mocks revision

Question 1

Economic Growth - causes

Answer 1

new technology
improved efficiency
education and training
more resources

Question 2

Negative Economic Growth - causes

Answer 2

Resource depletion
Weather patterns
Educated and experienced people move overseas
Wars, natural disasters and conflict

Question 3

causes of shifts in demand curve

Answer 3

Tastes and fashion
Income (disposable income, shift right for normal goods, left for inferior goods)
Direct taxes
Weather (when it affects what consumers buy)
Price of complementary goods
Price of substitute goods
Interest rates
Advertising
Changes in population (age, gender, graphical distribution, ethnicity)

Question 4

causes of shifts in supply curve

Answer 4

Natural factors (natural disasters and weather)
Costs of production
Changes in technology
Subsidies
Indirect taxes (if they increase supply will shift left)
Availability of resources
Price of other goods

Question 5

equilibrium price

Answer 5

Equilibrium price / market clearing price - price at which supply and demand are equal and amount supplied is completely bought up by consumers.

Question 6

PED formula

Answer 6

%changeQD/%changeP

Question 7

%change formula

Answer 7

old

Question 8

Perfectly price inelastic demand

Answer 8

Demand where PED = 0 (a change in price will result in no change in quantity demanded)

Question 9

Price inelastic demand

Answer 9

Change in price results in proportionally smaller change in quantity demanded.
PED < 1 ( fraction or decimal, ie. -0.5)

Question 10

Unitary price elasticity of demand

Answer 10

Where PED = -1 ( the responsiveness of demand is proportionally equal to the change in price.

Question 11

Price elastic demand

Answer 11

Change in price results in greater change in quantity demanded.
PED > 1 (ie. -2.5)

Question 12

Perfectly price elastic demand

Answer 12

Demand where PED = ∞ (increase in price will result in 0 demand)

Question 13

d) The factors influencing PED, including:

Answer 13

Availability of substitutes
Degree of necessity (need/habit/addiction)
Percentage of income spent on product
Time (ie. after the change in price )

Question 14

Perfectly price inelastic supply

Answer 14

PES = 0
Quantity supplied is fixed and can’t e adjusted whatever the price

Question 15

Price inelastic supply

Answer 15

where PES < 1 ( a fraction or decimal )
a change in price will result in proportionally smaller change in quantity supplied.

Question 16

Unitary price elasticity of supply

Answer 16

where PES is equal to 1,
so a change in price will result in an identical change in quantity supplied.

Question 17

Price elastic supply

Answer 17

PES > 1
Change in price results in a proportionally greater change in quantity supplied.

Question 18

Perfectly price elastic supply

Answer 18

where PES = infinite
suppliers will supply an infinite amount at a given price

Question 19

d) The factors influencing PES, including:

Answer 19

factors of production needed (if resources are available/mobile, PES is elastic)
availability of stock (if stocks they can respond quickly to price changes so elastic, perishable goods are inelastic)
spare capacity (output can be increased in short notice)
time (the more time producers have to react, the more elastic supply will be)

Question 20

PRIV SECTOR AIMS

Answer 20

Aims are determined by owners:
Survival (especially initially or in struggle periods)
Profit maximisation
Growth
Social responsibility

Question 21

PUB SECTOR AIMS

Answer 21

Aims vary between organisations but generally include:
Improving quality of services
Minimising costs (government resources are scarce)
Allowing for social costs and benefits ( as they don’t aim to make a profit they can take externalities into account)
Profit (sometimes)

Question 22

b) Why governments might need to intervene because of market failure

Answer 22

Externalities - not taking into account the costs of production
Lack of competition (monopolies exploit consumers)
Missing markets (public/merit goods that are not provided or underprovided by private sector)
Lack of information
Factor immobility (if factors are in mobile it is wasteful)

Question 23

Government can intervene by:

Answer 23

regulate/fine businesses with externalities (ie. fine pollution)
Use legislation to prevent lack of competition (ie. prevent merger)
Public sector can provide public/ merit goods (ie. street lamps)
Lack of info can be prevented by legislation and internet
Some factors can become more mobile (such as people by retraining) but little can be done for specialised machines

