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Economics > Theme 1 > Flashcards

Theme 1 Flashcards

1
Q

What is the economic problem

A

That there are infinite wants but scarce resources

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2
Q

What is economic activity

A

The production of goods and services to satisfy needs and wants

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3
Q

What is economic welfare

A

The benefit gained by individuals firms or society in the production of goods and services

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4
Q

What is a renewable resource

A

A resource that can be replenished like trees

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5
Q

What is a non renewable resource

A

A resource that can’t be replenished

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6
Q

What is opportunity cost

A

The benefit lost if the next best alternative when making a choice

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7
Q

What is a trade off

A

When you get a benefit at the cost of another benefit

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8
Q

What is an economic agent

A

The individual, firms and government that partake in economic activity e.g the demand for and supply of goods and services

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9
Q

What is a free market economy

A

Where firms decide what goods and services to produce with limited government intervention

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10
Q

What is Profit maximisation

A

To produce a level of output where profit is at its highest

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11
Q

What is sales maximisation

A

To achieve the highest value of sales by volume or value

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12
Q

What is profit satisficing

A

To make enough profit that satisfies but isn’t the only motivation

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13
Q

What is cost efficiency

A

A business objective in which the business achieves the maximum level of outputs with the lowest value of inputs

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14
Q

What is employee welfare

A

A business objective in which the business looks after the economics and physical well being of their workers

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15
Q

What is customer satisfaction

A

A business objective in which the goods and services meet the needs and expectations of consumers

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16
Q

What are social objectives

A

To behave in a way which benefits society like creating employment or supporting the community

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17
Q

What is ROI

A

Return on investment is how much money the business is getting back on a capital investment in a business

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18
Q

What is a stakeholder

A

Anyone with an interest in the actions of a business

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19
Q

What are government objectives

A

Maximise the welfare of society as a whole

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20
Q

what is CSR

A

corporate social responsibility - where a business tries to act ethically and help economic development, make stakeholders happy

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21
Q

what is creative destruction

A

getting rid of old methods with innovation

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22
Q

what is an entrepreneur

A

a person who spots an opportunity and takes the risk in order to get potential rewards

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23
Q

what are the four factors of production

A

land, labour, capital, enterprise

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24
Q

what is added value

A

the ability to ensure that the value of the output is higher than the sum of all the inputs value

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25
Q

how can added value be achieved

A

USP, enhancing customer experience, marketing to increase perceived value

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26
Q

what are non financial motives

A

ethical stance, social entrepreneurship, independence, homeworking

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27
Q

what is ethical stance

A

to behave in a good manner or be morally correct, provide a morally correct good or service

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28
Q

what is social entrepreneurship

A

motivated by supporting a cause rather than making a profit

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29
Q

what is independence

A

being your own boss make own decisions

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30
Q

what is homeworking

A

match family commitment to work commitment

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31
Q

what is capital

A

capital has multiple meaning like money, equipment, factories and offices (premises)

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32
Q

what is capital goods

A

a piece of capital that will bring a stream of income into a business

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33
Q

what is land

A

all of the natural resources that come from the earth e.g. oil, crops, fish (raw material to generate goods)

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34
Q

what is labour

A

all the workforce in an economy

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35
Q

what is human capital

A

the value of a worker , decided by their skills, education and training

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36
Q

what is specialization

A

when economic units focus on producing a specific good or service

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37
Q

what is economic units

A

individuals, firms, regions or countries in an economy

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38
Q

what is division of labour

A

specialized use of workers within an organization (roles)

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39
Q

what is productivity

A

the amount of output per worker

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40
Q

advantages of specification

A

each economic unit can focus on what they are best at
- more efficient with time
- better technical economies within an economy

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41
Q

what are technical economies of scale

A

when a economic unit invest in physicals capital in order to have cost advantages over other firms

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42
Q

disadvantages of specialization

A

work can become monotonous (repetitive)
- may limit the size of the market
- reduces flexibility of workforce (less range of skills)

