mocks revision Flashcards
Economic Growth - causes
new technology
improved efficiency
education and training
more resources
Negative Economic Growth - causes
Resource depletion
Weather patterns
Educated and experienced people move overseas
Wars, natural disasters and conflict
causes of shifts in demand curve
Tastes and fashion
Income (disposable income, shift right for normal goods, left for inferior goods)
Direct taxes
Weather (when it affects what consumers buy)
Price of complementary goods
Price of substitute goods
Interest rates
Advertising
Changes in population (age, gender, graphical distribution, ethnicity)
causes of shifts in supply curve
Natural factors (natural disasters and weather)
Costs of production
Changes in technology
Subsidies
Indirect taxes (if they increase supply will shift left)
Availability of resources
Price of other goods
equilibrium price
Equilibrium price / market clearing price - price at which supply and demand are equal and amount supplied is completely bought up by consumers.
PED formula
%changeQD/%changeP
%change formula
old
Perfectly price inelastic demand
Demand where PED = 0 (a change in price will result in no change in quantity demanded)
Price inelastic demand
Change in price results in proportionally smaller change in quantity demanded.
PED < 1 ( fraction or decimal, ie. -0.5)
Unitary price elasticity of demand
Where PED = -1 ( the responsiveness of demand is proportionally equal to the change in price.
Price elastic demand
Change in price results in greater change in quantity demanded.
PED > 1 (ie. -2.5)
Perfectly price elastic demand
Demand where PED = ∞ (increase in price will result in 0 demand)
d) The factors influencing PED, including:
Availability of substitutes
Degree of necessity (need/habit/addiction)
Percentage of income spent on product
Time (ie. after the change in price )
Perfectly price inelastic supply
PES = 0
Quantity supplied is fixed and can’t e adjusted whatever the price
Price inelastic supply
where PES < 1 ( a fraction or decimal )
a change in price will result in proportionally smaller change in quantity supplied.
Unitary price elasticity of supply
where PES is equal to 1,
so a change in price will result in an identical change in quantity supplied.
Price elastic supply
PES > 1
Change in price results in a proportionally greater change in quantity supplied.
Perfectly price elastic supply
where PES = infinite
suppliers will supply an infinite amount at a given price
d) The factors influencing PES, including:
factors of production needed (if resources are available/mobile, PES is elastic)
availability of stock (if stocks they can respond quickly to price changes so elastic, perishable goods are inelastic)
spare capacity (output can be increased in short notice)
time (the more time producers have to react, the more elastic supply will be)
PRIV SECTOR AIMS
Aims are determined by owners:
Survival (especially initially or in struggle periods)
Profit maximisation
Growth
Social responsibility
PUB SECTOR AIMS
Aims vary between organisations but generally include:
Improving quality of services
Minimising costs (government resources are scarce)
Allowing for social costs and benefits ( as they don’t aim to make a profit they can take externalities into account)
Profit (sometimes)
b) Why governments might need to intervene because of market failure
Externalities - not taking into account the costs of production
Lack of competition (monopolies exploit consumers)
Missing markets (public/merit goods that are not provided or underprovided by private sector)
Lack of information
Factor immobility (if factors are in mobile it is wasteful)
Government can intervene by:
regulate/fine businesses with externalities (ie. fine pollution)
Use legislation to prevent lack of competition (ie. prevent merger)
Public sector can provide public/ merit goods (ie. street lamps)
Lack of info can be prevented by legislation and internet
Some factors can become more mobile (such as people by retraining) but little can be done for specialised machines
b) Factors that affect productivity
land – use of fertilisers, drainage, irrigation, reclamation, genetically modified crops
labour – quality of labour, including improved human capital through education and training, improved motivation, improved working practies and impact of migration
capital – increased quantity is employed and technological advances imporve efficiency, often at the expense of labour
division of labour -advantages to workers
Worker becomes more skilled at doing a specific task, therefore they will find employment more easily in this skill in future
More highly skilled means they are more likely to get paid more
May enjoy more job satisfaction if they feel they are highly skilled at a specific task
division of labour - adv to business
Efficiency is improved as workers can work more efficiently and accurately
Greater use of specialist tools, machinery and equipment is possible, which further improves efficiency
Production time is reduced as workers do not have time to move from one place to another
Organisation of production is easier (they can fit more easily into structured production system like assembly line)
division of labour disadvantages to workers
Work can become boring because it is repetitive (especially if little skill is required) which can lead to job dissatisfaction and affect motivation
Repetitive tasks can also have health implications such as joint wea
If they are too specialised they might have a higher risk of unemployment if there only skill is no longer needed or difficulty finding a job if little jobs require their skill
disadvantages to businesses
division of labour
If its too repetitive and boring and people become dissatisfied then they will produce low quality work, not arriving on time, and increased rates of absence and staff turnover - which would reduce productivity and impact profitability
Probloems can occur if a stage of production depends on another, and if one breaks down all of the stages have to be stopped (interdependance)
Specialisation results in a loss of flexibility in workplace
c) Types of internal economies of scale
Purchasing (bulk buying)
Marketing
Technical
Financial
Managerial
Risk bearing
e) Types of external economies of scale
skilled labour
infrastructure
access to suppliers
similar business area
g) Types of diseconomies of scale
bureaucracy
communication problems
lack of control
distance between top management and workers at the bottom of the organisation
b) Reasons firms grow
size of the market
government regulation
access to finance
economies of scale
the desire to spread risk
the desire to take over competitors
c) Reasons firms stay small:
size of the market and nature of the market –niche
government regulation
lack of finance
Diseconomies of scale
aims of the entrepreneur
Small Firms: Advantages:
Flexibility (can quickly adapt to change as owners are actively involved in business)
Personal service
Lower wage costs (workers dont belong to trade unions and they can be paid the minimum wage)
Better Communication (informal and rapid)
Innovation
Small Firms: Disadvantages:
Higher costs (can’t exploit economies of scale)
Lack of finance
Difficulty attracting quality staff
Vunnerability (risk of takeovers and harder to survive when trading conditions worsen)
Large Firms: Advantages
economies of scale
Market domination
Large-scale contracts
Large Firms: Disadvantages
Too bureaucratic
Difficulty to coordinate and control
Poor motivation (effort by a single person seems insignificant)
c) Advantages and disadvantages of monopolies
Advantages:
Efficiency (natural monopolies)
Innovation
Eocnomies of scale
Disadvantages
Higher prices
Restricted choice
Lack of innovation
inefficiency
c) Advantages and disadvantages of oligopolies
Advantages:
Choice
Quality
Eocnomies of scale
Innovation
Price wars
Disadvantages
Collusion or cartels
a) Factors that shift supply of labour:
Population size
Migration
Age distribution of the population
Retirement age
School-leaving age
Female participation
Skills and qualifications
Labour Mobility (Ability to move geographic locations / move to different types of employment)
b) Factors that shift demand for labour:
Demand for the final product (derived demand)
Availability of substitutes, including machines
Productivity of the workforce
Other employment costs (they also have to pay for workers pensions, for example, and if these get too expensive then it could affect demand)
b) Reasons for minimum wage & c) Advantages and disadvantages of minimum wage
They benefit disadvantaged workers as they reduce inequality
Help reduce social gap between rich and poor
Benefit government (more tax comes from more income, and workers need to claim less welfare benefits from state)
Higher wages motivate workers, bootsing productivity
Improve productivity, by making workers work harder to justify wages or by replacing inefficient workers with machinery