Question 24

b) Factors that affect productivity

Answer 24

land – use of fertilisers, drainage, irrigation, reclamation, genetically modified crops
labour – quality of labour, including improved human capital through education and training, improved motivation, improved working practies and impact of migration
capital – increased quantity is employed and technological advances imporve efficiency, often at the expense of labour

Question 25

division of labour -advantages to workers

Answer 25

Worker becomes more skilled at doing a specific task, therefore they will find employment more easily in this skill in future More highly skilled means they are more likely to get paid more May enjoy more job satisfaction if they feel they are highly skilled at a specific task

Question 26

division of labour - adv to business

Answer 26

Efficiency is improved as workers can work more efficiently and accurately Greater use of specialist tools, machinery and equipment is possible, which further improves efficiency Production time is reduced as workers do not have time to move from one place to another Organisation of production is easier (they can fit more easily into structured production system like assembly line)

Question 27

division of labour disadvantages to workers

Answer 27

Work can become boring because it is repetitive (especially if little skill is required) which can lead to job dissatisfaction and affect motivation Repetitive tasks can also have health implications such as joint wea If they are too specialised they might have a higher risk of unemployment if there only skill is no longer needed or difficulty finding a job if little jobs require their skill

Question 28

disadvantages to businesses division of labour

Answer 28

If its too repetitive and boring and people become dissatisfied then they will produce low quality work, not arriving on time, and increased rates of absence and staff turnover - which would reduce productivity and impact profitability Probloems can occur if a stage of production depends on another, and if one breaks down all of the stages have to be stopped (interdependance) Specialisation results in a loss of flexibility in workplace

Question 29

c) Types of internal economies of scale

Answer 29

Purchasing (bulk buying) Marketing Technical Financial Managerial Risk bearing

Question 30

e) Types of external economies of scale

Answer 30

skilled labour infrastructure access to suppliers similar business area

Question 31

g) Types of diseconomies of scale

Answer 31

bureaucracy communication problems lack of control distance between top management and workers at the bottom of the organisation

Question 32

b) Reasons firms grow

Answer 32

size of the market government regulation access to finance economies of scale the desire to spread risk the desire to take over competitors

Question 33

c) Reasons firms stay small:

Answer 33

size of the market and nature of the market –niche government regulation lack of finance Diseconomies of scale aims of the entrepreneur

Question 34

Small Firms: Advantages:

Answer 34

Flexibility (can quickly adapt to change as owners are actively involved in business) Personal service Lower wage costs (workers dont belong to trade unions and they can be paid the minimum wage) Better Communication (informal and rapid) Innovation

Question 35

Small Firms: Disadvantages:

Answer 35

Higher costs (can’t exploit economies of scale) Lack of finance Difficulty attracting quality staff Vunnerability (risk of takeovers and harder to survive when trading conditions worsen)

Question 36

Large Firms: Advantages

Answer 36

economies of scale Market domination Large-scale contracts

Question 37

Large Firms: Disadvantages

Answer 37

Too bureaucratic Difficulty to coordinate and control Poor motivation (effort by a single person seems insignificant)

Question 38

c) Advantages and disadvantages of monopolies

Answer 38

Advantages: Efficiency (natural monopolies) Innovation Eocnomies of scale Disadvantages Higher prices Restricted choice Lack of innovation inefficiency

Question 39

c) Advantages and disadvantages of oligopolies

Answer 39

Advantages: Choice Quality Eocnomies of scale Innovation Price wars Disadvantages Collusion or cartels

Question 40

a) Factors that shift supply of labour:

Answer 40

Population size Migration Age distribution of the population Retirement age School-leaving age Female participation Skills and qualifications Labour Mobility (Ability to move geographic locations / move to different types of employment)

Question 41

b) Factors that shift demand for labour:

Answer 41

Demand for the final product (derived demand) Availability of substitutes, including machines Productivity of the workforce Other employment costs (they also have to pay for workers pensions, for example, and if these get too expensive then it could affect demand)

Question 42

b) Reasons for minimum wage & c) Advantages and disadvantages of minimum wage

Answer 42

They benefit disadvantaged workers as they reduce inequality Help reduce social gap between rich and poor Benefit government (more tax comes from more income, and workers need to claim less welfare benefits from state) Higher wages motivate workers, bootsing productivity Improve productivity, by making workers work harder to justify wages or by replacing inefficient workers with machinery