EC-907
This type of system is divided into two main categories, communism and socialism.
What is a Command Economy?
In a private enterprise system, these entities—rather than the government—own or control most economic resources.
What are individuals and groups?
This is the basic definition of profit: the amount of money left over after these have been subtracted from sales income.
What are expenses?
This is the general frequency with which risk occurs in the world of business.
What is regularly (or a regular part of doing business)?
In a private enterprise system, competition helps consumers by keeping the quality of goods high and keeping prices down.
What are prices?
In this economic system, decisions are made based on the interaction of buyers and sellers in markets.
What is a Market Economy?
This key characteristic provides the "incentive" or reason for people to start and operate a business.
What is the profit motive?
Profit is considered the "reward" for a business owner or investor who takes this specific action.
What is taking a risk (or investing in a business)
These are the four main classifications of business risk mentioned in the summary.
What are hazard, operational, strategic, and financial?
This is the specific economic system in which competition is considered an essential component.
What is a private enterprise system?
Every economic system must include these four components: resources, markets, participants, and a medium of exchange.
What are the elements of an economic system?
This specific characteristic describes a system where the costs of goods and services are determined by supply and demand rather than government decree.
What is a price-directed system?
Beyond making money, profit serves these two psychological purposes for business owners and employees.
What are motivation and satisfaction?
This type of risk, which involves only the possibility of loss or no loss, is typically considered insurable.
What is pure risk?
According to the summary, competition ensures that a business’s production remains this, meaning they use resources wisely without waste
What is efficient?
This is the primary reason countries need organized economic systems; it occurs because no nation has enough resources to supply everything its people want.
What is Scarcity?
This term refers to the rivalry between businesses to attract customers and is a cornerstone of the private enterprise system.
What is competition?
These are the two specific types of profit a business calculates to understand its financial health.
What are gross profit and net profit?
Unlike pure risk, this category of risk—which involves the chance of gain or loss—is generally not insurable.
What is speculative risk?
Competition benefits society as a whole by maintaining a high level of this, which measures the wealth and comfort available to a community.
What is the standard of living?
This term describes the organized way a country handles its economic decisions and solves its economic problems.
What is an Economic System?
While the system offers many freedoms, these are two of its primary social disadvantages mentioned in the summary.
What are unemployment, poverty, or unequal distribution of wealth?
On a larger scale, profit benefits society by meeting consumer needs, strengthening the economy, and providing jobs.
What are employment opportunities?
Of the four classifications, this one specifically relates to risks involving a company's high-level plans and long-term goals.
What is strategic risk?
While it may seem counterintuitive, healthy competition actually helps keep these "up" for businesses by forcing them to be better and more efficient.
What are profits?