Consumer and Business

Question 1

How can productivity be improved?

Answer 1

Through the specialisation of:
- Labour: break production into subprocesses, specialise in each area
- Natural resources: businesses who produce similar goods congregate in same area, share infrastructure
- Capital: use highly specialised equipment in production process

Question 2

What is consumer sovereignty?

Answer 2

Assuming the market is freely operating, consumers decide:
- What is produced
- How much is produced
- How resources are allocated

Question 3

Influences on Consumer Sovereignty

Answer 3

• Advertising
• Planned obsolescence
• Income
• Price of good
• Price of substitute or complementary good
• Consumer tastes and preferences

Question 4

Role of firms in an economy

Answer 4

• Use entrepreneurial skills
• Combine FOP to produce a good or service for sale

Question 5

What is an industry?

Answer 5

A collection of firms that produce a similar range of items.

Question 6

What are a firm’s production decisions?

Answer 6

• What to produce
• How much to produce
• How to produce

Question 7

What are a firm’s production decisions?

Answer 7

• What to produce
• How much to produce
• How to produce

Question 8

Goals of firms

Answer 8

() 1. Maximise profits
(x) 2. Meet shareholder expectations
() 3. Increasing market share
(x) 4. Maximising growth
5. Satisficing behaviour

• and x conflict in interest.

Question 9

What do businesses contribute to the economy?

Answer 9

• Provide jobs
• Regional development
• Increase efficiency in production
• Increase nation production capacity
• Improve living standards

Question 10

How can productivity increase?

Answer 10

• Discovery of new resources
• More efficient usage of existing resources (productivity)