theme 1 section 1 Flashcards
what is the basic economic problem
scarcity (unlimited wants but resources are finite
scarcity creates opportunity cost. what is this?
Opportunity cost is the benefit lost of the next best alternative
what are the economic agents
Governments,individuals, and firms
How does the economic problem effect the government
The government has to make a choice between spending money on the NHS or Schools
How does it effect firms
Firms have to make choices and sacrifices like chosing weather to employ new staff or invest in a new machine
what are the factors of production
land, labour, enterprise, capital
what is profit maximisation
This is what a buisnesses main objective is. This is the difference between total revenue and total costs.This is the rewad entrepeneurs yield
What is marginal costs
The change in total production cost that comes from making or producing 1 extra unit
mc=mr 1 or more unit creates no loss or no extra revenue
mr>mc profits increase
mc>mr profits decrease
Satisficing (who in a firm typically does this)
makes enough profit to be satisfied and keep their shareholders happy.
(managers potentially don’t want to max profit because it isn’t their company so maintain work life balance
What are the three sectors of economy
public (NHS) gov owned
Private (partners)
3rd (charity)
what does revenue mean
total money brought in over a set time
Why does a company want profit maximisation
Because this provides higher wages and less high interest rates
what is a shareholder
part owners of a company public or private
What is a stakeholder
A person/group/organisation with interest in the company
what are divdens
Sum of money paid from a company to its shareholders
What does it mean when a company is ethical
moral guidelines which govern good behavior
What is CSR!
Corporate social responsibility- operating in a way which does not degrade society or the environment (gives positive brand image)
How can productivity be increased
it can be increased through financial incentives like pay rises this can increase output. There can also be non financial incentives like early finishes.
What is specialisation
the optimum use of resources with means of reaching maximum efficency
productivity definition
output per unit of input
WHat is scarce for a firm
profit and revenue
What is scarce for individuals
income
What is scarce for gov
Tax revenue
What are entrepreneurial motives
being their own boss, money, providing a service that is lacked, community, work life balance
What are entrepreneurial characteristics
Perseverance, positive thinking, self motivated, enthusiastic and creative
What is creative destruction
A term created by Joseph Schumpeter in 40s. The idea that when an Entrepreneur creates a new product something else is considered old and destroyed. Something new destroys something old.
What is an Entrepeneur
A person who spots an opportunity and shows initiative and willingness to take risks in order to gain potential rewards. They run the other 3 factors of production
financial motives
Seek max profit
Profit = sales rev - total cost
Ethical motivation
To be deemed morally correct due to CSR and business manner
To provide a service that is ethical e.g not testing on animals
Added value
Means it is guaranteed that the entrepreneur is making profit as they are selling for more than the input
Social Entrepreneurship
Motivated by providing a service that uses profit to further support the cause
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