Consumers and Business

Question 1

consumer sovereignty

Answer 1

the consumer dictates what the market produces and the market will produce what the consumer wants

Question 2

influence on consumer choice - income

Answer 2

more disposable income, greater consumption. Lower income = less disposable income after tax and necessities

Question 3

influence on consumer choice - price

Answer 3

the lower the price of a good, the more likely consumers are to purchase it.

Question 4

influence on consumer choice - price of subs

Answer 4

if there is a cheaper substitute, consumers may choose the sub

Question 5

influence on consumer choice - price of complements

Answer 5

if the price of complements increases, demand for the original will drop

Question 6

influence on consumer choice - preferences/tastes

Answer 6

all consumers differing tastes/preferences

Question 7

influence on consumer choice - advertising

Answer 7

designed to shift consumer patterns

Question 8

wages

Answer 8

resulting from contributing labour to the production process

Question 9

rent

Answer 9

return on the ownership of property

Question 10

interest

Answer 10

return from lending your savings to financial institutions

Question 11

profits

Answer 11

the share of business that owners receive

Question 12

social welfare

Answer 12

government provided income for unemployed people, pensioners, disabled people, youth allowances and family allowances

Question 13

economic/production decisions of a firm

Answer 13

• what to produce
• how to produce it
• how much to produce
  (whom to distribute)

Question 14

goals of a firm

Answer 14

maximise profit/maximise growth/ increase market share/meet shareholder expectations/ satisficing

Question 15

goals of a firm - maximising profits

Answer 15

greatest positive difference between the total revenue of the firm and the total cost of production

Question 16

goals of a firm - maximising growth

Answer 16

maximising growth in business assets (e.g. machinery) to ensure the survival of the firm in the long term

Question 17

goals of a firm - increasing market share

Answer 17

market share is the portion of the market controlled by a firm. Greater market share will ensure that the firm increase its profitability over time

Question 18

goals of a firm - meeting shareholder expectations

Answer 18

shareholders expect the business to increase its profits, share price, dividends, capital growth and maintain a sound corporate image

Question 19

goals of a firm - satisficing

Answer 19

managers attempt to achieve a range of goals to satisfy all stakeholders

Question 20

productivity

Answer 20

productivity is a measure of efficiency and is the ratio of input to output

Question 21

economies of scale

Answer 21

increasing units produced decreases cost per unit

Question 22

internal economies of scale

Answer 22

within the firm’s control

• purchasing
• technical - machinery and equipment investments
• specialisation - division of labour
• financing - cheaper loans
• marketing

Question 23

external economies of scale

Answer 23

outside firms control

• local uni research
• improved transport facilities
• relocation of suppliers to production areas
• proximity to skilled labour force

Question 24

diseconomies of scale

Answer 24

increase in the scale of production leads to higher average costs

• morale
• communication
• coordination
• control

Question 25

factors that influence consumer choice

Answer 25

income/price/price of subs/ price of complements/ preferences/tastes/advertising

Question 26

sources of income for households

Answer 26

wages, rent, interest, profits, social welfare