Theme 2 Flashcards
Quality Control
Refers to the traditional method of checking that products are of an adequate standard.
Supply Chain
The sequence of processes by which a final product is created. Often this involves many different suppliers, perhaps in a range of different locations.
Quality Assurance
Means ensuring that quality standards are agreed and met throughout the organisation.
Inorganic growth
The firm grows by joining with another firm by merger or takeover.
Boom
A time of rapid growth and expansion in the economy.
Emerging economies
Have fast growing manufacturing sectors. Some are still poor but others, e.g. Mexico may soon be described as developed.
Globalisation
Refers to the increasing interdependence of trading economies with increased imports, exports and capital movement.
Multinational Corporations
(MNCs) are businesses that are active in more than one economy.
Viral Marketing
Spreads product information from person to person as individuals pass messages on via social media, text or email.
Lead time
The time taken from having an idea to selling the product to a customer.
Extension strategies
Are ways of lengthening the maturity stage of the product life cycle.
Organic Growth
The firm grows from within using its own resources to expand output.
Nominal Value
Means that the value is expressed in numerical terms at current price.
Real Value
Means that the effect of inflation have been removed. Real value is nominal value minus the inflation rate.
Product Life Cycle
The stages a product passes through, from an initial idea to the end of its life.
Depreciation
Is a fall in the exchange rate that makes imports dearer and exports cheaper.
Product Innovation
Occurs when a completely new or improved product or service is created.
Employment
Refers to all those people of working age who have jobs.
Base Rate
Set by the Bank of England and influences interest rates across the economy.
Fiscal policy
Adjusts taxation and government expenditure either to stimulate or to cool down the economy.
Efficiency
Means organising production so that waste is minimised and costs are the lowest possible.
Appreciation
Occurs when the exchange rate rises, making imports cheaper and exports dearer.
Contractionary policies
Slow down economic activity by increasing leakages and reducing injections into the circular flow of money.
Balance of Trade
The difference between exports and imports.
X - M
Structural Unemployment
Happens when people have the wrong skills for the employment on offer, or are located too far from the available jobs.
Income elastic
Applies to products for which an income change causes a proportionately bigger change in quantity demanded.
Globalisation
Refers to the increasing interdependence of trading economies with increased imports, exports and capital movements.
Supply-side Policies
Designed to increase the productive capacity of the economy by influencing aggregate supply.
Capital Intensive Production
Uses large amounts of capital and relatively little labour.
Disposable income
Amount of income a person can actually spend on goods and services. It measures consumers’ spending power after tax.
Economies of scale
Lead to a reduction in average cost (AC) brought about by an increase in the size of the business.
Keynes, J.M.
The highly influential economist who in the 1930s explained the importance of maintaining levels of aggregate demand during recessions.
Monopsony Power
Occurs when a firm is the only buyer or is big enough to behave like a monopsony. This means that is can drive down the price of inputs simply by refusing to pay more.
Market leader
The business with the most control over prices and output within its market.
Invisible
Exports and imports cannot be touched or handled; they are services e.g. Insurance, banking or tourism.
Outsourcing
Means buying inputs from independent suppliers, or locating the whole production process abroad.
Leakages
Reduce the demand for domestically produced goods and services by diverting part of people’s incomes into savings, taxes and spending on imports.
Vertical Integration
Means that two businesses in the same industry, but at different stages of the production processes or supply chain, have joined together.
Median income
Is the middle value in all incomes, 50% of above it, 50% below it.
Inflation
Measured using either the CPI (Consumer Price Index), the headline rate and the basis for the government’s inflation target, or the RPI (Retail Price Index) which includes housing costs e.g. Council tax and mortgage interest payments.
Price Elasticity of Demand
The responsiveness of demand to a change in price.
Constant prices
Value every year’s output at the price levels of a base year, removing the effects of inflation.
Conglomerate integration
Occurs when two businesses that have nothing in common join together.
Demand pull inflation
Is caused by excess aggregate demand. Quantity demanded exceeds total output.
Monopoly
Where there is only one firm in the market and no competition.
Public Sector Deficits
Occur when government spending exceeds tax revenue and it borrows to fund the difference.
Investment
Is spending now on capital assets that will generate income in the future.
Cyclical unemployment
Is caused by a downturn in the economic cycle. Spending is falling so output falls and fewer employees are needed.
Pricing Strategy
The way in which a business decides on the on the price to charge and the factors that influence that decision.
Monetary Policy
uses interest rates to control the level of spending in the economy.
Unemployment
Refers to the number of people able and willing to work but not able to find a paying job. The claimant count measures unemployment based on the number of people claiming unemployment benefits. The ILO or LFS measure of unemployment counts all those who are available and looking for work.
