Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics > Consumers and Business > Flashcards

Consumers and Business Flashcards

1
Q

What is consumer sovereignty?

A

Consumer demand for products that determines production and resource allocation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What do consumers achieve by having sovereignty?

A

enforce technical efficiency - produce goods at the least cost to maximise profit
enforce allocative efficiency - allocate resources in a way to satisfy consumer preferences
enforce dynamic efficiency - responding to changing consumer preferences and technological improvements over time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the four factors that diminish consumer sovereignty?

A
  1. Marketing
  2. Misleading or deceptive information
  3. Planned obsolescence
  4. Monopoly Behaviour
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How does marketing diminish consumer sovereignty?

A

Advertisements exert a powerful influence over the spending patterns of consumers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How does misleading or deceptive information diminish consumer sovereignty?

A

False or misleading claims about a product, leading them to pay for items that they do not really want to buy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How does planned obsolescence diminish consumer sovereignty?

A

Sometimes firms produce goods that are designed to wear out quickly in order to keep consumers buying their products, allowing them to manipulate consumer behaviour (eg iPhones)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How does monopoly behaviour diminish consumer sovereignty?

A

Firms that operate in a market where there are limited suppliers diminish consumer sovereignty, as the ability to choose is diminished

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What does Y = C + S mean?

A

Y = disposable income (after tax)
C = consumption
S = savings
The equation indicates that an increase in consumption will lead to a decrease in savings, vice versa

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is APC?

A

The proportion of an individual’s total income that is spent on consumption is called the average propensity to consume, calculated using the equation C/Y=APC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is APS?

A

The proportion of an individual’s total income that is saved is known as the average propensity to save, S/Y=APS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the minor factors influencing decisions?

A
  1. Cultural factors
  2. Personality factors
  3. Consumer confidence and future expectations
  4. Future spending plans
  5. Tax Policies
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How does income impact APC and APS?

A

As income rises, people tend to save more of their income, therefore APS rise and APC falls.
Consumers on lower incomes spend proportionately more of their disposable income - APC>APS and vice versa

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is MPC?

A

The proportion of each extra dollar of income that goes to savings. ΔS/ΔY=MPS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is MPS?

A

The proportion of each extra dollar of income that is consumed. ΔC/ΔY=MPC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What does MPC + MPS equal?

A

Since every extra dollar must be either spent or saved, MPS+MPC=1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the life cycle theory of consumption?

A

The life cycle theory of consumption tries to explain the consumption pattern of an individual over a lifetime. It states that an individual plans his/her consumption and savings pattern based on their anticipated life income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the 6 factors affecting consumer choice?

A 
Income
Price
Price of Substitutes
Price of Complements
Preferences/Tastes
Advertising
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How does income impact consumer choice?

A

The higher the level of income of a person, the more they can purchase, and higher quality

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How does price impact consumer choice?

A

Necessities: people will purchase regardless of price change
Consumers are likely to reduce their demand for other goods such as luxury goods as price increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How does price of substitutes impact consumer choice?

A

If the price of a substitute rises, consumers will be more willing to purchase the original good and vice versa

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

How does price of complements impact consumer choice?

A

If the price of a complement rises, consumers will be less likely to purchase the original good and vice versa

22
Q

How does preferences/taste impact consumer choice?

A

Consumers will generally buy the good that gives them the highest level of personal satisfaction

23
Q

How does advertising impact consumer choice?

A

Can generate demand and convince consumers they need/want the good.

24
Q

What are the sources of income from each other 4 factors of production?

A 
Labour = Wages
Land = Rent
Capital = Interest
Enterprise = Profit
25
Q

What is social welfare?

A

Income is collected through taxation and reallocated from the government to consumers. A candidate for social welfare may be someone who is:
- Disabled
- Old age [pension]
- Family benefits
- Unemployed
Social welfare is aimed to provide a minimum “safety net” which allows consumers to buy the necessities for life.

26
Q

What is the definition of a firm and industry?

A

A business firm is an organisation involved in using entrepreneurial skills to combine the factors of production in order to produce a good or service and create a profit.

An industry is a collection of business firms that are involved in making the same product and generally compete with each other.

27
Q

What are the 3 production decisions a business must make?

A

Businesses must determine what to produce, how to produce and how much to produce. In a free-market economy, these are generally determined by the market, and consumer demand.

28
Q

What is “what to produce” determined by?

A

The skills and experience of the business operator
Consumer demand
Specific business opportunities (ie. a region where there is less competition/niche market)
Amount of capital required

29
Q

What is “how much to produce” determined by?

A

The level of consumer demand for the product/service. A business may commission market research

30
Q

What is “how to produce” determined by?

A

How to combine inputs in order to create outputs.
Depends on the relative efficiency of the 4 factors of production
The entrepreneur must create an operation plan

31
Q

What is the main goal of a firm?

