Test Focus Areas

Question 1

What are the 5 conditions of demand?

Answer 1

• Income
• Price
• Substitutes
• Seasonality
• Interest rates

Question 2

What is an inelastic product?

Answer 2

• When the change in a products price doesn’t effect the demand in a significant way.
• E.g petrol, cigarettes

Question 3

What is a elastic product?

Answer 3

• As the price of a product increases the demand also has a significant change.
• This is normally through the availability of substitutes.
• E.g clothes, luxury cars

Question 4

What is the concept of motivation suggested by Taylor?

Answer 4

• Scientific management
• Employees should obey orders strictly and the jobs of managers is to give orders and to constantly watch over employees.
• People should get paid in proportion to how much work they do.
• People main form of motivation is money.

Question 5

What is the concept of motivation suggested by Maslow?

Answer 5

• Hierarchy of needs:
  1. Physiological needs- Food, water, shelter.
  2. Safety needs- Secure job.
  3. Love/belonging needs- teamwork, social job.
  4. Esteem needs- Responsibility, promotion.
  5. Self actualisation- Potential is reached, happy.

Question 6

What is the concept of motivation suggested by Herzberg?

Answer 6

• Two factor theory
• Motivating factors include interesting work, recognition for good work, personal achievement, responsibility.
• If hygiene factors are not met this can dissatisfy people and cause de motivation. However, if they are met it would not provide extra motivation as they are base standards (e.g a clean working environment/toilets).

Question 7

What is Price Elasticity of Demand (PED)?

Answer 7

• PED measures the responsiveness of demand to a change in price.
• PED values are always a minus.

Question 8

What is Income Elasticity of demand?

Answer 8

• YED is used by businesses to estimate how demand will change given changes in income.
• As consumer incomes change (up or down) so do demands.

Question 9

What are normal goods?

Answer 9

• Normal goods are those for which consumer demand increases when income increases.
• YED value would be between 0-1.

Question 10

What are inferior goods?

Answer 10

• Products where demand decreases as income increases.
• YED would be below 0 (negative value).
• E.g charity shop clothes might have a YED of -1.5.

Question 11

What are luxury goods?

Answer 11

• A luxury good is when an increase in income causes larger increase in demand (it’s all about proportion)
• YED value would be above 1.
• E.g sports cars, luxury watches.

Question 12

What are the 3 objectives of a business?

Answer 12

• Profitability
• Survival
• Help the environment (social enterprise).

Question 13

Definition of motivation

Answer 13

how driven and happy an employee is in their role