SME
The recognised abbreviation for Small and Medium sized Enterprises.
Aggregate Supply
The total cost output supplied from all sources in the economy.
Promotion
The use of advertising, branding, and public relations to increase sales.
FDI
Foreign Direct Investment
Refers to funds invested in other economies.
Free trade areas
Are groups of countries that trade completely freely with each other, with no trade barriers, but each member country retains its own independent radar policies in relation to the rest of the world.
Total Quality Management
(TQM) refers to employees’ being involved in quality control and taking responsibility for the quality of their and their team’s work.
Resources
CELL
Downturn
The stage of the economy cycle when the boom slows and the rate of growth of GDP decreases.
Process Innovation
Occurs when new or improved production methods are used, enhancing efficiency and reducing costs.
Oligopoly
Occurs when several large firms dominate the market.
Takeover
When one firm makes a bid for another and secures over 50% of the shares. That firm effectively swallows up the other one.
Internal economies of scale
Are those that benefit the individual business.
Price Inelastic
A price change causes a proportionally smaller change in quantity demanded.
Micromarketing
The marketing of products or services designed to meet the needs of a very small section of the market.
Expansionary policies
Stimulate the level of economic activity by reducing leakages and increasing injections into the circular flow of money.
Mean income
The average income, i.e. Total income (GDP) divided by the production.
Long tail
The mass of niche markets that has vastly extended consumer choice, with small and larger businesses providing for small groups of consumers.
Marketing mix
The range of marketing strategies that businesses use to promote and sell their products or services. It includes pricing, design and all forms of advertising.
External strategies
Reduce production costs for all businesses in the industry.
Capacity Utilisation
Measures actual output as a percentage of maximum theoretical output.
Normal Good
Any good or service for which quantity demanded rises with incomes and falls when incomes do.
Just-in-time
(JIT) is a stock control system that does away with the need to hold large quantities of stocks or component inputs.
Injections
Investment, government expenditure and exports - increase demand for domestically produced goods and services.
Consumption
Is total household spending on goods and services.
Capital
Includes all assets that can generate income and includes premises, equipment and financial assets.
Labour intensive production
Uses large amounts of labour and relatively little capital.
Team working
Employees are organised into teams that share responsibility for production.
Merger
The joining together of two or more firms into a single business with the approval of the shareholders and management concerned.
Kaizen
Is the Japanese word for continuous improvement. It summarises a whole company approach to quality control.
Minimum Efficient Scale
The lowest point of the average cost curve where all available economies of scale have been put to use.
Aggregate Demand
The sum total of demand from all sources in the economy.
Recovery
Follows recession, GDP growth rises slowly at first, then gathers pace. If it then grows faster, it may lead to a boom.
Price Elastic
A price change causes a proportionally bigger change in quantity demanded.
Monopoly Power
When a business is big enough to behave like a monopoly and control price or quantity supplied.
Economic cycle
The fluctuations in the levels and rates of growth of GDP over a period of time. It is sometimes referred to as the trade or business cycle.
Synergy
Sometimes the combination of two businesses that have merged will yield more than the expected results. Often illustrated as 2+2=5.
Human capital
Is the knowledge, experience and skills of individuals or of the workforce.
Underemployment
Refers either to employed people whose work does not make full use of their qualifications or to those forced to take part-time employment.
Income inelastic
Applies to products for which an income change causes a proportionately smaller change in quantity demanded.
Productivity
Describes how efficiently resources are actually being used, usually by looking at output per unit of input.
Diseconomies of scale
Happen when further increases in size begin to increase average costs and inefficiencies develop.
Cost-pushing inflation
Is caused by rising costs of production.
Monopsony
Occurs when there is only one buyer of a product or service.
Lean production
Refers to any system of production that minimises costs through eliminated waste.
Inferior good
A good or service that sees an increase in demand following a fall in income and a fall in demand following an increase in income.
Recession
Occurs when there are at least two consecutive quarters of negative growth in GDP.
Physical Capital
Any buildings, tools and equipment that will help to generate output.
Comparative Advantage
Refers to the theory that if two countries specialise in the product which for them has the lowest opportunity cost, and then trade, real incomes will rise.
BRICs
The developing economies within the world: Brazil Russia India China (South Africa)
Horizontal integration
Means two businesses in the same industry have joined together.
Uncertainty
Describes a situation where events are unpredictable and beyond the control of the business.
Income elasticity of demand
Measures the proportionate change in quantity of demand following a change in incomes.
Market power
Exists when a successful business with a significant market share can influence price and output in the market.
Common Markets
Have completely free trade internally and a common external trade policy covering the rest of the world.
