Key Concepts In Economics and Analysis Flashcards
What are the two basic sides to the worlds economic oepration
Production and consumption
Define production
the transformation of inputs into outputs by firms in order to earn a profit or to meet some other objectives
Define Consumption
the act of using goods and services to satisfy wants. This will normally involve purchasing the goods and services
What is decision marking in a business influecned by
External influences, internal decisions and feedback or effects of decisions.
PESTEL
What does PESTELstand for
Political Economic Social/cultural Technological Environmental Legal
Define primary production
Production and extraction of natural resources, and agriculture (3%)
Define secondary production
Production from manufacturing and construction sectors (20%)
Define teriary production
Production from the services sector (3%)
What is NACE
Statistical classification fo economic activities developed in the European community
Four level classification framework
What are some internal aims of a business
Primary goal traditionally: Profit maximisation Others; Internal structure Information Competence of management Quality of workforce Systems
Why might profit maximisation not occur
Owners vs managers
Managers own objectives
Satisficing behaviour - meeting target vs making a mix new target and not focussing on meeting them
Why do we have firms?
Reduces transaction costs
Complex production - impossible to produce production alone sometimes. Everyone works on different parts in a firm
Define transaction costs
costs incurred when making economic contracts in the marketplace
What are the sources of transaction costs
Uncertainty - delivery uncertainty, external factors influence
The complexity of contracts - terms and conditions
Monitoring contracts - enforcing and investigating them
Enforcing contracts
Explain scarcity and its importance
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.
Define factors of production
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
Define demand, aggregate demand, potential demand and actual demand
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
Define supply, potenial supply and actual supply and aggregate supply
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
Define macroeconomics and its key areas
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
Define supply side policy
Government policy that attempts to alter the level of aggregate supply directly. Why or when should the government intervene?
Define demand side policy
Government policy designed to alter the level of aggregate demand (and thereby the level of output, employment and prices)
Define microeconomics
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
Define opportunity cost
Opportunity cost: the cost of any activity measured in terms of the best alternative forgone
Define rational choices
Rational choices: choices that involve weighing up the benefit of any activity against its opportunity cost
Define marginal cost and benefit
Marginal cost: cost of doing a little bit more of an activity
Marginal benefit: the benefit of doing a little more of an activity
Bets way to compare data
Graphing! - you can spot the differences between them better than parameter analysis alone
What is time series analysis
looking at two data sets or two events together
- Correlation between two factors can be examined
What does cross sectional data examine
Examines observations of multiple variables at a particular point of time
Explain indexing method of analysis
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
