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| Economic System | The organized way in which a country handles its economic decisions and solves its economic problems. |
| Traditional Economic System | An economic system in which people produce only what they must have in order to exist; all economic decisions are based on habit and tradition. |
| Command Economic System | An economic system in which all or many of the means of production and distribution are owned and controlled by the government. |
| Communism | A command economic system in which the government controls the economic system and does not allow private ownership of the means of production and distribution |
| Socialism | A modified command economic system in which government owns the basic means of production and allows private ownership of businesses as well |
| Private Enterprise System/Free Market Economy | An economic system in which individuals and groups, rather than government, own or control the means of production |
| Profit | Monetary reward a business owner receives for taking the risk involved in investing in a business; income left once all expenses are paid. |
| Profit Motive | The desire to make a profit which moves people to invest in business |
| Income | The money received by resource owners and by producers for supplying goods and services to customers |
| Expenses | Money spent or cost incurred in an organization's efforts to generate revenue, representing the cost of doing business. |
| Cost Of Goods | The amount of money a business pays for the products it sells or for the raw materials from which it produces goods to sell; the amount of money a business pays for the products (or for any part of the products) it sells. |
| Operating Expenses | All of the expenses involved in running a business |
| Gross Profit | This is the difference between sales income and the direct costs of making those products. Gross profit is used as a performance indicator to help the business make decisions over its pricing policies and use of materials. |
| Net Profit | Net profit represents gross profit less all expenses associated with the normal running of the business. Net profit shows how well the business performs under its normal trading circumstances. |
| Risk | The possibility of a financial loss. |
| Risk Management | The process of managing a business’s exposure to risk in order to achieve business objectives. |
| Business Risk | The possibility of loss (failure) or gain (success) inherent in conducting business |
| Pure Risks | The possibility of loss to a business without any possibility of gain. |
| Economic Risks | Risks that result from changes in overall business conditions. Examples: Competition, Inflation, Government regulation, Recession |
| Natural Risks | Perils resulting from environmental causes. Examples: Floods, Earthquakes, Tornadoes, Hurricanes, Fires |
| Human Risks | Perils caused by human errors as well as the unpredictability of customers, employees, or the work environment. Examples: Shoplifting, Employee theft |
| Speculative Risks | Chances of loss that may result in loss, no change, or gain. Examples: buying new machinery, constructing new buildings. |
| Guarantees | A promise made to the consumer that a product’s purchase price will be refunded if the product is not satisfactory |
| Warranties | A promise made by the seller to the customer that the seller will repair or replace a product that does not perform as expected. |
| Competition | The rivalry among two or more businesses to attract scarce customer dollars |
| Direct Competition | Rivalry between or among businesses that offer similar types of goods or services. |
| Indirect Competition | Rivalry between or among businesses that offer dissimilar goods or services. |
| Oligopoly | A market structure in which there are relatively few sellers, and industry leaders usually determine prices. |
| Monopoly | A type of market structure in which a market is controlled by one supplier, and there are no substitute goods or services readily available. |
| Regulated Monopoly | Monopoly that the government allows to exist legally |
| Perfect Competition | A market structure in which there are many businesses selling a lot of identical products for about the same price to many buyers |
| Price Competition | A type of rivalry between or among businesses that focuses on the use of price to attract scarce customer dollars. |
| Non Price Competition | A type of rivalry between or among businesses that involves factors other than price |
| Price discrimination | selling a good or service at a number of different prices, and the price differences is not justified by the cost differences. |
| Freedom of Choice | The key ingredients of economic freedom are personal choice, voluntary exchange, freedom to compete in markets, and protection of person and property. |
| Private Property | is the exclusive authority to determine how a resource is used, whether that resource is owned by government or by individuals. |
