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Economics > eco topic 2 chap 5 (chap 4 in 1st topic oops) > Flashcards

eco topic 2 chap 5 (chap 4 in 1st topic oops) Flashcards

1
Q

industry

A

collection of firms involved in making similar items usually competing w/ each other

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2
Q

business firm

A

organisation using entrepreneurial skills to combine FOP t produce & sell g/s
-major production units in eco
-size, behaviour, performance influence overall productive capacity

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3
Q

factors that may infleucne decision of investors & entrepreneurs in WHAT to produce (SDOC)

A
  1. SKILLS & experience of business operator
  2. industries w/ strong consumer DEMAND
  3. business OPPORTUNITIES
  4. amt. CAPITAL required to start business
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4
Q

how do skills & experience of business operator influence WHAT to produce

A

likeliest successful operating in industry know well
-understand DEMANDS of consumers
-NATURE of production
-HOW to maintain QUALITY
-where they have PERSONAL CONTACTS

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5
Q

how do industries with strong consumer demand affect WHAT to produce for entrepreneurs?

A

attracted to produce goods with significant UNTAPPED demand

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6
Q

not on sheet

how do business OPP influence entrepreneurs in WHAT to produce?

A

particularly attracted to bus opp
-develop business might not otherwise have interest
-find niche market by focusing tastes of specific customers

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7
Q

niche market

A

segment of mass market for g/s defined by specific tastes/characteristics of target customers

(specific target market)

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8
Q

how does amount of capital required influence an entrepreneur’s decisions on WHAT to produce?

A

-access to capital is CONSTRAINT in start up
-likely attracted to business w/ lower start up costs (reduces barriers to entry & minimise risk)

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9
Q

hwo do entrepreneurs decide how MUCH to produce?

A

assess level of consumer demand & its ability to convert demand into SALES (may commission market research)

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10
Q

what happens when a firm produces too much?

A

-produce too much –> unsold goods require storage, waste –> financial burden for firm

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11
Q

what happens when a firm produce too little?

A

-produce too little –> unable to offer goods will forgo potential sales to customers

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12
Q

when is the question how MUCH to produce most difficult for a firm?

A

firm starts up/introduces new product line
-others generally able to anticipate market demand by observing past trends

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13
Q

what odes the production process involve

A

combining range of resources (inputs) to create g&s (outputs)

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14
Q

capital

A

manufactured products used to produce g&s aka ‘produced means of production’

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15
Q

whwat does a firm’s decision about how to produce depend on?

A

relative efficiency of FOP which can change over time, choose combination of FOP most efficient

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16
Q

what will a healthy, growing private sector generate?

A

higher rate of eco growth

stronger revenue base to fund services provided by GVT

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17
Q

what do growing business contribute to?

not on sheet

A

reduce unemployment

regional development
-tourism
-better regional infras, improved liveability, population attraction & retention

increases eco’s PRODUCTIVE CAPACITY over time
-outward shift in PPF
-greater eco output, competition –> lower inflation –> improved living standards

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18
Q

objectives firms usually pursue in daily operations GPMS

A
  1. maximise growth
  2. maximise profits
  3. increase market share
  4. satisficing behaviour
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19
Q

firm objective to maximise growth

A

maximise growth rate of firm’s assets
-long run, larger asset base allow business achieve higher profits
-bring management other rewards (higher salaries)
-sometimes leads to business failure

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20
Q

firms objective to increase market share

A

-profit maximisation not always highest priority (larger businesses generlaly split between owners (shareholders) & managers)
-instead may seek increase market share (% of sales business has in overall market)

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21
Q

market share

A

measure of consumer preferences for business’ product over competitors
-higher market share –> more sales, competitive advantage

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22
Q

profit motive

A

business seeks maximise PROFIT using LOWEST cost combination of resources & charging HIGHEST possible price

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23
Q

satisficing behaviour

A

firms attempt pursue satsifactory level in ALL goals (profit & sales maximisation, etc) than maximising single goal.

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24
Q

firms objective to maximise profits

A

maximise biggest possible profit/smallest possible loss main objective of most firms

profit : total revenue (output sold x price) deducted by total costs of production

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25
Q

firm objectives satsificing behaviour instead of profit maximisation

A

-excessive profits may attract new competitiors into industry/provoke greater **regulatory oversight
-sometimes aim non-financial outcomes (political influence, social prestige, environmental impact**)

26
Q

satisfactory level of profit

A

acceptable rate of retun on investment for shareholders

27
Q

firms objective to meet shareholder expectations

A

sometimes conflicting shareholder expectations
-**RETAIL investors **may make investment decision based on bus’ environmental credentials/ethically

to meet, look beyond immediate financial expectations of shareholders, decisions on purpose & future
-shareholders can vote to change management & bus operations

