Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

economics > the role of markets and money > Flashcards

the role of markets and money Flashcards

1
Q

market

A

a way of bringing together buyers and sellers to buy and sell goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

market economy

A

an economy in which scarce resources are allocated by the market forces of supply and demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

primary sector

A

the direct use of natural resources such as the extraction of basic materials and goods from land and sea e.g farming and mining

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

secondary sector

A

all activities in an economy concerned with either manufacturing or construction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

tertiary sector

A

all activities in an economy that involve the idea of service eg. teaching, entertainment, health

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

product market

A

where final goods and services are offered to consumers, businesses and the public sector

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what is the price determined by - product market

A

determined by the intersection of supply and demand for a good/ service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

factor market

A

where the services of the factors of production are bought and sold, e.g. skills of a workforce, suitability of land

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what is the price in a factor market affected by?

A

interaction of demand (depends on the demand for a good/service) and supply (labour from households in return for wages)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

interdependence of factor and product markers

A

households own the factors of production in the factor market and sell to firms. in the product market, households are the main buyers while firms sell the goods and services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

specialisation

A

the process by which individuals, firms, regions and countries concentrate on producing those products they are best at doing - they may have to give up the making of other goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

exchange

A

the giving up of something that an individual or firm has in return for something they wish to have, but do not possess - usually money is used

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what groups are affected by specialisation and exchange

A

producers, workers, regions and countries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

costs of specialisation for producers

A
  • diseconomies of scale : as output increases, costs may rise, maybe resources in shorter supply or more people to manage workforce
  • dependency - if one part of the process fails the whole production could stop
  • maybe not able to buy necessary scarce resources, maybe if prices of those resources are raised by the producer
  • if workers become bored and leave or produce less
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

benefits of specialisation for producers

A
  • higher output of goods
  • higher productivity as workers become more skilled in one specific area
  • higher quality because the best factors can be employed + you can buy the best components from specialists rather than making them
  • bigger market for each product means there should be more buyers for each product we
  • economies of scale bc of larger output
  • time saving because only one product is made, no stopping to start and finish another product
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what is specialisation by individuals called

A

division of labour

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

benefits of specialisation for workers

A
  • increased skill level leading to more money being earned (through bonuses, promotions etc)
  • workers doing what they’re best at leads to them becoming more skilled
  • doing what they’re good good at uncreated job satisfaction meaning more motivation and more money
  • increased standard of living by earning more
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

costs or specialisation for workers

A
  • boredom leading to demotivation
  • deskilling because they lose skills to other types of work and can’t respond to changes in demand
  • unemployment if there’s a fall in demand for the product they specialise in and also replaced by machines
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

specialisation in regions

A

regions within a country can specialise in specific areas like coal in the north

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

benefits of specialisation for regions

A
  • a region uses its own resources efficiently
  • creates jobs for residents
  • development of better infrastructure and therefore supply industries that will develop the region
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

costs of specialisation for regions

A
  • if demand falls then the industry may collapse
  • if resources run out then those in the induration will become unemployed
  • loss of advantage if another region becomes better at producing the specialised product leading to unemployment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

benefits of specialisation for countries

A
  • greater efficiency and output when doing what they do best
  • more output leads to more investment and jobs
  • international trade means more products for its own people
  • increased choice, income, output and infrastructure meaning better standard of living
  • government revenue increased leading to better school, hospitals etc
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

costs of specialisation for countries

A
  • as specialisation for a country changes, workers in that industry become unemployed
  • if world demand changes then the economy may collapse if the country over specialises
  • over exploration of resources so unsustainable development or environmental damage
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

demand

A

the quantity of goods and services that consumers are willing and able to buy at a given price in a given period of time, usually varies inversely with price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

individual demand

A

the demand for a good or service by an individual consumer, shows how much a consumer is prepared to buy at different prices not what theyactually will buy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

market demand

A

the total demand for a good or service round by adding together all individual demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

shifts of the demand curve

A

a compete movement of the existing demand curve either outward or inward

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

movement along the demand curve

A

when the price changed (due to change in supply, leading to a contraction (up) or expansion (down) the demand curve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

what causes shifts of the demand curve

A
  • increase in income - consumers can buy more products at every price
  • increased in marketing - persuades consumers to demand more products at every price
  • changes in taste and fashion - if something becomes trendy the demand will increase
  • preference for a substitute - some people might like pepsi more than coke so demand for pepsi will increase
  • complementary goods - if the price for one good falls then the demand for any good that goes with it will increase like cars and petrol
  • expectations of prices to rise - consumers will buy more products now to save money in the future like sales
  • population changes - more population means more demands, gender patterns and ageing population means different goods are more popular
  • government prices - a subsidy or cut in tan will increase consumer demand
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

subsidy

A

an amount of money a government gives directly to forms to encourage production and consumption

