Business in the Market Economy Flashcards
What is an industry?
The collection of firms involved in making a similar range of items that compete with eachother
Explain what may influence what to produce (x4)
The skills and experience of the business operator - a person is more likely to be successful operating in an industry they know
Industries where there is strong demand - an entrepreneur is more likely to be attracted to an industry where there is rapid growth as they are more likely to find business expanding opportunities
Specific business opportunities - an individual might find an attractive business opportunity e.g. a region may not have a particular business
The amount of capital required to start up the business
What is a niche market?
A segment of a mass market for a good or service, defined by specific tastes or characteristics of the target customers
How will firms decide how much to produce?
How much to produce will be based on the firm’s assessment of the level of consumer demand and its ability to convert that demand into sales
How will a firm decide how to produce?
A firm’s decision about how to produce depends upon the relative efficiency of the four factors of production which can change over time
How do businesses contribute? (x3)
- Growing businesses employ more people and reduce unemployment
- Businesses contribute to regional development, driving economic growth in regional communities which can lead to better infrastructure and improved livability
- Businesses can increase an economy’s productive capacity over time, reflected in an outward shift in the PPF
Goals of the firm (x4)
Maximising profits - making the biggest possible profit or the smallest possible loss - the main objective of most firms
Meeting shareholder expectations - serving the interests of the shareholders
Increasing market share - more sales and a competitive advantage
Maximising growth - maximise the rate of growth of the firm’s assets, bringing in higher profits in the long run
Satisficing behaviour - firms seek to achieve a satisfactory level of attainment in each area
What is satisficing behaviour?
The idea that firms will attempt to pursue a satisfactory level in all goals (profit, sales) rather than maximising a single goal
What is profit motive?
Where a business seeks to maximise profit by using the lowest cost combination of resources and charging the highest price
What is productivity?
The quantity of goods and services the economy can produce with a given amount of inputs such as capital and labour
What is production?
The total amount goods and services produced
Contributions of productivity on living standards
Less wastage of our scarce resources - as each factor of production can produce more in a given period, it costs less to produce the same quantity of goods and services
A lower inflation rate - Due to lower production costs, firms do not have to raise the prices of goods
Higher incomes - since labour is more productive, firms can afford to pay better wage rates to workers without increasing prices
Improved international competitiveness of Australia’s industries - increased productivity compared with foreign businesses will make Australian goods more competitive on local and international markets
What is specialisation of labour?
When businesses break down their production processes into a number of sub-processes allowing labour to specialise in a particular part of the process
What is location of industry?
When a large number of businesses that produce similar goods and services position themselves in the same area to reduce production costs by sharing common infrastructure requirements e.g. Macquarie Park technology industries
What is large scale production?
When businesses grow so large that they can use highly specialised capital in their production process
