1.1 Scarcity, Choice and Potential Conflicts Flashcards
What is the main economic problem?
Scarcity
What is the problem regarding scarcity?
People have unlimited wants but there are limited goods so we have to choose where’s best to use these resources
In a free market, what determines the allocation of resources?
Demand and supply, consumers decide what they want and businesses supply it
What is a free market?
Where there is no interference from external agencies such as the government, e.g. no tariffs
They don’t really exist
What negative can occur with making a choice?
Opportunity cost; what has been sacrificed to allow the best possible choice
Basically, the missed advantages of the choice not chosen
What’s a trade-off?
Where having more of one thing leads to less of another, a gradual process of opportunity cost
What are the 2 main business objectives?
Profit maximisation
Sales maximisation
What is satisficing?
When a business achieves enough profit to stay afloat but doesn’t seek maximum sales/profit
e.g. a school
Name 7 other business objectives?
Survival Market share Cost efficiency Return on investment Employee welfare Customer satisfaction Social/environmental concerns
What’s a stakeholder?
Individuals or groups with an interest in the actions of a business. Such as; employees, owners, customers, shareholders, suppliers, the environment and pressure groups.
What’s an economic agent?
Those who have a say in how resources are used
What trade-off occurs with stakeholders?
A trade-off between the different wants of stakeholders helps prevent stakeholder conflict
What’s the shareholder model?
Prioritises shareholders’ interests over other stakeholders and focusses on profit maximisation
Who is a shareholder?
Part-owners of the business, played a part in financing the business directly or have shares. They receive dividends every year.
What’s the stakeholder model?
Takes into account the wants and needs of all stakeholders not just shareholders’
