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ECONOMICS > topic 2- consumers and business > Flashcards

topic 2- consumers and business Flashcards

1
Q

what is Y = C + S

A

disposable income(income after tax) = consumption(expenditure) + savings

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1
Q

what is consumer sovereignty

A

the consumer dictates what is produce whilst wants and preferences can be altered

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2
Q

what is apc

A

average propensity to consume

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3
Q

what is aps

A

the average propensity to save

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4
Q

does apc and aps add to 1?

A

yes

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5
Q

what factors may impact a person’s APC or APS

A
  1. cultural(different cultures have different spending patterns)
  2. personality(some people may be cautious, others not as much)
  3. expectation- future plans alter spending and saving

however, the two most important factors influencing consumer decision

  1. level of income(more y means more c and s)
  2. age(with age may come with additional income)
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6
Q

what does the average propensity to save refer to

A

the proportion of your income that you spend relative to the overall income

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7
Q

what is the formula for aps

A

S/Y
savings / disposable income

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8
Q

what is the formula for apc

A

C/Y
Consumption/disposable income

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9
Q

what is the Marginal propensity to consumer(MPC) and marginal propensity to save(MPS)

A

marginal refers to the new or changed circumstance

propensity refers to the likelihood or willingness for someone to do something

i.e marginal propensity to consume is
likelihood of consuming their extra dollar earned

and f

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10
Q

what the formula for mpc

A

△C/△Y
△ = change in…

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11
Q

what is the formula for mps

A

△S/△Y

△= change in …

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12
Q

does mpc and mps add to 1

A

yes

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13
Q

what is the life cycle theory of consumption

A

there are three distinct stages that influence consumption patterns

young people = lower income, high spending, low saving, high borrowing

working life = income rises, low spending, high saving

retirement = income decreases, high spending, low saving

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14
Q

what does the life cycle theory of consumption tell us

A

in general, individuals on higher incomes tend to have lower apc,

APC falls with rising age, but then increases again upon retirement

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15
Q

what is utility maximisation

A

economists tend to think of people as utility maximisers meaning in other words everyone is trying to get the most amount of utility possible at all time

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16
Q

what factors influence individual choice

A

1.income
-if you have more money, you can buy more stuff at a higher quality

2.price
-necessities vs luxuries

3.price of substitutes
-substitute good is a good that can be replaced for a similar good
i.e butter and margarine

  1. price of complements
    -complement good is a good used in combination with another
    -car and petrol
  2. preferences/tastes
    -some goods give a consumer a higher satisfaction than it would to others
    (change over time)

6.advertising
- play a major role in creating the demand for goods where non existed before

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17
Q

what are the two categories of income

A

returns on factors of production and social welfare payments

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18
Q

what are the returns of factors of production

A

rewards given to an individual from four main sources

land
labour
capital
enterprise(entrepreneurship)

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19
Q

what is social welfare payments

A

money collected by the government through taxes, then distributed for assistance

taxes –> benifits

forms of social welfare payments

pensions
-given to those over 65 and retired, to assist them in old age

unemployment benefits
- a small amount given to those who are seeking to work, but can’t find a job

disability support
-for people who are not able to work due to personal factors

or family payments
-for families with children

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20
Q

what is the key point of social welfare payments

A

social welfare payments are designed to provide a minimum income safety net to all consumers in our society so they can purchase the basic necessities of life

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21
Q

what does utility refer to in economics

A

the pleasure derived from consuming a good or service

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22
Q

what a business firm

A

an organisation involved in using entrepreneurial skills to combine certain factors of production to produce a good or service for sale in the economy

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23
Q

what is an industry

A

a group of business firms that produce a similar good or service

24
Q

how do businesses contribute to the economy

A
  1. economic growth

businesses impact both positively and negatively on economic growth

  • the economy is a collection of businesses across various industries
    -strong growth in sales for businesses will boost the overall rate of economic growth(more production, buying and selling going on)
  1. employment
    -businesses employ people because labour is a key input to the production process
    -thus businesses reduce the rate of employment in an economy
  2. regional development
    -business can significantly impact the rate of regional development in Australia
    i.e. large growth in the wine industry
  3. living standards
    -if businesses can produce more consumer and capital goods, the result is an increase in productive capacity meaning improved living standards for all.
25
Q

what is productivity

A

the quantity of goods and services the economy can produce with a given amount of resources, or inputs

25
Q

what are the 5 goals of businesses

A
  1. maximise profits
    -the primary goal of a business is maximising profits(profit motive)
    -profit = total revenue - total costs
  2. maximising rate of growth
    The secondary goal is to maximise the rate of growth of assets
  3. increase market share
    -the percentage of an industry’s total sales that is earned by a particular firm
  4. shareholders expectations
    -firms must operate to meet shareholders’ expectations
  5. satisficing behaviour
    -not just profit maximisation, but other intangible goals for long-term gain.
    i.e. sacrificing profit for social or political influence
    another is charities or NGOS
26
Q

how does productivity improve our standard of living

A
  1. less waste of our scarce resources
  2. lower production costs and higher profits for the business firms
  3. higher incomes
  4. improved international competitiveness of our industries
27
Q

what is specialisation

A

is a process by which a firm focuses on using factors of production in areas that are most efficient

there are three types of specialisation
the specialisation of labour, land and capital

28
Q

what is internal economies of scale

A

the concept that a firm needs to achieve a large scale or production in oder to minimise costs

economies of scale = being more economical(cheaper) to increase scale of operations

internal = internal business operations not external businesses

29
Q

how is internal economies of scale achieved

A

when the average per unit costs of production falls and the total output increases

