1.2 Business Economics

Question 1

Production

Answer 1

Process that involves converting resources into goods or services (to satisfy needs and wants)

Question 2

Factors of production

Answer 2

Resources used to produce goods and services (land, labour capital and enterprise)

Question 3

Land

Answer 3

All natural resources in an economy

Question 4

Labour

Answer 4

People used on production

Question 5

Human capital

Answer 5

Value of workforce or an individual worker

Question 6

Capital

Answer 6

Man-made resources available in an economy, help produce goods

Question 7

Working / circulating capital

Answer 7

Resources used up in production - raw materials & components.

Question 8

Fixed capital

Answer 8

Stocks of “man-made” resources help in production - machines & tools

Question 9

Enterprise (entrepreneurs)

Answer 9

individuals who organise the other factors of production and risk their own money in the business venture

Question 10

Capital intensive

Answer 10

production relies heavily on machinery relative to labour.

Question 11

Labour intensive

Answer 11

production relies heavily on labour relative to machinery.

Question 12

Labour intensive

Answer 12

production relies heavily on labour relative to machinery.

Question 13

Primary sector

Answer 13

production involving the extraction of raw materials from earth.

Question 14

Secondary sector

Answer 14

involving the processing of raw materials = finished/semi-finished goods

Question 15

Tertiary sector

Answer 15

production of services in the economy.

Question 16

De-industrialization

Answer 16

decline in manufacturing (secondary -> tertiary)

Question 17

Industrialization

Answer 17

process of shifting resources from primary to secondary sector.

Question 18

Productivity

Answer 18

rate at which goods are produced, and the amount produced in relation to the work, time, and money needed to produce them.

Question 19

Training

Answer 19

to improve the quality of human capital is to invest in training.

Question 20

Piece rates

Answer 20

amount of money paid for each item a worker produces (rather than time taken)

Question 21

Job rotation

Answer 21

practice of regularly changing the person who does a particular job. (Job satisfaction)

Question 22

Division of labour

Answer 22

breaking down of the production process into small parts with each worker allocated to a specific task.

Question 23

Specialization

Answer 23

production of a limited range of goods by individuals, firms, regions or countries.

Question 24

Costs

Answer 24

expenses that must be met, setting & running a business

Question 25

Fixed costs

Answer 25

(overheads) costs that do not vary with the level of output = rent, advertising, insurance premiums, interest payments, research and development costs.

Question 26

Variable cost

Answer 26

costs that change when output levels change.

Question 27

Calculate "Total Variable Cost" (TVC)

Answer 27

Variable cost per unit (VC) x number of units produced (Q)

Question 28

Total Cost (TC)

Answer 28

Total fixed costs and total variable costs added together. TFC + TVC = TC

Question 29

Average cost of production

Answer 29

cost of producing a single unit of output. (Total cost / Quantity produced)

Question 30

Total Revenue (TR)

Answer 30

amount of money a firm receives from selling its output. (Total revenue = Price x Quantity)

Question 31

Profit

Answer 31

difference between total revenue and total costs (profit = total revenue - total cost)

Question 32

Economies of scale

Answer 32

falling average costs due to expansion

Question 33

Diseconomies of scale

Answer 33

rising average costs when a firm becomes too big - aspects of production become inefficient

Question 34

Internal economies of scale

Answer 34

cost benefits that an individual firm can enjoy when it expands.

Question 35

Name 6 internal economies of scale

Answer 35

1 Purchasing economies 2 Marketing economies 3 Technical economies 4 Financial economies 5 Managerial economies 6 Risk-bearing economies

Question 36

External economies of scale

Answer 36

cost benefit all firms in industry can enjoy, when the industry expands.

Question 37

Competition

Answer 37

rivalry exists between firms when trying to sell goods to the same group of customers.

Question 38

Monopoly

Answer 38

a situation where there is one dominant seller in a market (25% more)

Question 39

Pure monopoly

Answer 39

one producer supplies the whole market, 100% market share.

Question 40

Natural monopoly

Answer 40

one firm in an industry can serve an entire market at a lower cost than would be possible if the industry were composed of many smaller firms.

Question 41

Patent

Answer 41

licence that grants permission to operate as a sole producer of a newly designed product

Question 42

Oligopoly

Answer 42

market dominated by a few large firms.

Question 43

Collusion

Answer 43

informal agreements between firms to restrict competition

Question 44

Price wars

Answer 44

one firm in the industry reduces price causing others to do the same

Question 45

Niche market

Answer 45

market for a product or service, perhaps expensive / unusual, does not have many buys - but make good profits

Question 46

Cartel

Answer 46

group of firms or countries join together and agree on pricing or output levels in market

Question 47

Wage rate

Answer 47

the amount of money paid to workers for their services over a period of time (price of labour)

Question 48

Derived demand

Answer 48

demand that arises because there is demand for another good.

Question 49

Factors affecting the demand of labour (shift)

Answer 49

DOAP Demand for products Other employment costs Availability of substitutes Productivity of workers

Question 50

Factors affecting supply of labour (shift)

Answer 50

SPLARFMS Skills & Qualifications Population Labour mobility Age distribution of population Retirement age Female participation Migration School leaving age

Question 51

Trade unions

Answer 51

organisation representing people working in an industry, protects their rights.

Question 52

Government intervention

Answer 52

government involved in a situation, help deal with a problem

Question 53

Minimum wage

Answer 53

minimum amount per hour which most workers are legally entitled to be paid.

Question 54

Closed shop

Answer 54

Company or factory where all the workers must belong to a particular trade union

Question 55

Secondary picketing

Answer 55

Workers in one workplace or company strike in a group at a particular location in order to support the striking workers in a different workplace or company

Question 56

Labour mobility

Answer 56

Ease with which workers move geographically and occupationally between different jobs