EC-907
In this type of economy, individuals and businesses make most of the economic decisions with little government interference.
What is a free market economy?
In this type of enterprise system, individuals and businesses own the resources and operate for profit with little government interference.
What is a private enterprise system (or capitalism)?
This classic phrase says that to earn more, you usually have to take on more uncertainty.
What is "higher risk, higher reward"?
A sudden increase in raw material prices can mess with your profit margins. This risk comes from market changes.
What is economic risk?
This type of competition occurs when companies sell similar products and target the same audience, like Pepsi vs. Coca-Cola.
What is direct competition?
This economic type relies on customs, traditions, and rituals to make economic decisions, often seen in rural or indigenous communities.
What is a traditional economy?
In this system, the government owns and controls all means of production, aiming for equal distribution of resources.
What is a communist (or command) economy?
Investors seeking low-risk and stable returns might choose these government-backed assets.
What are Treasury bonds?
When a company faces losses due to poor decisions, like choosing the wrong market to enter, it's this type of risk.
What is strategic risk?
Apple competing with Netflix for consumers' attention and screen time is an example of this type of competition.
What is indirect competition?
In this economic type, the government owns all means of production and decides what gets produced, how, and for whom.
What is a command economy?
This economic model seeks to reduce income inequality by redistributing wealth through progressive taxation and social programs, while still allowing for private enterprise.
What is socialism?
Entrepreneurs often accept high startup risks in exchange for this potential future benefit.
What is high return/profitability (or business growth)?
A factory catching fire or a key machine breaking down are examples of this very physical type of risk.
What is operational risk?
When companies strive to out-innovate one another with new technology or better customer service, they’re engaged in this form of rivalry.
What is innovation-based competition?
This economic system aims to reduce inequality by having the government provide essential services and regulate major industries, while still allowing some private ownership.
What is socialism?
In this type of market, prices and production are determined by supply and demand, with little to no government intervention.
What is a free market economy?
This principle in finance describes how investors should be compensated for taking on extra risk compared to a risk-free investment.
What is the risk premium?
This type of contractual clause shifts liability from one party to another, commonly used in construction and service agreements.
Transferring risk
This kind of competition is seen when companies try to win over customers by lowering their prices.
What is price competition?
This theory-based economic system advocates for a classless, stateless society where all property is communally owned and each person contributes and receives according to their ability and need.
What is communism?
This economic system is often described as a compromise between capitalism and socialism, where the government regulates key industries but private businesses still operate freely in many sectors.
What is a mixed economy?
This financial metric helps assess whether the reward of an investment justifies the risk by comparing expected return to volatility.
What is the Sharpe ratio?
When a business takes on debt to fund expansion, it increases potential return but also exposes itself to this type of financial risk, which reflects its ability to meet long-term obligations.
What is financial risk?
When a company competes by making its product seem superior through branding or emotional appeal, it’s using this strategy.
What is non-price competition?