30
Q

what are the advantages of the internal economies of scale

A

a firm can use the money saved on production towards
-increasing profits
-efficient capital equipment
-resource and development

31
Q

in internal economies of scale how does the business decrease per unit costs

A
  1. buying raw materials in bulk which reduces the per-unit costs of each input
  2. when the business is becoming larger business can have specialisation of labour
32
Q

what is internal diseconomies of scale

A

incurs when per unit costs start to increase again with increased output

33
Q

what is an LRAC(long run average cost curve)

A

it shows the relationship between internal economies and diseconomies of scale

we say average cost because average cost = cost per unit (over a long period of time)

34
Q

what is technical optimum

A

the x which is when the internal economies of scale begin to become internal diseconomies of scale

35
Q

what is external dis/economies of scale

A

when the industry the business is in grows
which leads to cost savings or cost increases

36
Q

what are the advantages of the external economies of scale

A

there are advantages in reducing average per unit costs, external to the business

savings from industry external to business scaling up = external economies of scale

i.e transportation
growing industry –> new infrastructure –> decreased transport costs

37
Q

what happens to the lrac curve when external economies of scale happens

A

the entire curve shifts down despite no change to the level of production however the overall cost per unit decreases

[simple term] it is now cheaper to produce when producing the same amount

38
Q

what is external diseconomies of scale

A

cost saving disadvantages that often result from the growth of the industry from outside influence such as growth from pollution, or growing industry means the rise of raw materials

39
Q

what happens to the lrac curve when businesses experience external diseconomies of scale

A

the curve will shift up, per unit costs have increased despite no change in output

40
Q

Impact of investment, technological change and ethical decision-making of globalisation

A

technology and increased investments have lead to global market economy

41
Q

Impact of investment, technological change and ethical decision-making of production methods

A

businesses now have much higher productive capacity than ever before

42
Q

Impact of investment, technological change and ethical decision-making to prices

A

through the internet, it has helped consumers compare prices quickly and buy online at retail price forcing firms to be more competitive with their prices

43
Q

Impact of investment, technological change and ethical decision-making to employment

A

technology has made some jobs extinct, however it also created new jobs

43
Q

Impact of investment, technological change and ethical decision-making to output

A

changes to technology and investment, this has led to the growth in new quality products

i.e improved quality of cars and technology

44
Q

Impact of investment, technological change and ethical decision-making to profits

A

growing world demand for new products has led to major profits for companies, however changing technology may mean expectations won’t be fulfilled for the next day

45
Q

Impact of investment, technological change and ethical decision-making to the types of products

A

new technologies can be combined and expanded upon to create a new range of products
i.e a phone and a watch

46
Q

Impact of investment, technological change and ethical decision-making to environmental sustainability

A

this means minimising pollution and waste, preserving the environment and using renewable energy in order to sustain natural resources

as well it has sparked a whole new industry and set out business practices focused on energy-efficient technology

i.e solar panels and

47
Q

what is the role of the ethical decision making (EDM) plays a role in a businesses in the 21st century

A

EDM is whereby business decisions about production methods, employment and other matters are made by taking into account the impact they have on society the environment and basic moral standards rather than just focusing on profit maximisation

48
Q

What is globalisation?

2018 Atomi Question
A
(Choice A)
The intensification of transnational economic, social and political links
B
(Choice B)
The ease with which people can travel across the world
C
(Choice C)
The merging of cultures across the world into one unified culture
D
(Choice D)
The increasing number of businesses around the world

A

a

49
Q

Which of the following is a reason why globalisation has benefited businesses?

2018 Atomi Question
A
(Choice A)
Enabling international capital formation
B
(Choice B)
Ease of sourcing labour from overseas
C
(Choice C)
Improved access to overseas markets
D
(Choice D)
All of the above

A

d

50
Q

How has technology altered business production methods?

2018 Atomi Question
A
(Choice A)
Increased complexity of production
B
(Choice B)
Improved efficiency and economic output
C
(Choice C)
More expensive means of making goods
D
(Choice D)
Greater focus on cheap, mass-produced goods

A

b

51
Q

Technology has replaced a large chunk of the jobs which were common in the 20th century.

2018 Atomi Question
A
(Choice A)
True
B
(Choice B)
False

A

a

52
Q

Which of the following is NOT a way that internet and communication technology assisted consumers?

2018 Atomi Question
A
(Choice A)
More safety and security with purchases
B
(Choice B)
Easier to research products
C
(Choice C)
Can quickly compare prices
D
(Choice D)
Ability to purchase remotely

A

a

53
Q

What must businesses consider when trying to make ethical decisions?

2018 Atomi Question
A
(Choice A)
Environment
B
(Choice B)
Society
C
(Choice C)
Moral standards
D
(Choice D)
All of the above

A

d

54
Q

Which of the following is NOT a motivating factor for businesses to pursue environmentally friendly practices?

2018 Atomi Question
A
(Choice A)
Government incentives and regulation
B
(Choice B)
A cleaner and more healthy environment
C
(Choice C)
Consumer demands
D
(Choice D)
Community values

A

b

55
Q

What is business community involvement?

2018 Atomi Question
A
(Choice A)
Selling goods and services to people in the community
B
(Choice B)
Employing people within the community to be a part of the business
C
(Choice C)
Supporting causes in local areas to portray their goodwill as a company
D
(Choice D)
Distributing flyers and ads to engage the local community

A

c

56
Q

Which of the following is NOT a factor that businesses must consider when supporting gender equality?

2018 Atomi Question
A
(Choice A)
Equal pay for equal work
B
(Choice B)
Hiring a set quota of women
C
(Choice C)
Flexible working arrangements
D
(Choice D)
Equal access to all occupations and industries

A

b

ECONOMICS (5 decks)

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