1.1 The Economic Problem Flashcards
Define scarcity
how resources are limited in supply and so choices have to be made for their use
What is the result of humans having unlimited wants?
Choices having to be made over the allocation of resources
Define the economic problem
the concept that wants are unlimited but resources are limited so choices have to be made about their use
Define opportunity cost
the foregone option that wasn’t selected
Define Trade-off
the choice between 2 options
What is the importance of an opportunity cost to a consumer?
May choose to buy something of a higher quality at the opportunity cost of buying something else, due to the higher cost
What is the importance of an opportunity cost to a producer?
Choosing to sell a good at a higher price may incur the opportunity cost of the demand for that good
What is the importance of an opportunity cost to the government?
Choosing to invest money into different departments (e.g. Education) has the opportunity cost of investing it in other areas (e.g. Healthcare)
Define normative statement
a statement based upon opinion and judgement
Define positive statement
a statement based on solid facts which can be tested and proven as true or false
Give the 10 possible business objectives
Profit Maximisation Sales Maximisation Satisficing Survival Market Share Cost Efficiency Return on Investment Employee Welfare Customer Satisfaction Social Objectives (CSR)
Define Satisficing
Wanting to make profits without profit maximising (profits are important but not the be all and end all)
What is CSR?
Corporate Social Responsibility - donating parts of the profits to charities and foundations to help improve the world
Define stakeholder
Someone who has an interest in the firm
Give 6 examples of stakeholders
Staff Shareholder Union Supplier Pressure Group Customer