28
Q

retail investors

A

individuals who invest for themselves using brokerage/retirement accounts

29
Q

institutional investors

A

make investments on behalf of others with resources & specialised knowledge to research wide range of investment opportunities & can invest much larger amounts
-superfunds & investment banks

30
Q

productivity

A
  • increase output produced w/ given quantity of resources per unit of time
  • ^ production prop more than ^inputs
31
Q

how is productivity diff form production

A

production total g&s produced, ^amt resources used/work resources longer time

32
Q

productivity formula

A

total output/total input

33
Q

to increase productivity

A

increase production PROPORTIONATELY more than increase of inputs of resources

34
Q

5 how productivity improves standard of living (satisfy more wants)

WC&PIIC

A
  1. less WASTAGE of scarce RESOURCES
    -produce more with given quantity of resources
  2. lower production COSTS & higher PROFITS for bus firm
    -each FOP can produce more in given period, costs less to produce same quantity
  3. LOWER INFLATION rate
    -lower production costs –> firms don’t need to raise prices & can reduce
  4. higher INCOMES
    -labour more productive, firms can pay better wage rates to workers without increasing prices
  5. improved international COMPETITIVENESS of AUS industries
    -w/ foreign bus, AUS goods more competitive on local & international markets
35
Q

major way busienss firms can icnrease productivity

A

specialisation (FOP used more intensely for smaller no. production processes)

36
Q

how specialisation occurs in relation to 3 FOP

A

(specialisation of)
land: LOCATION of INDUSTRY
labour: DIVISION of labour
capital: large-scale PRODUCTION

37
Q

division of labour (specialisation of labour)

A

businesses break down production process into no. sub-processes
-labour specialise in certain part of process
-avoid time & effort moving from one process to another

each worker may complete small task in constructing each vehicle

38
Q

location of industry (specialsiation of land)

A

large no. businesses producing similar g&s CONGREGATE in SAME area to reduce production COSTS by sharing common infrastructure requirements

39
Q

large-scale production (specialisation of capital)

A

businesses grow so large can use highly-specialised capital equipment in production process

40
Q

internal economies of scale

A

cost saving advantages resulting from firm expanding its scale of operations

when firm’s output is below technical optimum

need to achieve large scale of production to minimise costs

41
Q

economies of scale

A

average costs per unit of production fall as output size grows

42
Q

internal DISECONOMIES of scale

A

cost disadvantages (increase of marginal costs per unit) faced by firm after expanding its scale of operations beyond certain point

output level ABOVE technical optimum

43
Q

what are most factors that cause diseconomies of scale

A

management problems

as business grows size, management unable to organise all areas of business efficiently –> slowing production process & increasing costs

44
Q

6 cost saving advantages from internal economies of scale (firm expands scale of operations) SCRMDF

A
  1. becoming larger, firm can take advantage of SPECIALISATION of labour
    -breaking up production process into different stages
  2. large firm able to INVEST in CAPITAL equipment
  3. can buy RAW MATERIALS in BULK
    -reduces per-unit cost of inputs
    -economies of SIZE
  4. large firm can find MARKET for its by-products
    -small firm would have to discard as waste
    -furniture manufacturer sells timber to trophy manufacturer
  5. put resources into R&D
    -expand new production lines
    -reduce per-unit costs in future
    -invest in HUMAN CAPITAL (improve skills of its labour force, tailoring to firms needs)
  6. easier & cheaper to raise finance for BUSINESS EXPANSION
45
Q

4 disadvantages of internal DISeconomies of scale (cause per-unit production costs to increase once firm expands size past certain point)

A
  1. MANAGEMENT inefficiency may increase
  2. large firm may lead to duplication & paperwork
  3. problems arise in workplace relations
    -management no longer knows staff personally
    -management increasingly unaware of issues faced by diff workers
    -increase tension in employer/ee relationship and become workplace disputes
  4. decrease in managerial & administrative efficiency
    -overshadow advantage of large size
    -increase in per-unit production costs
46
Q

technical optimum

A

most efficient level of production for firm, average costs or production at lowest possible level

47
Q

what does the LRAC (long run average cost) curve look like and what relationship does it display?

A

production costs and INTERNAL dis/economies of scale

output x-axis, cost per unit y-axis
concave up parabola floating with vertex at technical optimum, internal DISecos of scale on RHS, vice versa

48
Q

what causes the LRAC to have a downward shift?

