Flashcards in Basic Terms Deck (42):
What are Factors of Demand?
Factors which influence what we purchase
What are the four factors of demand?
1. The price of the product itself
2. The price of complementary products
3. The price of substitute products
4. Our personal tastes and preferences
What are complementary products?
A pair of products that are connected to each other- an increase in sales for the first product would increase the demand for the second product.
Example; cars and petrol, seeds and fertiliser
What are substitute products?
Products that are very similar - if the price of one changes it will impact the demand for the other product.
Example: If Coke were to become expensive, the demand for Pepsi would increase
What factors can influence our personal tastes and preferences?
Our peers, marketing, celebrities, the media etc.
What does the price of the product itself determine?
It determines whether we can justify the purchase.
What is economics?
Economics is the study of how resources are used to best satisfy society's needs and wants.
What are the four types of resources?
Land, Labour, Capital and Enterprise.
What is a land resource?
A land resource is a natural resource.
Example: farmland, trees, minerals, water etc.
What is a labour resource?
All physical and mental effort by workers.
Example: builders, farmers, engineers etc.
What is a capital resource?
A capital resource is any machinery or tool.
Example: hammer, robotics, drills etc.
What is an enterprise resource?
An enterprise resource is the idea in the production process.
What is a Need?
An item we need in order to survive.
Example: food, shelter and clothing
What is a Want?
Items which improve our lifestyle, but are not essential- luxury items.
What is Relative Scarcity?
Relative scarcity describes how our needs and wants are unlimited but the resources available to satisfy them are limited.
What is opportunity cost?
Opportunity cost describes the idea that the choices in consumption are based not on "what I want the most" but rather "what will bother me the least if I miss out on it".
What are the three basic economic questions?
What to produce?
How to produce?
For whom to produce?
What is consumer sovereignty?
When the needs and wants of the consumers control the output of producers (meaning businesses should produce goods & services that consumers actually want to purchase)
What is a cost-efficient method that producers use?
Maximising outputs for a given amount of inputs.
Example: using off cuts of food in a restaurant for other purposes (recycling the waste)
For whom should businesses produce?
The people who can pay the price will receive the products that are produced by businesses.
What is the law of Demand?
As the price decreases the quantity demanded for any product must increase.
What is the law of Supply?
As the price decreases the quantity supplied for any product must decrease.
What is a Supply and Demand Curve?
A diagram (graph) that shows the concept of supply and demand. It describes the 'market' for any good or service.
What is equilibrium?
A situation in which supply and demand are matched and prices are stable.
If the price of a product is too high, causing excess supply (due to fewer purchases) it is known as?
Oversupply or Surplus
If the price of a product is low and there is an excess in demand (leaving an insufficient amount of the product) it is known as?
What is the invisible hand?
A market force that helps the supply and demand of a product reach equilibrium automatically.
What are the three main types of ownership structure?
Sole trader: if the business is owned by just one person eg. milk bars, hairdressers etc.
Partnership: if you own a business with anywhere between 2 and 20 people eg. doctors, lawyers
Private listed company: when the business has between 1 and 50 private shareholders eg. Aldi super markets, Tattersalls
Define entrepreneur and enterprising
Entrepreneur- a person willing to take risks and start new business ventures to make money.
Enterprising- having the ability and capacity to initiate ideas and do something about them.
What is inflation?
Is an average rise in the general level of prices of goods and services over a period of time, leading to a reduction in the purchasing power of money. eg. $5 in old days bought more than what it can buy now days.
What is a small business?
A small business is an independently owned and operated business with less than 50 employees.
What businesses does the private sector consist of?
Sole trader businesses
Businesses owned by private individuals who exchange goods and services with consumers in order to make a profit.
What is the public sector made up of?
The three levels of government- Local, State and Federal
What's the difference between private and publicly listed companies?
Private listed companies are privately owned by the founders, management or a group of private investors. If the company offers all or a portion of itself to investors via an initial public offering, the company becomes a publicly listed company as any shareholder has claim to part of the companies assets and profits.
What are the advantages and disadvantages of being a sole trader?
Advantages- all business decisions are made by you, you get to keep all the profit, it's cheaper to set up
Disadvantages- can be difficult to obtain financing to start and maintain, if the business goes broke, your personal assets can be sold off to recoup any outstanding debts. (unlimited liability)
What are the advantages and disadvantages of having a partnership?
Advantages- greater access to resources and money, broader range of expertise, shared workload.
Disadvantages- unlimited liability (personal belongings used to settle debts), hard to leave agreement, cam lead to disagreements.
What are the advantages and disadvantages of having a private listed company?
Advantages- the personal assets of the owners won't be affected if the company goes bankrupt (limited liability), easier to access finance, it is easier to leave the company
Disadvantages- it's more expensive to register a company name, you have less input in the day to day running of the business.
What is a gap in the market?
A gap in the market is an unmet consumer need or potential customers who are not yet purchasing a good or service. Gaps in the market represent opportunities for companies to expand their customers base by creating products to reach a new untapped market.
What is a market economy?
A system where the prices of goods and services are determined by open market and its consumers/producers. Companies sell goods and services at the highest price consumers are willing to pay, while workers demand the highest wages that companies are willing to pay for their services.
What is a command/planned economy?
A system where the government determines how and why things should be produced and for what price.
What is a cost benefit analysis (CBA)?
A way business owners can estimate and analyse business decisions. (Like a pros/cons list)
Cost: any negative effect on an organisation which occurs due to the execution of the project.
Benefit: any positive effect on the organisation resulting from completing the project.