AOS 1.2

Question 1

economic agents

Answer 1

participants in the economy ( consumers, businesses and gov)

Question 2

public sector

Answer 2

the part of the economy owned or controlled or operated by the government

Question 3

private sector

Answer 3

businesses owned and controlled by individuals, not governments. almost all are run in order to make profit (except for things like charities)

Question 4

consumer behaviour

Answer 4

the study of why, how, where and when
consumers choose to purchase or not purchase a product.

Question 5

what are the 4 types of consumer behaviour

Answer 5

Self-interest and rationality

Maximisation of utility

Maximise marginal utility from
consumption

Informed decision-making

Question 6

Consumer self-interest and rationality

Answer 6

assumes that consumers behave in a rational, logical, self-interested and calculated way
In other words, make purchase decisions based on what makes you most happy –
don’t worry about what makes other consumers most happy

Question 7

being rational as a consumer

Answer 7

means acting in accordance with the things you are looking for when purchasing a product

Question 8

maximisation of utility

Answer 8

consumers will choose products that maximise their total utility
Utility refers to the satisfaction you get from consuming a product

Question 9

maximise marginal utility from consumption

Answer 9

Marginal utility refers to the extra
satisfaction/utility gained from
consuming additional quantities of a
product

Question 10

informed decision making

Answer 10

before purchasing a product, consumers try to collect and analyse factual information so that they can weigh up the potential advantages and disadvantages

Question 11

incentive (positive )

Answer 11

encourages or motivates someone to do
something

Question 12

disincentive (negative)

Answer 12

encourages or motivates someone not to do
something

Question 13

Positive financial incentives

Answer 13

Consumers
- Bulk discounts
- clearance sales
- discounts for new customers, early payment

workers
- performance based bonus
- tips
- higher pay after promotion, Sunday, public holiday

Question 14

subsidy

Answer 14

financial aid given from government to producers generally in form of money

Question 15

why does government offer subsidies

Answer 15

want to encourage producers to produce more of a certain product, benefit the community, encourage good behaviour

Question 16

tax rebates

Answer 16

The government also uses tax rebates as an incentive to try to encourage consumption of a good or service considered desirable or
beneficial.

Tax rebates are a tax discount — they reduce the amount of tax paid on products purchased by consumers or they reduce the amount of income
tax payable by consumers who purchase particular products

Question 17

Positive non-financial incentives

Answer 17

consumers
- priority (vip) access
- extended product warranty
- faster delivery
- gift wrapping

workers
- time off
- promotion to more senior title
- bigger or better located desk/ office
- employee of month

Question 18

Negative financial incentives

Answer 18

consumers
- late payment penalty
- High interest rates on unpaid
credit card balances
- Higher costs for bookings made
later,
- Fines for bad behaviour

workers
- Arrive late
- Poor performance
- Non-attendance not supported
by valid reason
- Demotion

Question 19

indirect taxes

Answer 19

a tax imposed on the consumption of specified prodicts
Governments sometimes impose indirect taxes on the consumption of goods that they want to discourage because these products are dangerous for buyers
or have bad effects on the broader community. they do this by making it more expensive therefore less appealing eg on cigs

Question 20

government regulations

Answer 20

often preventing the consumption of particular goods and services.

For instance, there are regulations about underage drinking and vaping, wearing bike helmets, Recreational drugs and certain steroids

Failure to comply with regulations may result in fines or other penalties for
consumers.

Question 21

Negative non-financial incentives

Answer 21

consumers
- Consumption ban (eg ejected
from club, casino)
- humiliation
- loss of membership
- Limits on quantities of
purchases

workers
- Formal or informal warnings
- Negative remarks in front of
co-workers
-Transfer to less desirable
location
-Allocation of less desirable
shifts

Question 22

profit maximisation

Answer 22

maximising revenue and minimising expenses to make as much money as possible for business

profit = revenue - expenses

Question 23

incentives and discentives for businesses

Answer 23

incentives- subsidies, tax rebates
discentives- direct tax, regulations

Question 24

Why government gets involved in the economy

Answer 24

in order to maximise living standards

Question 25

living standards

Answer 25

Living standards refer to a society’s general level of well-being

Question 26

material

Answer 26

measured by individuals access to goods and services – how much stuff can you purchase? Generally, the higher your income, the more stuff you can purchase and the higher your material living standard

Question 27

non material

Answer 27

– measured by the impact that non-material factors have on an individual’s quality of life. Things like leisure time, crime rates, pollution levels and mental health all impact on people’s well-being

Question 28

how does gov try to improve living standards

Answer 28

Economic stabilisation Improving efficiency in resource allocation Redistribution of income to improve living standards

Question 29

economic stabalisation

Answer 29

– changing the levels of government taxation and spending in order to manage levels of economic growth And how does government do that? Spending more money and collecting less taxes when the economy is very weak and close to a trough or recession Spending less money and collecting more taxes when the economy is very strong and near the top of a boom

Question 30

Improving efficiency in resource allocation

Answer 30

So government will step in when There is not enough competition among sellers Some products that people want cannot be profitably made by businesses – so insufficient resources are being allocated to those products Some item that produce negative consequences when produced or consumed are being produced or consumed in quantities that are too high – too many resources are being allocated to that product

Question 31

Redistribution of income to improve living standards

Answer 31

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