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Exam 1 Study Guide BUS 100

by: Autumn Ratliff

Exam 1 Study Guide BUS 100 BUS 100

Marketplace > Western Kentucky University > Business > BUS 100 > Exam 1 Study Guide BUS 100
Autumn Ratliff

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This study guide covers chapters 1, 2, and 4.
Introduction to Business
Trish Steelman
Study Guide
business, BUS 100, Intro to Business
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This 8 page Study Guide was uploaded by Autumn Ratliff on Friday February 19, 2016. The Study Guide belongs to BUS 100 at Western Kentucky University taught by Trish Steelman in Spring 2016. Since its upload, it has received 70 views. For similar materials see Introduction to Business in Business at Western Kentucky University.


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Date Created: 02/19/16
Introduction to Business Trish Steelman Test Guide Ch. 1, 2, & 4 Highlight = Important Concept Highlight = Key Term Chapter 1 Key Terms:  Value is defined as the relationship between the price of a good or service and the benefit that it offers a consumer.  Business: Organization or activity that provides goods and services  Profit: Money earned in sales/revenue, minus expenses  Loss: When expenses are greater than revenue  Entrepreneurs: People who risk their time, money, and other resources to start and manage a business  Standard of living: Generally refers to the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class, in a certain geographic area. o Some examples are life expectancy, disease, cost of goods and services, affordable access to quality health care.  Quality of life: Overall sense of well-being o Some examples are right to privacy, freedom of thought, right to fair pay, right to vote, right to education, and right to be treated equally without regard to gender, race, language, religion, political beliefs, nationality, socioeconomic status and more  SWOT Analysis: o Strengths – internal characteristics of the business that provide an advantage over competitors in the industry. o Weaknesses – internal characteristics of the business that place the firm at a disadvantage over competitors. o Opportunities – external chances in the environment to increase sales or profits. o Threats – external environmental variables that hinder the business’s operations, market position, or some other aspect of the business. Social Environment Economic Global Environment Environment Business Environment Competitive Technological Environment Environment  Factors of Production: o Fundamental resources required to achieve organizational objectives o For example, for producing wheat, a farmer uses inputs like soil, tractor, tools, seeds, manure, water and his own services.  Natural resources-land  Land, for example, provides raw materials such as lumber, minerals and metals  Capital-Capital represents the money necessary to fund new ventures, as well as pay for land and labor. It also increases labor's ability to produce wealth  Human resources-Labor  Labor represents the people and skills necessary to manipulate, process, distribute, market and handle raw materials as well as finished goods  Entrepreneurship  Aids economy by creating opportunities and by harnessing other factors of production  Business creates Utility. Utility=Usefulness o Possession  The usefulness of a product that results from having the product transfer ownership in a way the consumer wants to pay for it.  How useful is a car if it's still in the lot? o Time  The usefulness of a product that results from having it available when the consumer wants it.  Time utility is created when a product is offered when it is needed. For example, Christmas decorations are offered right after Halloween, so therefore, time utility is created. o Place  The usefulness of a product that results from having it available where the consumer wants it.  Place utility is when products are where they're needed at. For example, Walmart has many different kinds of products, from Advil to Zebra Cakes. You can get almost anything there, creating place utility o Form  The usefulness of a product that results from having it available in a form the consumer wants it.  Form utility is making a product more useful by changing its form. This can be illustrated by buying a cake. You're probably not going to eat flour and other ingredients by themselves, but you will eat a cake  Leading Edge vs. Bleeding Edge o Speed-to-market: Rate at which a firm transforms concepts into actual products  Key source of competitive advantage o Bleeding-edge firms  Launch products that are too far ahead of the market o Leading-edge firms  Offer products as the market becomes ready to embrace them Chapter 2  Business Cycle - Periodic contraction and expansion that occur over time in every economy o Contraction: Period of economic downturn  Recession: Decrease in the Gross Domestic Product for two consecutive quarters  Depression: Long and deep recession  Low GDP for two consecutive quarters (6 months) = Recession  When a recession goes on past 6 months = Trough o Recovery: Period of rising economic growth and employment o Expansion: Period of robust economic growth and high employment  Economics - The study of the choices that people, companies, and governments make in allocating societies resources.  Guide decision making  Help understand broad forces that affect business and personal life  Macroeconomics: The study of a country’s economic dynamics  Employment rate, gross domestic product, and taxation policies  Microeconomics: Study of smaller economic units  Individual consumers, families, and individual businesses  Managing the economy o Fiscal and monetary policies help achieve the goal of sustained economic growth. o Fiscal Policy: Use of taxes and spending by the government. Influences by the government to promote taxation and spending o Monetary Policy: Shaping of the economy by the Federal Reserve by influencing interest rates and supply of money. o Disposable income: What you have to spend after taxes on your necessities; rent, food, utilities. Use for needs. o Discretionary income: The money left over after paying for your needs. You can either spend it or save it. Can use for wants.  Federal debt: The sum of all the money borrowed and not yet repaid by the federal government (Currently around $446,000,000,000+ and counting)  Expansionary: Government spending o Infrastructure o Making the surrounding area safe and presentable  Contractionary: Raise taxes, government trying to slow the government down  Monetary: o Federal Reserve System/Banks  Monitors money supply  Execute federal policies  Perform banking services for commercial banks in their districts  Commercial banks: Privately owned financial institutions o Money Supply: Total amount of money within the overall economy  When economy contracts, Fed reduces the money supply  When prices rise, Fed reduces the money supply  M1: All currency + checking accounts and traveler’s checks  M2: M1 money supply + most savings accounts, money market accounts, and certificates of deposit  When economy slows, Fed increases the money supply  When prices rise, Fed reduces money supply o Interest rates: Cost of borrowing money  Lowering IR makes people spend more o Reserve requirement (% of banks deposits): Rule set by the Fed which specifies the minimum amount of reserves a bank must hold.  