1.2 Flashcards
who are the instigators of creative destruction?
consumers switching to new products and old products becoming obsolete
what is creative destruction?
quality improving innovations ensuring a market is dynamic and leads to economic growth
what is a disruptor?
a firm that initiates change across a market e.g. board games by online games
what is added value?
selling the output for more than the cost of inputs e.g. paper by making a newspaper
what is GDP?
the quarterly % figure to say how good the economy is doing
how do you calculate GDP?
total expenditure (sales)
total income
total output
what GDP accounts for rapid growth?
4% increase
what is a recession?
2/4s in a row in negative GDP
what are the 2 types of entrepreneurial motives?
financial or non-financial
what is a financial entrepreneurial motive?
profit
what is a non-financial entrepreneurial motive?
ethical stance
independence
home working
social entrepreneurship
what is a social entrepreneur?
someone who comes up with innovative solutions to society’s most pressing social problems
what is factors of production?
finite inputs that are used in the production of goods/services in the attempt to make an economic profit
what are the 4 factors of production?
capital
enterprise
land
labour
what is capital?
man-made tech used to produce goods
financial:when you buy a producer
physical:what you buy to produce
what is enterprise?
the initiative used in organising the factors
what is land?
natural resources/location
what is labour?
human effort
what is specialisation?
when individuals, firms and economies concentrate on producing goods/services in which they have an advantage
what is the division of labour?
breaking the production process down into simpler more specialised tasks allowing more efficiency
what are advantages of the division of labour?
quicker
cheaper
increased production
expertise
less training
being able to introduce technology
what are the disadvantages of the division of labour?
repetitive and boring work
only gives employees one skill
workers have more power to disrupt production
what are the 4 functions of money?
deferred payment
unit of account
medium of exchange
store of value
what does deferred payment mean?
borrowing money to buy now and pay later
what does unit of account mean?
a way to help compare prices of products
what does medium of exchange mean?
using money as a way of trading goods
what does store of value mean?
being able to store money and save for later
what are interest rates?
the cost of borrowing and reward for saving decided by the Bank of England
what are exchange rates?
the value of one currency in terms of another
what is the floating exchange rate system?
when the central bank allows currency to find its own level
what is government taxation (the fiscal policy)?
when government finance their expenditure by imposing charges
what is direct taxation?
tax levied on income and profit
what is indirect taxation?
tax levied on spending
what are progressive taxes?
when tax rises as income rises
what are regressive taxes?
when tax falls as income rises
name 7 types of tax
corporation tax
excise duty
income tax
capital gains tax
inheritance tax
VAT
stamp duty
what is corporation tax?
a percentage of profit made by firms
direct
progressive
what is excise duty?
tax on specific goods/services at purchase
indirect
regressive
what is income tax?
tax payable on all incomes
direct
progressive
what is capital gains tax?
a tax paid by an investor upon selling, based on appreciation during time held
direct
progressive
what is inheritance tax?
a tax on the estate of someone who died
direct
progressive
what is VAT?
tax on most products
indirect
regressive
what is stamp duty?
tax when buying a residential property
indirect
progressive
what is unemployment?
(NEET+18)
what does unemployment mean?
scarce human resources aren’t being used and persistently high levels have damaging consequences
what are the factors causing unemployment?
low demand for labour
geographical and occupational immobility
skills shortages
what is inflation?
a sustained increase in the general price level and reduction in value of money
what is inflation measured as?
retail price index (RPI)
consumer price index (CPI)
what does inflation lead to?
lender uncertainty
more expensive exports
shoe leather costs
menu costs
name 2 types of direct tax.
income tax as a % of income
corporation tax as a % of revenue
name 2 types of indirect tax.
specific
ad valorem
what is specific tax?
fixed amount of tax on each unit sold
what is ad valorem tax?
tax charged as a % of a good
what is the incidence of tax on consumers/consumer burden?
how much tax consumers pay
what is the incidence of tax on producers/producer burden?
how much tax producers pay
what do specific and ad valorem taxes mean for prices?
that they have to increase to make up for the tax
what happens if their is inelastic demand when dealing with specific tax?
the demand curves steeper gradient will mean a bigger consumer burden because inelastic demands mean most specific tax is given to consumers
what happens if their is elastic demand when dealing with specific tax?
the flatter demand gradient means a bigger producer burden as demand is responsive to price changes
how do you calculate tax revenue?
size of specific/ad valorem tax x quantity sold
