Theme 1.1_scarcity, choice and potential conflicts

Question 1

What is the basic economic problem?

Answer 1

Human wants are unlimited, but resources are scarce

Question 2

In Economics, what does “scarce” mean?

Answer 2

There is limited availability of a resource (finite)

Question 3

What is meant by an economic agent?

Answer 3

A general term to cover people and organisations involved in economic activity and make decisions that affect how resources are used.
They may primarily be seen as:
Producers (contributing to output)
Consumers (using goods and services)

Question 4

Who are the 3 main groups of economic agents

Answer 4

Businesses, consumers and the Government

Question 5

What is meant by an opportunity cost?

Answer 5

Is the benefit that is lost in making a choice between two competing uses of scarce resources.

Each choice made by an economic agent involves an opportunity cost…

Question 6

What are the 4 factors of production?

Answer 6

Capital
Enterprise
Land
Labour

Question 7

What is meant by a trade off?

Answer 7

any situation where making one choice means losing something else, usually forgoing a benefit or opportunity.

Question 8

What is meant by positive economics?

Answer 8

When we are dealing with facts that can be tested.

Question 9

What is meant by normative economics?

Answer 9

Where judgements and opinions are involved.

Question 10

What is meant by an objective?

Answer 10

A short term goal set to achieve

Question 11

What does PIGS stand for?

Answer 11

Profit
Increase Market Share
Growth
Survival

Question 12

What is meant by Profit Maximisation as an objective?

Answer 12

Entrepreneurs may set up businesses as they are motivated by a desire to become rich, and therefore their main objective would be to make a surplus, and to maximise that over time.

Question 13

What is meant by Sales Maximisation as an objective?

Answer 13

A goal that aims to maximise sales or sales revenue (P x Q)
Building sales is a sign of stability in a market
Sales maximisation can be a very short term objective, and once market share has grown – the emphasis could shift to profitability

Question 14

What is meant by Satisficing?

Answer 14

Means reaching a good enough profit level, without maximising. (and without the feeling of burn out for the owner / employees – work life balance)

Question 15

There are 7 other objectives, what are they?

Answer 15

Survival
Building and retaining market share
Gaining a return on investment
Becoming cost efficient
Gaining customer satisfaction
Employee welfare
Social objectives (ethical policies)

Question 16

What is meant by stakeholder?

Answer 16

Those with an interest or who are influenced by the behaviour of a specific business
For example –
employees, managers, owners, suppliers, Government, local community, shareholders, pressure groups, competitors
Can categorise as internal and external

Question 17

What are the main objectives of employees?

Answer 17

Employee welfare (job security, fair pay, safe conditions)

Question 18

What are the main objectives of owners and shareholders?

Answer 18

Interested in sales, profits, survival

Question 19

Main objectives of customers are?

Answer 19

Their biggest need is customer satisfaction

Question 20

What are the main objectives of suppliers and creditors?

Answer 20

They wish to be paid promptly and receive regular custom

Question 21

What are the main objectives of the local community, society, environment and the government?

Answer 21

Provider of jobs, contribute to the wellbeing of society, tax contributions

Question 22

What is meant by Corporate Social Responsibility?

Answer 22

Involves a business behaving in an ethical way and accepting responsibility for its effects on all its stakeholders, including the wider community and the environment

Question 23

Why has CSR become increasingly important?

Answer 23

Ethical Reasons
Reputation
Profit Maximisation