, legal structures, and the vital role businesses play in the economy. This study guide covers essential concepts such as job creation, innovation, and community contribution. Perfect for students looking to understand the basics of business.

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