Gross Domestic Product (GDP) o Total value of all goods and services produced within a nation’s physical boundaries over a given period of time o Used to:  Measure the economic performance of individual nations  Compares the growths among nations  Test question. o Percent of people in the labor force age 16 years and older who do not have a job but are actively seeking work = unemployment rate o Nation: 4.9 % Unemployment Rate o KY: 5.0% Unemployment Rate since April 2015 o Doesn’t take account of the discouraged workers = people who have given up looking for a job.  Categories of unemployment o Frictional - Temporary unemployment  Unemployed but looking to start a new job soon o Structural - Long term unemployment This is the worst type of unemployment  Machines taking jobs, people no longer needed o Cyclical - Layoffs during recessions  GDP drops and layoffs happen until GDP rises and people get their job back o Seasonal - Job loss related to the time of year  Discount Rate o Discount rate: interest rate that the Federal Reserve charges when it loans funds to banks  Debt Ceiling and Fiscal Cliff o Debt Ceiling: Max amount Congress lets the government borrow o Fiscal Cliff: Package of across the board spending cuts and sharp tax hikes  Meant to decrease the U.S. budget deficit  Capitalism: Free Market System o Economic system based on private ownership, economic freedom, and fair competition  i.e. Private enterprise or free market system o Fundamental Rights of Capitalism  Right to own a business and keep after-tax profits  Right to private property  Right to free choice  Right to fair competition  Socialism: Government owns and operates key enterprises that affect public welfare o Higher taxes  Communism: Public ownership of all enterprises, under strong central government  Mixed Economies: has elements of planned and market-based economic systems o Federal government partly owns a number of financial institutions o Privatization: Converting government-owned businesses to private ownership Degrees of Competition  Pure/Perfect Competition: Have your own example for the test o Market structure with many competitors selling virtually identical products o Barriers to entry are very low (Low cost start up) o Advantages of Pure Competition  Often smaller businesses  Generally startup costs are low  Similar products  Ex: Yard sales, bakeries, florists, dentists o Disadvantages of Pure Competition  Unlimited liability  Lack of expertise in all areas of business  Monopolistic competition Have your own example for the test o Market structure with many competitors selling differentiated products o Barriers to entry are low o Advantages of Monopolistic Competition  Many competitors selling similar products/services  Decisions of one do not affect the whole o Disadvantages of Monopolistic Competition  Many marketing competitors  Unlimited liability  Ex: Convenience stores, Restaurants  Oligopoly: Market structure with only a handful of competitors selling products that can be the same or different Have your own example for the test o Barriers to entry are high o Advantages of Oligopoly  Potential to make large profits  Well known  Decision of one affects all  Ex: Airlines, Movie theaters o Disadvantages of Oligopoly  Barriers to entry  High entry costs  Large number of employees  Monopoly: One producer dominates the industry Have your own example for the test o Natural Monopoly: Market structure with one company as the supplier of a product  Consumer price index (CPI) o Evaluates the weighted average price of goods and services consumers buy each month o The price of groceries, haircuts, gas. If people do the same thing in the next month but the total price is higher, then the CPI has risen from that last month.  Price levels o Inflation: Rising of average prices o Hyperinflation: Average monthly inflation rate of more than 50% o Disinflation: Slowing average price increases o Deflation: Falling average prices  Productivity o Output: Production of goods and services o Input: Resources required to produce goods or services  Productivity = Output/Input o The four factors of production are Land, labor, capital and Entrepreneurship Chapter 4  Ethics – A set of beliefs, not the law, about what’s right/wrong, good/bad  How are ethics formed: Learning through what you are exposed to during life, what you see and hear, how you were raised. o Ex: unethical: taking candy from a child, not illegal but still unethical.  Code of Ethics – defines the ethical standards of an organization and gives employees the information they need to make ethical decisions across a range of situations o In multinational companies it lays out unifying values and priorities for divisions that are rooted in different cultures o Whistle blowers – people who watch unethical/illegal situations for a long period of time until they decide to report it.  4 quadrants of social responsibility: Have an example of each o Legal and ethical o Legal but unethical o Ethical but illegal o Illegal and unethical  Universal Ethical Standards  Trustworthiness  Respect  Responsibility  Fairness  Caring  Citizenship Social responsibility: Obligation of a business to contribute to society Responsibility to Employees:  Employers must comply with laws that relate to equal opportunity, workplace safety and minimum wage  Employers ensure: o Hard work and talent are rewarded o Proactive protections are established o Programs for on-site day care Stakeholders: Groups that have a stake in the performance and actions of an organization Responsibility to Customers:  Consumerism: Social movement that focuses on four key consumer rights  Right to be safe  Right to be informed  Right to choose  Right to be heard  Planned obsolescence: Deliberately designing products to fail in order to shorten the time between consumer’s repurchases. Responsibility to investors:  Sarbanes-Oxley Act: Limits conflict-of-interest issues by restricting the consulting services that accounting firms can provide for the companies they audit Responsibility to Community:  Corporate philanthropy: All business donations to nonprofit groups  Cause-related marketing: Partnership between a business and a nonprofit o Designed to spike sales for the company and raise money for the nonprofit  Corporate responsibility: Focuses on the actions of the business itself rather than donations of money and time


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