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Consequences of shifts of demand

A

In nearly all situations a shift leads to price and quantity moving in the same direction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

exceptions to quantity and price both rising/falling (shift of demand curve)

A
  • If income rises faster than prices then consumers can demand more
  • if a substitute is preferred then demand will fall even if price increases
  • if the increase in demand allows firms to gain economies of scale, they could cut prices leading to an increase in demand
  • if demand falls a form could go out of business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What causes movements along the demand curve

A

caused only by a change in price/supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Consequences of movements along the demand curve

A

Price and quantity move in opposite directions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

What is the effect of contraction of demand

A

Price rises, quantity falls
Effect on consumers : buy fewer goods, buy cheaper substitutes
Effect on firms : sales and profits fall, may need fewer workers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

What is the effect of expansion of demand

A

Fall in price, rise in quantity
Effect on consumers : buy more and better goods
Effect on firms : increase supply and profit, employ more workers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Firm

A

A single supplier of a specific good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Industry

A

All of the firms which supply a specific good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Utility

A

The satisfaction received from the consumption of a good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Necessity

A

Essential for survival

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Luxury

A

A ‘nice to have’ but not essential good/service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

PED

A

The responsiveness of quantity demanded to a change in the price of a product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

Elastic demand

A

When the % change in quantity demanded is greater than the % change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Values of PED

A

PED 0 - perfectly inelastic
PED ∞ - perfectly price inelastic
PED -1 - unitary price elastic
PED more than -1 (eg. -2, -3.5, -6) - price elastic
PED less than -1 (e.g. 0 or 0.25) - price inelastic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

What do PED and PES values have to have

A

always include the - sign in the PED value to shows the demand curve sloping downward, PES is always + due to the positive slope

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

5 PED curves

A

Price elastic, price inelastic, perfectly price inelastic, perfectly price elastic, unitary price elastic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

What is the importance of PED for consumers

A
  • if the product they buy has inelastic demand they can face price rises as suppliers can pass on cost increases
  • the government can impose high taxes easing prices if the product has inelastic demand
  • allows them to make choices if substitutes available
  • consumers PED depends on factors like weather/ time if day (eg train times)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

Importance of PED for producers

A
  • allows producers to maximise their total revenue
  • can charge different prices to different groups for the same product
  • can affect their decision whether to supply the product or not
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

Revenue equation

A

Total revenue = price x quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

The effect of a price change on total revenue : demand is price elastic

A

Decrease in price : revenue increases because 🔺q > 🔺p
Increase in price : revenue decrease because 🔺q> 🔺p

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

The effect of a price change on total revenue : demand is price inelastic

A

Price decreases : tr decreases because 🔺q<🔺p
Price increases : tr increases because 🔺q<change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

Calculating PED values

A

PED = - %🔺q / %🔺p

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

Supply

A

the quantity of goods and services that producers are willing and able to supply at a given price in a given period of time, usually varies directly with price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

What causes a movement along a supply curve

A

It is caused only by a change in price/ demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
55
Q

Causes of shifts of the supply curve

A
  • increases in costs of production - producers would supply less at each price
  • increase in taxes and subsides
  • new technology - fall in costs so rightward shift
  • climate change - in agriculture can cause less to be supplied
  • increases in producers/ size of firms - more supplier at every price so rightward shift
  • government regulation - increase in costs so shift to the left
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
56
Q

Shift of the supply curve

A

A complete movement of the existing supply curve either outward or inward showing either more or less supplied at every price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
57
Q

Consequences of shifts in supply

A
  • Gain greater economies or scale - greater profits for the producer and lower prices for consumers
  • increases in efficiency - increase in profit and possibly greater productivity
  • increases in exports - greater economies of scale, increases in efficiency and fall in price makes firm more competitive
  • increase in sales - in price falls consumers will buy more leading to increase in profit
  • becoming a monopoly/oligopoly - a more competitive firm gains market share and forces competitors out
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
58
Q

