Business and Its Publics/2009 Section 20 Vocabulary Wiki

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Business and its Publics (BiP) 2009. Section 20 Vocabulary Wiki.[edit]

Enter new vocabulary terms here, and sign your name. Then contribute definitions to open vocabulary terms. BiP2009S20 20:51, 20 January 2009 (UTC)

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Section 501(c)(3): Section 501(c)(3) of the Internal Revenue Code is a tax law that exempts non-profit organizations from federal income taxes. The organization must not operate for private interests, but public interests. Educational, religious, and charitable corporations generally qualify for Section 501(c)(3). The tax law exemption does not include other federal taxes, such as employment taxes. -Sneha Venkateswaran

TLA stands for Three-Letter Acronym, an abbreviation that consists of three letters. WTO, IMF, and NGO are organizations whose names are written in TLA. WTO is an abbreviation for World Trade Organization, IMF for International Monetary Fund, and NGO for Non-Governmental Organization. WTO is a global organization, established in 1995, that deals with the rules of trade between nations. IMF is another international organization that was established in order to promote international trade, high employment, and economic growth, and encourage monetary cooperation. - Scarlett Lee

Debt is something (usually assets) that is owed to a creditor. It contributes to a decrease in future purchasing power. It is an accumulation of deficits.

Debit is a term used in accounting to keep track of financial transactions. Debits are always recorded on the left side in double-entry accounting. A debit in the asset account is an increase, while a debit in the liabilities or equity accounts is a decrease. Assets = Liabilities + Equity

Deficit occurs when more money is spent than is received. Remedies of a budget deficit include borrowing, issuing of bonds, or sales of assets. However, such solutions can cause inflation. ~Juliet Huang

Escalation of Commitment entails making an irrational decision to continue involvement and participation in something such as a plan, project, or event. This decision is based off previous resources (time, money, effort) that have already been spent on the project. The "dollar auction" game that was played in class exemplified escalation of commitment, as students continued raising their bids since they had already wagered certain amounts early in the game. ~Daniel Agnello


An Arbitrage Event is when there is a price difference for the same product, but in two different locations. For example, if a security is priced higher in the U.S. than in the U.K. then a savvy investor - with international connections - can purchase the securities overseas to sell them at a profit in North America. This process is common when dealing with hedge funds and other small private investment groups. A more relevant example would be a Merger Arbitrage or risk arbitrage in which an investor buys the stock of a company that will be subject to a takeover whilst shorting the stock of the acquiring corporation. This was the case when Microsoft bid for Yahoo! where millions were made in the process. - Imran Qureshi

Marginal cost in economic terms refers to the change in total cost to produce one more unit of a particular good. For example, if sewing one shirt requires the labor of three workers, then the marginal cost of the shirts include the labor of the workers. I think marginal cost, described in terms of the relationship between business, government, and consumers is relevant to our studies. Businesses and firms use the marginal cost to make decisions to generate maximum profit, while consumers use it in their purchasing decisions. In addition, marginal cost also involves social costs as the decisions producers and consumers make necessarily affect the society as a whole. Thus marginal cost must be considered and weighed to balance the objectives of businesses, consumers, and the society. -Cecilia Zhu

A social entrepreneur is a person who strives to make a change in society. He/she recognizes a social problem and uses business models to help bring about that change. A social entrepreneur can make a profit (therefore, he is not limited to non-profit organizations), but he measures his success in terms of the impact he has made on society, whereas a business entrepreneur measures his success purely by profits, returns, or sales. Social entrepreneurship relates to our study of the relationship between business and society. We often criticize business for being ignorant of societal problems, such as large income variability and environmental sustainability. Social entrepreneurs help bridge this gap because they consider the views of both business and society. ~Juliet Huang

Regression towards the mean is a statistical phenomenon that states that for a given variable, the predicted value is always fewer standard deviations away from its mean than the first variable is from its mean. That is, the response is closer to its average than is the predictor to its average. In daily life, regression towards the mean states that things tend to return to 'normal' if left to themselves. This idea applies to the interaction between business and society. Any radical behavior on either part will ultimately result in a situation that is less extreme, due to the counter behavior of the other party. In terms of social justice, if business acts in a way that deviates greatly from the 'norm' (i.e. 'fair'), society (perhaps labor unions) will behave in a way that would result in a situation that is 'normal' (more 'fair'). ~Juliet Huang


Principal-agent problem - In political science and economics, the principal-agent problem or agency dilemma treats the difficulties that arise under conditions of incomplete and asymmetric information when a principal hires an agent. The solution to this information problem — closely related to the moral hazard problem — is to ensure the provision of appropriate incentives so agents act in the way principals wish. In terms of game theory, it involves changing the rules of the game so that the self-interested rational choices of the agent coincide with what the principal desires. - Elspeth Ong

Moral hazard - Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its doings, and therefore has a tendency to act less carefully than it alternately would, leaving another party to hold some responsibility for the consequences of those actions. For example, a person with insurance against automobile robbery may be less cautious about locking his or her car, because the negative consequences of vehicle theft are (partially) responsibility of the insurance company/corporation. - Elspeth Ong