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BTF > Chapter 13, 14 > Flashcards

Chapter 13, 14 Flashcards

1
Q

Macroeconomics

A

National economy and government policies

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2
Q

Microeconomics

A

Demand and supply + Market structures

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3
Q

The national economy

A

the national output of goods and services is measured as GDP

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4
Q

Factors of production

A

Land, labour, capital and entrepreneurship

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5
Q

Influences on the national economy

A

Government
Consumers
Savers
Businesses

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6
Q

Business trade cycle

A

The continual sequence of rapid growth in GDP, followed by a slow down in growth and then a fall. Growth then comes again and when this has reached a peak the cycle begins again.

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7
Q

Traits of the boom phase

A

Demand may outstrip supply causing inflation
Businesses tend to be more profitable
Expectations of the future are very optimistic

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8
Q

Traits of the recession phase

A

Businesses suffering a loss in sales revenue
reducing inventory and cutting back investment
Adds momentum to recession

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9
Q

Inflation

A

an increase in price levels generally and a decline in the purchasing power of money

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10
Q

Problems of inflation

A

Fewer people can afford goods
Wage inflation
Exports falling as imports appear cheaprr
Consumers may stock pile fearing price increase

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11
Q

Two types of inflation

A

Cost push inflation and Demand pull inflation

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12
Q

Cost push inflation

A

Price rises resulting from an increase in the costs of production of goods and services

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13
Q

Demand pull inflation

A

Persistent excess of demand over supply

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14
Q

Monetary policy

A

Government policy on interest rates, exchange rates and money supply

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15
Q

Fiscal policy

A

Government policy on government spending taxation and borrowing

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16
Q

Expansionary financial stance

A

Government spending> taxation = increased borrowing

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17
Q

Contractionary fiscal stance

A

Government spending< taxation = reduced borrowing

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18
Q

Demand curve

A

Shows the demand at each price assuming that all other variables are constant

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19
Q

Things that determine demand

A 
Price of the good itself
Price of other goods
Substitutes
Complements
National income 
Fashion 
income distribution
20
Q

Price elasticity of demand

A

looks at the degree to which demand is affected by changes in the selling price

21
Q

PED< 1

A

Inelastic

22
Q

Ped> 1

A

Elastic

23
Q

PED = 0

A

Perfectly inelastic

24
Q

Factors affecting PED

A 
Substitues
Time
Competitors pricing
Nature of the product
Proportion of income
25
Q

Elasticity

A

Measures the responsiveness of demand to a change in a relevant variable

26
Q

Inelastic products

A

increasing the price will increase the total revenue even though fewer units are sold

27
Q

Giffen goods

A

Goods that as the price increases they still buy them and then buy more as they can’t afford other goods

28
Q

Veblen goods

A

Bought for ostentation, so a higher price makes them more exclusive and desirable

29
Q

Cross elasticity of demand

A

Looks at the degree to which demand is affected by changes in price of other products

30
Q

Supply curve

A

shows supply at each price assuming all other variables are constant

31
Q

Things that determine supply

A 
Price of the good itself
Price of other goods
Price of joint products
Cost
Changes in technology
32
Q

Market structures

A

A description of the number of buyers and sellers in a market for a particular good and their relative bargaining powers.

33
Q

Perfect competition

A

Large number of buyers and sellers
Free entry to/exit the market
Free access to perfect information
Homogeneous/identical products

34
Q

Implications of perfect competition

A

Single selling price
Suppliers can only sell at the market price
Suppliers only make normal profits

35
Q

Monopolistic competition

A

Many buyers and sellers
Some differentiation of products
Some customer loyalty
Few barriers to entry

36
Q

Implications of monopolistic competition

A

Firms have some freedom to set prices

Lack of barriers to entry ensure only normal profits in the long run

37
Q

Oligopolies

A

Few large suppliers
Differentiation of products
High degree of mutual dependency

38
Q

Implications of Oligopolies

A

Difficult to predict the actions of competitors
Price wars
Collusion to form cartels

39
Q

Monopoly

A

One supplier
Many buyers
Barriers prevent new entrants

40
Q

Implications of monopoly

A

Supplier can fix price or quantity

Firms make super normal profits

41
Q

Market failure

A

When a free market fails to produce the optimum allocation of resources

42
Q

4 types of market failure

A

Market imperfections
Externalities
Public goods
Economies of scale

43
Q

Market imperfections

A

Markets do not satisfy assumption of perfect competition

44
Q

Externalities

A

Cost or benefits which the market mechanism fails to take into account because the market only incorporates private costs and benefits

45
Q

Public goods

A

Without government intervention some goods would not be provided at all by a market economy

46
Q

Economies of scale

A

Results in larger firms making more profit, larger firms pushing smaller firms out of business, reducing choice

47
Q

What does the CMA do?

A

Investigates those suspected of breaching competition act

BTF (4 decks)

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