A

learning by doing (experience & practice) over time

49
Q

EXTERNAL economies of scale

A

advatanges for firm due to growth of INDUSTRY firm is operating in, regardless of firm’s level of production

NOT the result of firm changing OWN scale of operations

50
Q

LAC 3 external economeis of scale cost-saving advantages

A
  1. increasing LOCALISATION of industry
    -all firms in certain region enjoy certain cost-saving advantages
    -eg. locating highly populated area with supply of skilled labour & plentiful supply of** inputs **& major consumer market
  2. industry grows–> all firms derive extra benefits
    -eg. **GVT/private enterprise **provide special R&D to promote industry
  3. growing, competitive CAPITAL market benefit all firms
    -provide cheaper INVESTMENT funds from **variety **of sources
51
Q

external DISeconomies of scale

A

disadvantages faced by firm due to growth of industry firm/economy operates in.
NOT result of firm changing own scale of operations

52
Q

PTR external diseconomies of scale

A
  1. growth of industry –> ^ POLLUTION
    -illness, premature deaths,
    -closures of factories harmful effects on business
    2.** ^ CONCENTRATION** of industry in urban areas cause TRANSPORT BOTTLENECKS
    -^ transport costs of all firms
    -eg. growth of tokyo high property prices, ppl move far and millions spend hrs travelling to work
  2. industry grows, cost of firm’s RAW MATERIALS rise
    -increasing demand forces up price
    -esp very limited supply of resources
53
Q

ethical decision making

A

business decisions about production methods, employment, etc made taking consideration broader impacts on society & environment, not simply maximising profits for firm

54
Q

7 implications tech change & ethical decision making have for business conduct PPEOTGE

A
  1. PRODUCTION methods
  2. PRICES
  3. EMPLOYMENT
  4. OUTPUT and PROFITS
  5. types of PRODUCTS
  6. GLOBALISATION
  7. ENVIRO sustainability
55
Q

hwo do tech & ethics affect production methods?

A

-increased productive capacity of eco, use EXISTING resources efficiently
-invest in tech varies, but mostly:
lower costs,
increased efficiency,
reduction in workforce size,
possibility of larger production runs

56
Q

business ethics

A

going aboe & beyond *requirements of law *and taking account social interests in decision making
-not just abiding by law, meeting contractual obligations & building customer relationships

57
Q

how does tech & ethics affect a firm’s prices?

A

proliferation of price comparisons enable consumers to check prices offered by many firms selling g/s
-squeezes profit margins
-froces firms to reduce costs & compete with overseas competitors

58
Q

how does tech & ethics affect a firm’s employment?

A

tech change made many jobs redundant
-automation & AI reduced demand for labour
-increased competition of overseas firms causes others to cut back local manufacturing operations/move them offshore –> AUS job losses
HOW, new tech –> new job opp (strong demand for employees with tech skills)

EDM affects employment starts
-under law, all business must meet equal employment opp obligations in hiring new employees
-ethical factors may encourage bus to further actively hire employees from groups traditionally suffered discrimination/disadvantage (women, disabled, etc)

59
Q

how does EDM and tech affect firm’s output & profits

A

bus invest in tech able offer better quality products at lower price

adapt & respond to changes in MARKET DEMAND and CUSTOMISE output to specific needs of marketplace
-increase demand for their products –> higher output level & ^profitability

sometimes tech fail to perform to expectation and expensive to fix/superseded by even better tech competitors invest in at lower price

60
Q

hoes does tech & edm affect firm’s type of products

A

tech expands range of products to satisfy market demand
-creates new products & industries
-regularly **update **eg cars, phones
-new production tech more FLEXIBLE, can CUSTOMISE output to specific wants
-smaller production runs more affordable –> broaden range of products, easier to satisfy consumer demand

EDM –> produce environmentally conscious g&s
-plant based meat, plastic free packaging
-draws ppl to run bus in ethically consumerist markets

61
Q

how does edm & tech affect globalisation of markets

A

tech facilitates emergence of a global market economy)
-develop global money & stock markets possible for bus to attract INVESTMENT funds globally
-individuals diversify investments
-low cost communication allows info flow freely from overseas to consumers & bus –> make informed decision of production & consumption

greater access to foreign markets, able to source cheaper products in economy with fewer regulations
-forced labour overseas
-very low wages
-dangerous work environments
-denial of right to join trade union & seek better pay
for global eco, consumers & nonGVT orgs greater attention to HOW goods produced –> pressure businesses to improve practices of their subsidiaries & their suppliers

62
Q

how does tech & edm affect firm’s enviro sustainability (minimise pollution & waste, preserve natural enviro, increase use of renewable energy)

A

sig driver of investment in new tech -bus change activities to become environmentally sustainble responding to:
-consumer demands
-new regulations/financial incentives from GVT
-bus ethics value natural enviro

affect WHAT g&s produced and HOW produced

Economics (14 decks)

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