Consumers & Businesses Flashcards
Consumer Sovereignty
Refers to consumers sending indicators to businesses about what to produce & how much to produce
How can businesses limit consumer sovereignty?
Marketing
Misleading or Deceptive Conduct
Planned Obsolescence
Anti-Competitive Behaviour
Average Propensity to Consume
The proportion of an individual’s income that is spent on consumption
APC = C/Y
Average Propensity to Save
The proportion of income that is saved
APS = S/Y
Marginal Propensity to Consume
Change in Consumption/Change in Income
Marginal Propensity to Save
Change in Savings/Change in Income
As income rises…
People tend to save a higher proportion of their income
Factors Influencing Consumer Choice
Income
The Price of the Good or Service
The Price of Substitute & Complementary Goods
Consumer Tastes & Preferences
Advertising
Sustitute Goods
a product that can be used in place of another (eg: butter & margarine)
Complementary Goods
goods which are used together (eg: DVDs and DVD Players)
Return for Labour
Wages & Salaries
Return for Investment
Interest
Return for Enterprise
Profit
Return from Ownership of Housing
Rent
Social Welfare
attempts to prevent people from falling into poverty and being unable to meet their basic needs
Reasons for Receiving Welfare
Assistance to the Aged
Assistance to People with Disabilities
Assistance to Families with Children
Assistance to the Unemployed
Assistance to Veterans
A Business Firm
Any organisation which uses resources to produce goods & services to satisfy consumer needs and wants in return for profit
Industry
A grouping of firms/businesses that are involved in the production of the same or similar goods & services, and who usually compete with one another
Primary Industry
Extraction of Natural Resources
Secondary Industry
Manufacturing of Products from Natural Resources
Tertiary Industry
Services that relate to the Movement of Goods & People
Quaternary Industry
Gathering, Processing, and Provision of Information
Quinary Industry
Personal & Domestic Services that would normally be provided in the home
Goals of the Firm
Maximising Profit
Maximising Growth
Increasing Market Share
Meeting Shareholder Expectations
Satisficing
Satisficing
When a firm does not attempt to maximise any particular objective but rather seeks to achieve an adequate level of attainment in each area
Productivity
refers to the amount that is produced with a given amount of resources in a given period of time
Average Output
Output/Resources
Marginal Output
The extra output that an extra unit of resources produces
Impact of Improved Productivity
Less Wastage of Resources
Lower Production Costs
Lower Prices
Increased Income
Greater Competitiveness
Economies of Scale
If the average cost decreases it shows greater efficiency from increasing productive capacity
Diseconomies of Scale
If the average cost increases it shows greater inefficiency from increasing productive capacity
Internal Economies & Diseconomies of Scale
A result of an individual business’ decision to increase its own productive capacity
External Economies & Diseconomies of Scale
A result of changes in the industry in which the business operates
