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Economics > Section 3: Microeconomic decision makers > Flashcards

Section 3: Microeconomic decision makers Flashcards

1
Q

Define Money

A

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

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2
Q

Functions of money

A
  1. medium of exchange
  2. store of value
  3. standard of deferred payments
  4. unit of account
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3
Q

Characteristics of money

A
  1. Durable
  2. Homogenous
  3. Divisible
  4. Portable
  5. Limited Supply
  6. Generally acceptable
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4
Q

Define commercial banks

A

Banks which aim to make a profit by providing banking services to households and firms.

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5
Q

Functions of commercial bank

A
  1. Accept deposits
  2. Lend
  3. Enable customers to make payments
  4. Provide financial advice
  5. Currency exchange
  6. Sell insurance
  7. Mortgage loans
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6
Q

Define central bank

A

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

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7
Q

Aims of commercial banks

A
  1. Make a profit for its shareholders
  2. Liquidity
  3. Withdraw money from their account and meet their request
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8
Q

Role and Importance of Central bank

A
  1. Act as a banker to the government
  2. Operates as a banker to commercial banks
  3. Acts as a lender of last resort
  4. Manages national debt
  5. Holds countries reserves of foreign currency and gold
  6. Issues bank notes
  7. Implements the governments monetary policy
  8. Controls the banking system
  9. Represents the government
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9
Q

Define Wealth

A

a stock of assets including money held in bank accounts, shares in companies, government bonds, cars and property.

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10
Q

Define Rate of interest

A

a charge of borrowing money and a payment for lending money.

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11
Q

Reasons for saving

A
  1. Save to gain a particular sum of money for a particular purpose
  2. retirement, children’s future
  3. Cope with emergencies
  4. Save to increase their current income
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12
Q

Influences on Saving

A
  1. Income
  2. Wealth
  3. Rate of interest
  4. Tax treatment on savings
  5. Range and quality of financial institutions
  6. Age structure
  7. Social attitudes
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13
Q

APS Formula

A

Saving/disposable income

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14
Q

Borrowing

A
  1. Availability of loans and overdrafts
  2. Rate of interest
  3. Confidence
  4. Social attitude
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15
Q

Define Wage rate

A

a payment which an employer contracts to pay a worker.

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16
Q

Different wage factors

A
  1. Wages - salaries
  2. Overtime pay - paid in excess
  3. Bonus - an extra payment
  4. Commission - per sale
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17
Q

Non-wage factors

A
  1. Job satisfaction
  2. Type of work
  3. Working Conditions
  4. Working Hours
  5. Holidays
  6. Pensions
  7. Fringe benefits
  8. Job security
  9. Career prospects
  10. Size of the firm
  11. Location
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18
Q

Changes in demand for labour

A
  1. An increase in demand for product
  2. Rise in labour productivity
  3. Rise in the price of capital
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19
Q

Changes in the supply of labour

A
  1. A fall/rise in labour force
  2. Rise/fall in qualifications
  3. Reduction/Increment in non-wage benefits
  4. Rise/fall of wages in competitors
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20
Q

Extent to which earnings change

A
  1. Proportion of labour costs to total costs
  2. Ease with which labour can be substituted by capital
  3. Elasticity of demand for product
  4. Time period
  5. Qualifications and skills required
  6. Length of training period
  7. Level of employment
  8. Mobility of Labour
  9. Degree of vocation
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21
Q

Advantages of Division of labour

A
  1. Lower cost per unit produced
  2. Worker can focus on what they are best at
  3. Output increases
  4. High skills = high demand
22
Q

Disadvantages of Division of Labour

A
  1. Worker can get bored
  2. Costs may increase
  3. More costs for training
  4. Full use of workers talent is not being used
23
Q

Define Trade union

A

An association which represents the interests of a group of workers.

24
Q

Types of Trade Unions

A
  1. Craft Union - plumbers and weavers
  2. General Union - workers with range of skills
  3. Industrial Union - rail industry
  4. While Collar Union - pilots and teachers
25
Q

Role of Trade Unions

A
  1. Negotiate on behalf of members
  2. Protect and improve workers right
  3. Provide information about issues
  4. Pressurise government to benefit workers
26
Q

Basis of wage claims

A
  1. Paid more if working harder
  2. If profits have risen, must pay higher
  3. Other workers are being paid more
  4. Cost of living has increased
27
Q

Factors affecting strength of a trade union

A
  1. A high level of economic activity
  2. High number of workers
  3. High level of skill
  4. Consistent demand for product
  5. Favourable government legislation
28
Q

How strong strike action is:

A
  1. Number of strikes
  2. Number of workers involved
  3. Number of working days lost
29
Q

Define Strike

A

A group of workers stopping work to put pressure on an employer to agree to their demands.

30
Q

Define Industrial action

A

when workers disrupt production to put pressure on the employers to agree to their demand.

31
Q

Advantages of Trade Union

A
  1. Less time consuming
  2. Less stressful
  3. Cheaper to negotiate
  4. Useful channel of communication
  5. Encourages workers to engage in education and training
  6. Improvements in wages and working conditions can benefit non-members also
32
Q

Disadvantages of Trade Unions

A
  1. Revenue can be lost
  2. Flexibility would be affected
  3. Firms’ costs would increase
33
Q

Define Industry

A

a group of firms producing the same product.

34
Q

Size of firms

A
  1. Age of firm
  2. Availability of financial capital
  3. Type of business organization
  4. Internal economies and diseconomies of scale
35
Q

Small firms

A
  1. Small size of market
  2. Preference to consumers
  3. Owner’s preference
  4. Flexibility
  5. Technical factors
  6. Lack of financial capital
  7. Location
  8. Cooperation
  9. Specialisation
  10. Government support
36
Q

Horizontal merger Advantages

A
  1. Economies of scale
  2. Higher market share
  3. rationalisation
37
Q

Horizontal merger disadvantages

A
  1. Diseconomies of scale
  2. loss of control
38
Q

Vertical Merger advantages

A
  1. Economies of scale
  2. Control supply
  3. Increase sale
39
Q

Vertical Merger disadvantages

A
  1. Management problems
  2. difference in size
40
Q

Why do businesses grow?

A

Large Market, consumer trust, Market share

41
Q

How do businesses grow?

A

Internal and external growth

42
Q

Types of internal economies of scale

A
  1. Buying Economies
  2. Selling Economies
  3. Managerial Economies
  4. Labour Economies
  5. Financial Economies
  6. Labour Economies
  7. RND Economies
  8. Risk bearing Economies
43
Q

Types of internal diseconomies of scale

A
  1. Difficulties controlling the firm
  2. Communication problems
  3. Poor industrial relations
44
Q

External diseconomies of scale

A
  1. A skilled labour force
  2. A good reputation
  3. Specialist suppliers
  4. Specialist services
  5. Specialist markets
  6. Improved infrastructure
45
Q

Define Market structure

A

The conditions which exist in a market including the number of firms.

46
Q

Competitive market

A

a market with a number of firms that compete with each other.

47
Q

Characteristics of a monopoly

A
  1. Has 100% market share
  2. High barriers to enter and exit
  3. Price maker
48
Q

Define sunk costs

A

cost that cannot be recovered if the firms leaves the industry

49
Q

Advantages of a monopoly

A
  1. Unit cost and price may be lower than competitive market
  2. More efficient than competitive market
  3. Prevents wasteful duplication of capital equipment
50
Q

Disadvantages of a monopoly

A
  1. Absence of competition may lead to inefficiency
  2. Prices may be pushed up
  3. Poor quality but same price
  4. May fail to respond to changes in consumer tastes

Economics (3 decks)

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