Consequences or price rising (movements along the supply curve)

A

Change in quantity: rise
Effect on producers: initial increase in profits, but then more firms enter the market shifting supply to the right which might reduce profit
Effect on consumers : products are initially more expensive but then price falls - consumers have more choice and can buy more products

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
59
Q

Consequences of fall in price (movements along the supply curve)

A

Quantity falls
Effect on producers : reduction in profits, less efficient firms forced our, reduction in output
Effect on consumers ; consumers can afford more but now have less choice

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
60
Q

PES

A

The responsiveness of quantity supplied to a change in the price of the product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
61
Q

Elastic supply

A

Percentage change in quantity supplied is greater than the percentage change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
62
Q

How to calculate PES

A

+ % change in supply / % change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
63
Q

Values of PED

A

0- no change in quality as price changes
Between 0 and 1 - change in quantity is less than change in price
1 - change in quantity is equal to the change in price
Between 0 and ♾️ - change in quantity is more than the change in price
♾️ - an infinite amount can be supplied at the given price, no change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
64
Q

Unitary supply

A

When the % change in supply is the same as the % change in price

65
Q

Five PES curves

A

Price inelastic, price elasticity perfectly price inelastic, perfectly price elastic, unitary price elastic

66
Q

PES for consumers

A
  • if supply is inelastic for the product, they will face high prices to obtain more
  • if the product has very inelastic supply they maybe couldn’t get more as quantity is fixed eg tickets
  • if the product has elastic PES then its easy to purchase more
67
Q

PES for suppliers

A
  • firms would prefer an elastic supply because it’s easier to respond to price changes
  • more elastic supply enables a firm to be more flexible for consumers
  • very inelastic supply means price depends on demand
68
Q

How to increase PES

A
  • upgrade to latest technology
  • creating spare capacity
  • improving storage methods to prolonging life of a product
  • keep large amounts of stock
  • train employees to perform a large range of jobs
69
Q

price

A

the sum of money paid by a consumer to a producer for a good or service. it is determined by the interaction of supply and demand

70
Q

efficiency

A

the optimal production and distribution of scarce resource

71
Q

worth vs price

A

how much customer feels a product is worth to them and that then determines what price people are willing to pay for different products

72
Q

what is the role of price in a market economy

A

how scarce resources are allocated between competing users: signalling, transmission of preferences and rationing

73
Q

signalling

A

price changes to single where resources are needed, of price rises then more resources are required and vice versa.

for example, since people are worried about climate change so many wind farms have been built with guaranteed prices given to the owners by the government. this means resources move from coal stations to wind farms

74
Q

transmission of preferences

A

through choices producers can send information to suppliers about changing needs. higher prices encourage suppliers to supply and vice versa

for example, the government has shown their support for green energy which encouraged suppliers to buy more of it

75
Q

rationing

A

prices help to ration scarce resources since scarce resources cause the price to rise so only those able to buy the product can

eg football stadiums will raise their prices since they are too small for all fans

76
Q

equilibrium price and quantity

A

where the quantity supplied exactly matches the quantity demanded

77
Q

why is equilibrium price and quantity desirable

A

it is assumed the markets will always move toward this anyways since excess supply can only be gotten rid of by lowering the price. equilibrium means there is no excess or shortage of supply making it efficient

78
Q

determination of price

A

the interaction of the free market forces of demand and supply to establish the general level of price for a good or service
eg; of a price is too low, no one will buy that product so the company is forced to lower it

79
Q

surplus

A
  • forces prices down
  • demand expands
  • supply contracts
  • continues until equilibrium is reached
80
Q

shortage

A
  • forces prices up
  • demand contracts
  • supply expands
  • continues until equilibrium is reached
81
Q

allocation of resources

A

how scarce resources are distributed among producers and how scarce goods and services are allocated among consumers

82
Q

market forces

A

factors that determine price levels and the availability of goods and services in an economy without government intervention

83
Q

effect on equilibrium price and quantity if demand shifts to the right

A

demand increases, equilibrium price increases and equilibrium quantity increases

84
Q

effect on equilibrium price and quantity if demand shifts to the left

A

demand decreases, equilibrium price decreases and equilibrium quantity decreases

85
Q

effect on equilibrium price and quantity if supply shifts to the right

A

supply increases, equilibrium price decreases, equilibrium quantity increases

86
Q

effect on equilibrium price and quantity if supply shifts to the left

A

supply decreases, equilibrium price increases, equilibrium quantity decreases

87
Q

competition

A

where different firms are trying to sell a similar product to a consumer

88
Q

price competition

A

firms lower their prices to gain customers and market share.
any firm not being able to achieve this will lose customers and go out of business
firms however cannot sell at less that cost = price or will go out of business too

89
Q

non-price competition

A
  • small producers offering a specialist, more personalised product
  • convenient location
  • this type of competition often leads to customer loyalty
  • marketing by creating a brand and being more known to the public
90
Q

why do producers compete

A
  • to enter a market : new business or new product by advertising or offering a low price and then act existing producers to respond
  • survival : for customers and market shares. persuading existing customers to retur and enticing new customers. can be done by extending a new range of products e.g supermarkets introducing a banking/ opticians/ electrical goods
  • profit : means for investment to survive and grow via innovation and expansion. good innovation leads to being able to compete strongly in he market. eg. apple introducing new models and technology for phones
91
Q

how does competition affect price

A

competition can drive prices down so that total revenue = cost.

supply shifts right
this leads to an increase in quantity bought and sold and a fall in price.
the extent of the fall depends on the PED of the product

92
Q

how can competition lead to higher prices

A
  • marketing costs will pass onto consumers eg branded vs generic
  • innovation and inventions can lead to higher prices, if you’re the first you can charge a higher price but as competitors produce similar products prices fall
93
Q

positive economic impact of competition on producers

A
  • forces producers to improve their efficiency so reducing costs, eg. innovation, and improved technology
  • improved technology then improves the productivity of fop and leads to growth in the economy
  • this then leads to growth in the economy and then increased demand leading to greater profits for more efficient producers ad then expands output to meet demand
94
Q

negative economic impact of competition on producers and workers

A
  • those slow to adapt to more technology will go out of business
  • workers may be fired if new technology leads to them not being needed
95
Q

positive economic impact of competition on consumers

A
  • competition leads to a fall in price
  • improves choice, variety and quality of goods/ services
  • consumer sovereignty ( freedom of choice and therefore control over market supply) so more products that customers want at a price they want to pay -> leads to increased customer standard of living, e.g falling price of food
96
Q

negative economic impact of competition on consumers

A
  • producers can introduce goods like pesticides which can be harmful to consumers
  • advertising can cause consumers to buy goods they don’t need
  • can decrease costs then increase them when customers are addicted
  • low cost airlines actual have a lot of extra charges to travel comfortably as the cost of such a cheap flight
97
Q

monopoly

A

a sole producer or seller of a good or service, the absence of competition, control 25% of the market

98
Q

monopoly features:
size
no. of firms
control of prices
level of price and output
efficiency

A
  • very large
  • one firm
  • able to set the price but cannot control the quantity
  • a higher price and produce a smaller quantity
  • not seen as efficient but can be if they gain large economies of scale and can therefore charge lower prices
99
Q

barriers of entry for a monopoly

A
  • legal ones - eg only riyal mail can deliver mail
  • greater efficiency than rivals due to large economies of scale which reduces costs
  • location - even a small post office if its the only one in the area can be a monopoly
  • copyrights and patents prevent copying
100
Q

oligopoly

A

a small number of firms control a large majority of market share, 5 largest must control 50%

101
Q

barriers of entry for oligopoly

A
  • barriers are not sufficient to prevent existence of smaller firms entering and increasing competition
  • any decision about the price made about any of the firms will affect their rivals and result in a quick response
  • often try to control the market by agreeing on a set price to avoid price competition which illegal in the UK (collusion)
102
Q

oligopoly features:
size
no. of firms
control of prices
level of price and output
efficiency

A
  • can be large but may have smaller firms
  • a few firms
  • can influence price but is restricted by rivals
  • both price and quantity depend on how strong competitors are and ability to collude
  • usually not seen as being economically efficient
103
Q

competitve features:
size
no. of firms
control of prices
level of price and output
efficiency

