Micro Economic Factors Flashcards Preview

ACCA: F1: A: The Business Organisation, Stakeholders and the External Environment > Micro Economic Factors > Flashcards

Flashcards in Micro Economic Factors Deck (41)
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1

The micro environment refers to...

the immediate operational environment including:
1. Suppliers
2. Customers
3. Stakeholders and
4. Intermediaries

2

Drucker holds that to generate a profit, it is necessary to...

...create a customer - the distinguishing characteristic of business organisation

3

The micro environment has 4 'phases':

1. Inputs (Materials, money, men, machines, minutes
2. Organisation (Functions, structure, management, systems and procedures, staff, culture, competencies and skill, strategy, mission, objectives and goals)
3. Outputs (Added value, goods, services, knowledge, information, stakeholder satisfaction, social consequences)
4. Consumption

4

Mullins identifies at least 4 factors required by all organisations to function:

1. People; human interactions
2. Objectives
3. Structure
4. Management

5

The 'customer value proposition' consist of...

the sum total of benefits which a vendor promises that a customer will receive in return for their associated payment
(what the customer gets for what the customer pays!)

6

Value propositions can be evaluated on 2 dimensions:

1. Relative performance (relative to competitors)
2. Price (Payment + access cost)

7

A market can be defined as...

a situation in which potential buyers and potential sellers of a good or service come together for the purpose of exchange

8

Utility describes...

the pleasure, satisfaction or benefit derived by a person from the consumption of goods

9

Marginal utility is...

the satisfaction gained from consuming 1 additional unit of a good or the satisfaction foregone by consuming 1 unit less

10

Assumption: Customers act rationally meaning...

1. Consumers prefer more goods to less
2. Providing the price is right, a consumer is willing to substitute 1 good for another
3. Choices are transitive (A over B and B over C, then A over C)

11

Demand is...

the quantity of that good or service that potential purchasers would be willing and able to buy or attempt to buy at any possible price

12

Market demand is...

The total quantity of a product that all purchasers would want to buy at each price level

13

Factors affecting demand for a good: (6)

1. Price
2. Household's income
3. Price of substitutes
4. Tastes / fashion
5. Expectations of price changes
6. Distribution of income

14

Ceteris paribus means...

'all other things remain equal'

15

Substitutes are...

...goods that are alternatives to each other;
Swtiching demand from 1 good to another 'rival' good

16

Complements are...

goods that tend to be bought and used together

17

Elasticity is...

the relationship between 2 variables

18

Price elasticity of demand explains the relationship between...

Change in quantity demanded and changes in price

19

The coefficient of PED =

% change in quantity demanded /
% change in price

20

Income elasticity of demand indicates...

the responsiveness of demand to changes in household incomes

21

Income elasticity in demand =

% change in quantity demanded /
% change in income

22

Normal goods are those goods...

whose income elasticity of demand is positive; demand for them will rise when household income rises

23

Inferior goods are those goods...

whose income elasticity of demand is negative; demand for them falls as income rises

24

Necessities have an elasticity of demand...

which is inelastic; between 0 and 1

25

Cross elasticity of demand is...

the responsiveness of quantity demanded for 1 good following a change in price of another good

26

Cross elasticity of demand =

% change in quantity demanded of good A /
% change in the price of good B

27

Indices tending towards 0 and 1:

Indices tending towards 1 or -1 indicate a strong relationship
Indices tending towards 0 indicate a weak relationship

28

Demand curves shifting could be caused by: (6)

1. Rise in household income
2. Rise in price of substitutes
3. Fall in price of complements
4. Changes in taste
5. An expected rise in price
6. Population increase

29

Shifts along a demand curve are called...

movements (expansions / contractions) and are caused solely by changes in price

30

Shifts in demand curves are called...

shifts in demand and are caused by variations in the conditions of demand