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43
Q

what advantages can specialization cause

A
  • lower unit costs
  • better quality
  • innovation of physical capital
  • creates a USP
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44
Q

what repercussions can specialization cause

A
  • economic agents that specialize have a risk of losing their market
  • in a competitive global market UK economic agents can quickly lose market share
  • this means that the UK must quickly improve production process
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45
Q

what is GDP

A

GDP is the total value of a country’s output per year

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46
Q

what are interest rates

A

the price of money e.g. the cost of borrowing or the reward for saving

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47
Q

how can interest rates affect a business

A
  • if a firm has loans or overdraft this will affect the amount that has to be paid back
  • influences the level of demand by consumers
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48
Q

what are exchange rates

A

the cos of one currency in terms of another currency

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49
Q

effects of exchange rates

A
  • SPICED
  • WPIDEC
  • fluctuations in exchange rates can cause uncertainty with foreign suppliers
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50
Q

what is taxation

A

taxation is the process of imposing charges of businesses or individuals by the government

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51
Q

what is unemployment

A

the number of people who are actively looking for a job whilst not being in work

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52
Q

what is availability of workers

A

in times of high unemployment there will be an excess of available workers which makes recruitment easier

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53
Q

what is inflation

A

a general rise in price or a fall in the value of money

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54
Q

what is RPI

A

retain price index - a measurement of a basket of goods that people buy in the uk and its cost

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55
Q

what is CPI

A

consumer price index - RPI but it excludes housing costs

56
Q

what effect does inflation have on businesses

A

increased costs due to higher inflation - will be passed onto consumer

57
Q

what are the 4 stages of the business cycle

A

Boom, recession, slump and recovery

58
Q

what is private benefit

A

the benefits that come from individual or firm through economic activity (benefit from consuming a good or service)

59
Q

what is a normal good

A

a good where if price rises demand falls and vice versa

60
Q

what is demand

A

the amount of good or servicer that consumer are willing to buy at any given price

61
Q

what affects demand

A
  • price of the good
  • consumer income
  • price of other goods and services
  • trends
  • advertising / other factors
62
Q

what are veblen goods

A

goods that demand doesn’t change / increases when their price goes up

63
Q

what is a substitute product

A

a product that can be used as an alternative, creating competition

64
Q

what is a complementary product

A

a product bought alongside a good or service

65
Q

what is an inferior good

A

a good where demand decreases as income increases

66
Q

what causes a shift

A

if a change in demand is caused by anything other than a change in price

67
Q

what causes a shift

A
  • change in price of substitutes
  • change in price of complementary goods
  • change in consumer income
  • change in trends
68
Q

what are sunk costs

A

costs that the firm have already paid and will not be recovered if the firm leaves the industry

69
Q

what is supply

A

the amount of good or service that producers are willing and able to sell at any given price

70
Q

what can affect supply

A
  • price of the good
  • changing costs of production
  • technological process
  • prices of other goods or services
  • government policy e.g. taxes and subsidies
71
Q

what is an indirect tax

A

are taxes placed on goods or services produced by individuals or firms e.g. VAT

72
Q

what is a subsidy

A

a finance given to producers to encourage them to produce a good or service / lower prices (doesn’t have to be paid back)

73
Q

what causes a shift in the supply curve

A
  • changes to the cost of production
  • new technology
  • indirect taxes
  • government subsidies
74
Q

what is market equilibrium

A

where demand is equal to supply

75
Q

what is excess demand

A

when there is more demand than supply leading to increased prices by suppliers

76
Q

what is disequilibrium

A

when there is excess demand or excess supply

77
Q

what is a mass market

A

the market in which the production of goods is at a large scale e.g. mobile phones

78
Q

what is a niche market

A

a small specialised market for a particular product or service (not for a wide audience)

79
Q

what are economic incentives

A

the reasons for economic agents to provide goods or services

80
Q

what is rationing function

A

increased demand or reduced supply leading to increased prices

81
Q

what is signalling function

A

the signal given to consumer and producer whether to leave a market due to changing prices e.g. higher prices signal consumers should buy less

82
Q

what is incentive function

A

when a consumer or producer is motivated by a course of action e.g. higher prices incentivise a producer to enter the market

83
Q

what is allocative efficiency

A

when society is producing goods to match the need of consumers e.g. consumer satisfaction is maximised

84
Q

what is market segmentation

A

when a market is split into subgroups of consumers with similar characteristics to help identify different wants and needs

85
Q

what are the different segmentation methods

A

demographic
geographic
income
behavioural

86
Q

what is demographic segmentation

A

segmentation based on characteristics like; age, gender, race, religion etc

87
Q

what is geographic segmentation

A

segmentation based on where people live

88
Q

what is income segmentation

A

segmentation based on level of income and profession

89
Q

what is behavioural segmentation

A

segmentation based on behaviour when purchasing e.g. way of purchasing, brand loyalty, time of purchase