A

Profit Maximisation:

  1. Defined as making the biggest profit or smallest loss.
  2. Profit is the total difference between the firm’s total revenue and the cost of production.
  3. This goal can also lead to economic growth, employment, regional development, infrastructure development and production capacity.
32
Q

What are the other goals of firms?

A

Meeting Shareholder Expectations - Company directors make decisions to serve the interests and meet the expectations of all owners of the business

Maximising Growth - Accumulating assets in order to grow the business and dominate the market more over time

Increasing Market Share - More emphasis on increasing sales which could mean sacrificing profits in the short term

Satisficing - Pursuing a satisfactory level in all goals rather than maximising a single goal

33
Q

What is productivity?

A

Productivity refers to the quantity of goods and services the economy can produce with a given amount of inputs.
OUTPUT PER UNIT OF INPUT PER UNIT OF TIME

34
Q

What is production?

A

Production: total amount of goods and services produced.

35
Q

What does increased productivity result in for businesses?

A

Increased productivity allows a firm to satisfy a greater number of wants using the same resources.

36
Q

How do firms increase productivity?

A

In order to increase productivity, we need to increase production proportionately more than the increase in inputs of resources. This stimulates an increase in outputs per unit of inputs

37
Q

What does higher productivity mean for the economy?

A

Higher productivity =

  • A higher standard of living
  • Less wastage of resources
  • Lower production costs and higher profits
  • Lower inflation rate
  • Higher-income
  • Improved international competitiveness
38
Q

What is specialisation?

A

Using the factors of production more intensively for a smaller number of the production processes.

39
Q

What are the 3 ways of specialisation?

A

Division of labour - A person is trained to do one specific job
Location of industry - A number of businesses producing similar goods and services congregate in the same area to reduce production costs by sharing a common infrastructure
Large-scale production - When a business grows so large it can use highly specialised capital

40
Q

What is the technical optimum on the LRAC curve?

A

The point at which per-unit costs of production are minimum.

41
Q

What are internal economies of scale?

A

Internal economies of scale are the cost-saving advantages that are a result of a firm expanding its scale of operations. Economies of scale are achieved when average costs per unit of production fall as output increases. BELOW TECHNICAL OPTIMUM

42
Q

What are internal diseconomies of scale?

A

Internal diseconomies of scale are the cost disadvantages faced by a firm as a result of a firm expanding its scale of operations beyond a certain point. Generally related to management problems. As the size of the business grows, management may become inefficient in organising all areas of production. ABOVE TECHNICAL OPTIMUM.

43
Q

What are external economies/diseconomies of scale?

A

External economies and diseconomies of scale are the advantages/disadvantages that accrue to a firm because of external factors (eg. the growth of an industry in which the firm is operating in, not changes their own operations)

44
Q

What is the impact of production methods on investment, technology and ethical decisions by firms?

A

Investment - Capital goods vs consumer goods (capital goods expand future productive capacity of economy)

Technology - Makes production cost lower, less labour intensive, more efficient

Ethical - Firms may consider social interests (ie no sweat shops)

45
Q

What is the impact of prices on investment, technology and ethical decisions by firms?

A

Investment - Firms can charge a lower price because investment in capital lowers production costs
Technology - New tech has lowered prices because of comparison shopping
Ethical - Pricing decisions for demerit goods have an ethical component (ie Alcohol)

46
Q

What is the impact of employment on investment, technology and ethical decisions by firms?

A

Investment - N/A
Technology - Makes some jobs redundant, but also creates new ones (ie IT)
Ethical - Affirmative action and anti-discrimination

47
Q

What is the impact of output on investment, technology and ethical decisions by firms?

A

Investment - Large production runs and better quality products
Technology - Better quality products and responses to change in demand
Ethical - N/A

48
Q

What is the impact of profits on investment, technology and ethical decisions by firms?

A

Investment - Can over invest and reduce profits
Technology - N/A
Ethical - Could improve consumer loyalty and with-it, profits

49
Q

What is the impact of types of products on investment, technology and ethical decisions by firms?

A

Investment - N/A

Technology - Customisation (can improve profitability of small production runs)

Ethical - Production of organic food, renewable energy and recycled products. Planned obsolescence

50
Q

What is the impact of globalisation on investment, technology and ethical decisions by firms?

A

Investment - Provides a source of finance for investment
Technology - Technology driving globalisation (faster financial transactions, low cost communication and new markets)
Ethical - Differing wages, working conditions and environmental policies between contries

51
Q

What is the impact of environmental sustainability on investment, technology and ethical decisions by firms?

A

Investment - Consumers may demand sustainable production
Technology - New tech makes environmental sustainability possible
Ethical - Drives environmental sustainability

Economics (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions