Key Concepts In Economics and Analysis

Question 1

What are the two basic sides to the worlds economic oepration

Answer 1

Production and consumption

Question 2

Define production

Answer 2

the transformation of inputs into outputs by firms in order to earn a profit or to meet some other objectives

Question 3

Define Consumption

Answer 3

the act of using goods and services to satisfy wants. This will normally involve purchasing the goods and services

Question 4

What is decision marking in a business influecned by

Answer 4

External influences, internal decisions and feedback or effects of decisions.
PESTEL

Question 5

What does PESTELstand for

Answer 5

Political
Economic
Social/cultural
Technological
Environmental
Legal

Question 6

Define primary production

Answer 6

Production and extraction of natural resources, and agriculture (3%)

Question 7

Define secondary production

Answer 7

Production from manufacturing and construction sectors (20%)

Question 8

Define teriary production

Answer 8

Production from the services sector (3%)

Question 9

What is NACE

Answer 9

Statistical classification fo economic activities developed in the European community
Four level classification framework

Question 10

What are some internal aims of a business

Answer 10

Primary goal traditionally: Profit maximisation
Others;
Internal structure
Information
Competence of management
Quality of workforce
Systems

Question 11

Why might profit maximisation not occur

Answer 11

Owners vs managers
Managers own objectives
Satisficing behaviour - meeting target vs making a mix new target and not focussing on meeting them

Question 12

Why do we have firms?

Answer 12

Reduces transaction costs

Complex production - impossible to produce production alone sometimes. Everyone works on different parts in a firm

Question 13

Define transaction costs

Answer 13

costs incurred when making economic contracts in the marketplace

Question 14

What are the sources of transaction costs

Answer 14

Uncertainty - delivery uncertainty, external factors influence
The complexity of contracts - terms and conditions
Monitoring contracts - enforcing and investigating them
Enforcing contracts

Question 15

Explain scarcity and its importance

Answer 15

Scarcity is the excess of human wants over what can be produced. It is because of scarcity that we have to make choices between alternatives. If we could produce everything we needed economics concepts would be obsolete.

Question 16

Define factors of production

Answer 16

Factors of production we study are human resources or labour, natural resources or land and raw materials, and manufactured resources or capital. Capital is anything used in production that has to be produced itself

Question 17

Define demand, aggregate demand, potential demand and actual demand

Answer 17

Demand is what people want
Aggregate demand: total level of spending in the economy
Potential demand: what people could want
Actual demand what people look for

Question 18

Define supply, potenial supply and actual supply and aggregate supply

Answer 18

Supply is what a firm produces
Potential supply - what a firm could produce
Actual supply what firms do produce
Aggregate supply: the total amount of output in the economy

Question 19

Define macroeconomics and its key areas

Answer 19

Macroeconomics studies economic aggregates (grand totals) for example, the overall level of prices, output and employment in the economy
Areas: Economics growth
Inflaiton
Unemployment
Balance of payments

Question 20

Define supply side policy

Answer 20

Government policy that attempts to alter the level of aggregate supply directly. Why or when should the government intervene?

Question 21

Define demand side policy

Answer 21

Government policy designed to alter the level of aggregate demand (and thereby the level of output, employment and prices)

Question 22

Define microeconomics

Answer 22

Microeconomics studies individual units (ex: households, firms and industries). It studies the interdependence between these units in determining the pattern of production and distribution of good and services
Choices are central to microeconomics and opportunity cost

Question 23

Define opportunity cost

Answer 23

Opportunity cost: the cost of any activity measured in terms of the best alternative forgone

Question 24

Define rational choices

Answer 24

Rational choices: choices that involve weighing up the benefit of any activity against its opportunity cost

Question 25

Define marginal cost and benefit

Answer 25

Marginal cost: cost of doing a little bit more of an activity
Marginal benefit: the benefit of doing a little more of an activity

Question 26

Bets way to compare data

Answer 26

Graphing! - you can spot the differences between them better than parameter analysis alone

Question 27

What is time series analysis

Answer 27

looking at two data sets or two events together

- Correlation between two factors can be examined

Question 28

What does cross sectional data examine

Answer 28

Examines observations of multiple variables at a particular point of time

Question 29

Explain indexing method of analysis

Answer 29

This involves looking at a set of data and picking a period of time as the baseline to scale every other piece of data to that number ex: consumer price index