90
Q

what is competitive advantage

A

a feature of a business that allows it to perform better than other in the market

91
Q

what can cause competitive advantage

A

product differentiation
ability to add value
operational efficiency
position relative to competitors

92
Q

what are different kinds of differentiation

A

product - USP
promotion - create desire, exclusivity or brand loyalty
operation objectives like R and D and innovation

93
Q

how can you add value to a product

A

-manufacturing
- marketing
-technology
-customer service
- USP

94
Q

what is a stable market

A

a market in which there is little change in supply and demand leading to consistent prices (equilibrium)

95
Q

what is a dynamic market

A

market are always changing due to social trends, change in technology, taste, and the competitive environment

96
Q

what are commercial banks

A

ones that offer general services to the public and firms

97
Q

what is liquidity

A

the ease in which an asset can be turned into cash

98
Q

what is credit

A

the creation of money by banks that can be used to buy goods or services

99
Q

what is collateral

A

an asset pledged as security for repayment of a loan to be forfeited if you don’t repay

100
Q

what is risk

A

it is possible to calculate the degree of risk / measurable

101
Q

what is uncertainty

A

it is not possible to find the probability due to unpredictability / not measurable

102
Q

what is limited liability

A

when the investors liability is limited too how much they invested or were promised in share capital

103
Q

what is unlimited liability

A

the owners of the business are responsible for all debt of the business / high risk

104
Q

what are the types of credit

A

loans
overdraft
trade credit

105
Q

what is trade credit

A

when a customer is able to pay for a good or service on as later date

106
Q

sources of credit

A

banks
some other firms

107
Q

what is venture capital

A

investment from an established business into another business in return for a percentage of equity in the business

108
Q

what is share capital

A

the capital raised from selling shares

109
Q

what is leasing

A

leasing is where a business gets to benefit form an asset without owning or buying it outright

110
Q

what is retained profit

A

profit from earlier years that is reinvested in the business

111
Q

what is market failure

A

when the allocation of goods and services are inefficient

112
Q

what is government intervention

A

when the government takes action to remedy allocative inefficient markets

113
Q

what are externalities

A

the costs and benefits to a third party created by economic agents when undertaking their activities

114
Q

what are negative externalities

A

costs to a third party that are not included in the price of the economic activity

115
Q

what are positive externalities

A

those benefits to a third party that are not included in the price of the economic activity

116
Q

what are private costs

A

costs of consuming or producing goods or services that must be paid for by those that use them e.g. the individual or firm

117
Q

what are social costs

A

those costs of consuming or producing goods or services that are paid for by society

118
Q

when do negative externalities happen

A

when social costs are greater than private costs

119
Q

what is a private benefit

A

the benefits of consuming or producing goods or services that are received by an economic unit e.g. consumer or firm

120
Q

what is a social benefit

A

benefits of consuming or producing goods or services that are received by society

121
Q

what is marginal benefit

A

the benefit to a consumer of consuming one more unit of a good or service

122
Q

what is marginal cost

A

the cost toa producer of producing one more unit of a good or service

123
Q

why do governments intervene in markets

A

-reduce market failure
-reduce inequalities in the distribution of income and wealth
- to support UK industry

124
Q

what is a merit good

A

a good or service that is considered beneficial

125
Q

what is a demerit good

A

a good or service that is considered harmful

126
Q

how can the government correct market failure

A

-regulation
-legislation
-indirect taxation
-grants and subsidies
-voluntary agreements

127
Q

what is regulation

A

rules, normally set in place by the government to modify or determine the behaviour of firms and organisations in the market

128
Q

what is legislation

A

the creation and enacting of laws in order to protect consumers, firms and society as a whole

129
Q

what is government failure

A

when government intervention leads to a net welfare loss in comparison to the free market acting alone

130
Q

what are administrative costs

A

the expenditure that the government spends on intervening in markets

131
Q

provision of information

A

the government seek to reduce the lack of perfect knowledge within a market and asymmetric information

132
Q

what is perfect knowledge

A

both buyers and sellers are fully informed about the price, and utility of the good and service

133
Q

what is a grant

A

a loan that doesn’t have to be repaid that is given to fund a specific thing e.g. setting up in a new area

134
Q

what is average cost

A

the average cost of producing a unit of output

135
Q

what is the margin of safety

A

how much actual output is above the break even level of output

136
Q
A

Economics (5 decks)

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