The economic environment of business and finance

Question 1

For inelastic products (PED < 1), how do you increase revenue?

Answer 1

Increase the price

Question 2

For elastic products (PED > 1), how do you increase revenue?

Answer 2

Reduce the price

Question 3

Example of Giffen good

Answer 3

bread

Question 4

Example of Veblen good

Answer 4

Rolex

Question 5

What are the four factors of production?

Answer 5

Land
Labour
Capital
Entrepreneurship

Question 6

What is the return on land?

Answer 6

Rent

Question 7

What is the return on labour?

Answer 7

Wages

Question 8

What is the return on capital?

Answer 8

Interest

Question 9

What is the return on entrepreneurship?

Answer 9

Profit

Question 10

What are the four stages of the business/trade cycle?

Answer 10

Recession
Depression
Recovery
Boom

Question 11

Growth during a recession?

Answer 11

Negative

Question 12

Unemployment during a recession?

Answer 12

High and rising

Question 13

Inflation during a recession?

Answer 13

Low

Question 14

solutions for a recession?

Answer 14

Boost demand
Increase government spending
Decrease taxation
Cut interest rates to increase consumption

Question 15

Growth during a depression?

Answer 15

Negative

Question 16

Unemployment during a depression?

Answer 16

High and rising

Question 17

Inflation during a depression?

Answer 17

Increasing

Question 18

solutions for a depression?

Answer 18

boost supply
free up land
free up labour

Question 19

Growth during a recovery

Answer 19

starting to rise

Question 20

unemployment during recovery

Answer 20

falling

Question 21

inflation during recovery?

Answer 21

moderate

Question 22

solutions for recovery?

Answer 22

decrease government spending
increase taxation
raise interest rates

Question 23

growth during a boom?

Answer 23

high

Question 24

unemployment during a boom?

Answer 24

low

Question 25

inflation during a boom?

Answer 25

high and rising

Question 26

solution for a boom?

Answer 26

reduce demand decrease government spending increase taxation raise interest rates

Question 27

What are the two types of inflation?

Answer 27

Cost-push | Demand-pull

Question 28

What are the two types of demand-pull inflation?

Answer 28

Fiscal | Credit

Question 29

what is fiscal demand pull inflation?

Answer 29

when an increase in government spending or reduction in taxes raises demand in the economy

Question 30

what is credit demand-pull inflation?

Answer 30

when levels of credit extended to customers increases, so expenditure rises

Question 31

What does monetary policy focus on?

Answer 31

Interest rates Exchange rates Money supply

Question 32

What does fiscal policy focus on?

Answer 32

Government spending Taxation Borrowing

Question 33

What is an expansionary fiscal stance?

Answer 33

Government spending > taxation

Question 34

What is a contractionary fiscal stance?

Answer 34

Government spending < taxation

Question 35

What is a neutral fiscal stance?

Answer 35

Government spending = taxation

Question 36

What are the four main types of market structure?

Answer 36

Perfect competition Monopolistic competition Oligopoly Monopoly

Question 37

In what type of market structure: | is there a single selling price across the market?

Answer 37

Perfect competition

Question 38

In what type of market structure: | do suppliers make normal profits?

Answer 38

Perfect competition | Monopolistic competition

Question 39

In what type of market structure: | are there homogeneous products?

Answer 39

perfect competition

Question 40

In what type of market structure: | are there super normal profits?

Answer 40

Monopoly

Question 41

What are the four types of monopoly?

Answer 41

Pure Actual Government franchise Natural

Question 42

In what type of market structure: | are there likely to be price wars?

Answer 42

Oligopolies

Question 43

In what type of market structure: | can there be collusion to form cartels?

Answer 43

Oligopolies

Question 44

What are the four types of market failure?

Answer 44

Market imperfections Externalities Public goods Economies of scale