A
  • relatively small
  • many firms
  • price is set by market forces of supply and demand
  • price and quantity and decided by market forces and in theory lower prices and higher quantity
  • lead to economic efficiency
104
Q

profit

A

the difference between the revenue received from the sale of a good or service and the costs involved in making/ selling the good including opportunity costs

105
Q

individuals as producers

A
  • can produce non-market good or services
  • may only work part time
  • self employed so and keep all the profits
106
Q

firms as producers

A
  • can be very small businesses to huge corporations
  • can sell to at many different scales
  • competition, oligopolies and monopolies
  • larger producers exert power over markets by limiting supply to lower prices and drive out competitors
107
Q

government as producers

A

public sector: i.e. NHS and police
used to produce goods like coal before they were privatised

108
Q

production

A

the total output of goods and services produced by a firm or industry in a period of time

109
Q

what does an increase in production lead to

A
  • increase in employment unless caused by larger productivity
  • an increase in profits for firms and industries
  • larger economies of scale
  • an increase of market shares
  • economic growth
  • a rise in the standard of living
110
Q

productivity

A

a measure of the degree of efficiency in the use of fop in the production process, measured i output per unit of input

111
Q

productivity equation

A

total output / total input

112
Q

what does productivity depend on

A
  • improving the inputs to the production process
  • better technology, education and training, better quality raw materials
113
Q

why is high productivity important

A
  • lower average costs and increasing economies of scale making a firm is more competitive
  • greater profits by attracting best workers and equipment/research
  • better economic growth and development
  • more jobs and higher wages
114
Q

costs of productivity

A
  • uses capital equipment instead of labour which can increase unemployment
  • greater international competitiveness leading to a fall in GDP
115
Q

total cost

A

all costs of the firm added together e.g raw materials (variable costs) and marketing, machinery costs (fixed)

116
Q

total cost equation

A

total fixed cost + total variable cost

117
Q

average cost

A

the cost of producing a unit

118
Q

average cost equation

A

total cost / quanitty

119
Q

total revenue

A

the total income of a firm from the sale of its goods and services

120
Q

total revenue equation

A

price x quantity

121
Q

average revenue

A

the revenue per unit sold

122
Q

average revenue equation

A

total revenue / quantity

123
Q

loss

A

when a firm’s revenue is less than costs

124
Q

economies of scale

A

the cost advantages a firm can gain by increasing the scale of production, leading to a fall in costs

125
Q

internal economies of scale

A
  • technical economies - large firms can purchase specialist equipment
  • economies of increased dimensions - larger tankers and container ships,
  • bulk-buying economies - buy at a lower cost per unit
  • division of labour - large firms can divide tasks so specialised workers
  • financial economies - large firms can borrow money from banks easily at lower interest
  • managerial economies - can afford to employ specialist staff
  • marketing economies - can use more expensive methods that reach more potential customers such as newspapers. marketing costs per unit falls
  • risk bearing economies - can offer a larger range of goods and if one area loses sales can rely on the others
  • research and development economies - can afford it to stay in front of competitors
126
Q

external economies of scale

A
  • better transport links
  • education and training facilities nearby
  • concentration of firms, eg if supplier is near then transport costs cut
  • location - better reputation/hotspot of firms or just more accessible
127
Q

analysis of cost

A
  • if costs fall then firm can supply more at every price and supply curve shifts to the right
  • if costs rise the opposite is true and less is supplied at every price
128
Q

analysis of revenue

A
  • growth, eg. new equipment and investment
  • secure loans and favourable interest/ overdrafts with suppliers, works
  • confidence in the firm on the part of workers, suppliers and partners since more workers will stay on and suppliers will be confident in getting paid back
129
Q

analysis of profit

A
  • signals to scarce resources to move to firms making the most profit since more profits show more efficient use of resources so success of investment banks, suppliers, customers and entrepreneur
  • attracts other producers to move to that market
  • important source of finance to put back into the business for investment and growth
130
Q

analysis of loss

A

can cause a business to shut or rely on loans and in the long term still close
- causes fop to leave it to find an industry making profit

131
Q

labour market

A

where workers sell their labour and employers buy the labour: it consists of households’ supply of labour and firms’ demand for labour

132
Q

why does labour lack mobility

A
  • lack skills required
  • unwilling to relocate eg don’t know another language
  • personal ties prevent them from moving
  • lack information about the jobs available
133
Q

supply of labour

A

the total number of people who are willing and eligible to supply their labour, including the unemployed

