microeconomic decision makers

Question 1

Money- an item which is generally acceptable as a means of payment

Question 2

Commercial banks- banks which aim to make a profit by providing a range of banking services to households and firms

Question 3

Central bank- a government-owned bank which provides banking services to the government and commercial banks and operates monetary policy

Question 4

Liquidity - being able to turn an asset into cash quickly without a loss

Question 5

Disposable income- income left after income tax has been deducted and state benefits received

Question 6

Wealth- a stock of assets

Answer 6

including money held in bank accounts

Question 7

Rate of interest- a charge for borrowing money and a payment for lending money

Question 8

Average propensity to consume (APC) - the proportion of household disposable income which is spent

Question 9

Consumption- expenditure by households on consumer goods and income

Question 10

Savings ratio- the proportion of household disposable income that is saved

Question 11

Average propensity to save (APS)- the proportion of household disposable income that is saved

Question 12

Mortgage- a loan to help buy a house

Question 13

Earnings- the total pay received by a worker

Question 14

Wage rate- a payment which an employer contracts to pay a worker. It is the basic wage a worker receives per unit of time or unit of output.

Question 15

National minimum wage (NMW) - a minimum rate of wage for an hour’s work

Answer 15

fixed by the government for the whole economy.

Question 16

Elasticity of demand for labour- a measure of the responsiveness of demand for labour to a change in the wage rate

Question 17

Elasticity of supply of labour- a measure of the responsiveness of the supply of labour to a change in the wage rate

Question 18

Specialisation - the concentration on particular products or tasks

Question 19

Division of labour- workers specialising in particular tasks

Question 20

Trade union- an association which represents the interests of a group of workers

Question 21

Collective bargaining- representatives of workers negotiating with employers’ associations

Question 22

Industrial action- when workers disrupt production to put pressure on employers to agree to their demands

Question 23

Industry- a group of firms producing the same product

Question 24

Primary sector- covers industries which extract natural resources

Question 25

Secondary sector- covers manufacturing and construction industries

Question 26

Tertiary sector- covers industries which provide services

Question 27

Quaternary sector- covers knowledge-based service industries

Question 28

internal growth- an increase in the size of a firm resulting from it enlarging existing plants or opening new ones

Question 29

External growth- an increase in the size of a firm resulting from it merging or taking over another firm

Question 30

Horizontal merger- the merger of firms producing the same product and at the same stage of production

Question 31

Vertical merger- the merger of firms producing the same product but at a different stage of production

Question 32

Vertical merger backwards- a merger with a firm at an earlier stage of the supply chain

Question 33

Vertical merger forwards- a merger with a firm at a later stage of the supply chain

Question 34

Conglomerate merger- a merger between firms producing different products

Question 35

Internal economies of scale - lower long-run average costs resulting from a firm growing in size

Question 36

External economies of scale - lower long-run average costs resulting from an industry growing in size

Question 37

Internal diseconomies of scale - higher long-run average costs arising from a firm growing too large

Question 38

External diseconomies of scale - higher long-run average costs arising from an industry growing too large

Question 39

Total cost- the total amount that has to be spent on the factors of production used to produce a product

Question 40

Average total cost - total cost divided by output

Question 41

Fixed costs- costs which do not change with output in the short run

Question 42

Average fixed cost- total fixed cost divided by output

Question 43

Variable cost- costs that change with output

Question 44

Average variable cost- total variable cost divided by output

Question 45

Price- the amount of money that has to be given to obtain a product

Question 46

Total revenue- the total amount of money received from selling a product

Question 47

Average revenue- the total revenue divided by the quantity sold

Question 48

Profit satisficing - sacrificing some profit to achieve some goals

Question 49

Profit maximisation - making as much profit as possible

Question 50

Market structure- the conditions which exist in a market

Answer 50

including the number of firms

Question 51

Competitive market- a market with a number of firms that compete with each other

Question 52

Monopoly- a market with a single supplier

Question 53

Barrier to entry- anything that makes it difficult for a firm to start producing the product

Question 54

Barrier to exit- anything that makes it difficult for a firm to stop producing the product

Question 55

Scale of production- the size of production units and the methods of production used