Business - Economics Flashcards
What is the definition of economics
How people and the government behave or make choices with their money and resources.
What is an economy?
An economy is a system of individuals, business and governments that produce, sells and buys goods and services.
2 points of scarcity in economics
scarcity in economic resources requires choices to be made
it states that our needs and wants are unlimited, but economic resources are limited.
what is financial cost
the price paid
what is opportunity cost
what we missed out on by making a choice
Name the 4 Factors of Production
Labour
Land
Capital
Enterprise
What are the factors of production?
The factors of production are necessary for producing goods and services
Explanation and economic return for Land
Land is all natural resources for use in the production of goods and services
The economic return is rent
Explanation an economic return for labour (2points)
The workers available to help produce goods and services
different workers have different skills and experience
Economic return is wages
Explanation and economic return for capital
The man made resources to produce goods and services
includes: equipment, machines, money and buildings
economic return is interest
explanation and economic return for enterprise
The act of bringing together the other factors of production to produce goods and services
the economic return is profit or loss
Definition of an economic system
An economic system describes how a country chooses to control its economic resources
The 3 types of national economies
Market economy
Mixed economy
Controlled economy
The 3 points for free economy + example
A free economy is where anyone is free to make decisions about the production of goods and services
the market determines who gets what resources and how they are distributed
government shouldn’t interfere with market
USA
What 3 things does the government control in a market economy?
The police force
Public services
Laws protecting consumers and workers
3 points on controlled economy + example
the government has total control over the production of goods and services
citizens are not free to set up businesses
believes that the private enterprise are not the best way to determine the distribution of resources
North korea
2 points on mixed economy + example
the government and private business share the production of goods and services
the government controls certain areas of the economy but citizens can set up businesses
ireland is a mixed economy
How does the mixed economy balance things?
In a mixed economy the government tries to balance the public good with private profit
The irish economy points (4p)
Business create employment, pay tax and contribute to the local community
Businesses compete with each other, giving consumer more choices and lower prices
The government encourages entrepreneurship
the government has a low corporate tax rate (12.5%) that attracts global businesses to locate in ireland
Distributions of resources in a mixed economy - individuals
Individuals : provide labour, pay taxes, sell land and start businesses
Distributions of resources in a mixed economy - Organisations
Provide finance to buy capital resources
Hire workers and pay taxes
make products to meet consumer needs
Distributions of resources in a mixed economy - government
employs workers, collects taxes, pay for public services
provides grant aid, encourages enterprise
Definition of public sector
the part of the economy that is owned and controlled by the government
describe private sector
Businesses owned by individuals that produce and sell goods and services with the aim of making a profit
definition of third sector
Social enterprises are not for profit organisations such as charities and voluntary organisations
department of health
Hospitals, treatment, surgeries, healthcare
department of education and skills
Education, schools, state examinations
department of culture
Protection of Ireland’s heritage and Irish language
department of communications
responsible for telecommunication and broadcasting
State owned commercial
These charge for their product and services example an post
State owned non-commercial
These product services free of charge that are seen necessary to develop the country librwry
Public/private partnerships state owned
To provide important services and infrastructure
Market definition
A place where buyers and sellers connect with each other in order to trade or exchange goods and services
Final market definition
A place where finished goods and services are bought and sold
Factor markets
Where the factors of production are bought and sold
Commodities markets
Where raw materials used in the production of goods and services are bought and sold example serial, land
demand definition
Refers to the quantity of a product that buyers are willing to purchase at a given price
effective demand
Is a willingness to buy backed up by an ability to pay
Three consumer behaviour assumptions
rational/will purchase cheaper option
Consumers will get as much benefit or satisfaction as possible from their limited resource
The benefit or satisfaction that consumer receives from consuming a good or service decreases overtime this is the law of diminishing marginal utility
Price definition in economics
Reversed an amount of money expected or paid for product or service
Demand schedule
Shows the number of goods demand but demanded by customers at different price levels
Demand schedule
Shows the number of goods demand but demanded by customers at a different price level
Substitute good
Buying a little brand instead of a Coke
demand curve
Is a graph that illustrates the expected demand for product at a various price level
Other factors affecting demand
Demand for product can be affected by other factors apart from price. A change in these factors will cause the demand curve to shift left or right.
Price of substitute good
if the price of substitute goods product is reduced, consumers will demand more of the substitute, which may reduce demand for other products
Price of complementary good
A complementary good is a product that is used with another product, e.g. toothbrush and toothpaste or paper and pen
fads and fashions
As consumers taste change, demand for products will also change, fashionable goods or brands will see a sharp increase in demand, while those that are unfashionable will experience reduce levels of demand
advertising
Products that are heavily advertised missing an increase in demand, especially in the short or medium term
advertising
Products that are heavily advertised may see an increase in demand, especially in the short or medium term
Changes in population or market size
An increase in birth rate will lead to increase demand for baby products
seasonal factors
Demand for some products changes depending on the time of year e.g. Christmas decorations
Price expectations of buyers
if buyers expect goods to increase in the future. They may increase current demand to try beat the price area.
Income levels
Most goods are normal goods, because if a persons income increases, they will be able to buy more expensive goods and services. For example they may choose to buy a more expensive car.
Normal goods
A normal good is the one that will be in greater demand when the buyers income rises
Inferior goods
An inferior good is one for which there will be less demand when the buyers income rises e.g. Tesco brand items
Environmental conditions
Weather can impact the supply of crops available
Environmental conditions
Whether can impact the supply of crops available?
production and development costs
Producers of goods and services incur costs, e.g. transport costs. When cost low, more goods will be supplied at all different price levels, causing the supply curve to shift right.
Technology
Helps businesses be more efficient and productive. The result is increased use of technology which will lead to production cost being reduced and an increase in supply.
The number of suppliers
If a new supplier enter our market, total (aggregate) supply will increase and price will fall
Expectations of sellers
If sellers expect prices to increase, they may store current supplies in the hope of selling them at a higher price in the future
Government intervention
Supply will also be reduced where quotas are applied
Government intervention
Supply will also be reduced where quotas are applied
quotas
a quota is a limit on the number of goods made available, e.g. fishing quota. This means that the supply available has a legal limit.
quotation