134
Q

factors affecting the demand for labour

A
  • state of the economy ~ growing economy requires more jobs
  • more demand for a product means more demand for labour to produce it
  • wage rates, as wage decreases, the demand increases
  • a fall in real wages persuades employers to employ more people
  • productivity of labour : labour could become cheaper than capital
  • profitability of firms - large profits make companies expand and hire more people
135
Q

factors affecting supply of labour

A
  • wage rate: higher the wage, higher the supply
  • incentives like bonuses or overtime payments
  • size of the working population

-working conditions, opportunity for promotion, job security

  • barriers to entry: qualifications needed and training time
  • education and training availability
136
Q

market for ceos vs market for shop assistants

A
137
Q

gross pay

A

the amount of money that an employee earns before any deductions have been made

138
Q

income tax

A

a tax levied directly directly on a personal income

139
Q

net pay

A

the amount of money that an employee is left with after deductions are made from the gross income

140
Q

national insurance

A

contribution paid by workers and their employers toward the cost of state benefits

141
Q

pension contributions

A

payments made to a pensions fund. for employed people this comes from: employee, employer and the government

142
Q

money

A

anything that is generally accepted as a means if payment for goods and services

143
Q

barter

A

involves the “double coincidence of wants”
money is more suitable and efficient

144
Q

medium of exchange

A

anything that sets the standard of value of goods and services acceptable to all parties involved in a transaction

145
Q

financial sector

A

consists of financial organisations and their products, involves the flow of capital

146
Q

role and importance of the financial sector

A
  • helps markets to function and for economic activities to be carried out in a regulatory framework
  • involves the lending and borrowing of money done through financial institutions

credit provision - allow consumers to buy now and pay later, credit cards, gives people and opportunity to buy homes, same with firms and promotes growth, governments also use credit

liquidity provision - banks allow for assets to turn into cash ~ such as overdraft facilities

risk management - prevents savers from losing all of their money since savings and invested into a range of companies so if one fails, its alright

147
Q

role of the central banks

A
  • issues bank notes
  • set the bank rate to control monetary policy
  • provide financial stability by making financial organisations trustworthy
  • manage a country’s foreign reserves and intervene in a foreign market if necessary
  • act as a bank for commercial bank
  • act as a bank for the government
148
Q

investment

A

the purchase of capital goods that are used to produce future goods and services. it is also an asset purchased to provide an income in the future and/or sold at a profit

149
Q

interest rate

A

the cost of borrowing money, i.e that which is paid to the lender. it is also a reward for saving

150
Q

role of commercial banks

A
  • accept deposits, pay interest on them and keep savings safe
  • make payments on behalf of their customers by accepting cheques, card and mobile payments
  • issues loans to people and firms and provide overdraft facilities
  • offer safe deposit boxes for valuable items
  • provide foreign currencies
151
Q

building society

A

a mutual financial institution that is owned by its members. its primary objectives are to receive deposits from its member s and to lend money to members to purchase property

  • limited in the amount of money they can borrow from the money market
152
Q

mortgage

A

an agreement with a financial institution to borrow money to purchase a property

153
Q

insurance companies

A

financial institution that guarantees compensation for specified loss, damage, illness or death in return for an agreed premium

154
Q

savings

A

a part of person’s disposable income which isn’t spent on consumption - this is done by savers

155
Q

how do interest rates affect the level of saving

A

as interest rates are raised, savers will save more

156
Q

borrowing

A

to receive money from another party with the agreement that the money will be repaid

157
Q

how do interest rates affect borrowing

A

higher rates decrease the rate of borrowing because borrowing becomes more expensive and their current payments too

encourages people to save not spend, they purchase less goods and services, this land deter firms from borrowing because their revenue falls

a rise in interest leads to an increase in the foreign exchange value of the pound, this makes exports less competitive so firms will sell less and reduce borrowing

158
Q

how do interest rates affect investment

A

investment in inverse to the rate of interest.

fall in interest rate means borrowing is cheaper for investment and there is a lower opportunity cost involved in sacrificing saving

lower interest encourage customers to spend and firms will want to expand to meet this rise in demand

however this depends on the economy, if firms and consumers lack confidence, firms might not invest more because they don’t expect more demand

economics (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions