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Economics > Theme 1 > Flashcards

Theme 1 Flashcards

(77 cards)

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1
Q

Scarcity

A

Unlimited wants​, not enough resources available to supply.

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2
Q

Economic Problem

A

Unlimited wants​, not enough resources available to supply therefore choices have to be made how to use scarce resources.

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3
Q

Economic Activity

A

Purpose is to satisfy needs and wants of the society.

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4
Q

Opportunity Cost

A

Cost of the next best alternative foregone.

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5
Q

Trade Offs

A

Range of alternatives that have been given up.

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6
Q

Economic Agents

A

Firms, government, individuals that partake in the economic activity.

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7
Q

Free market economy

A

Firms decide what goods and services to produce with limited intervention from the government.

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8
Q

Business objectives​

A

Quantifiable target or goal to be achieved withing a specific timeframe.

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9
Q

Stakeholders

A

Anyone with an interest in the action of the business.

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10
Q

Corporate Social Responsibility

A

Commitment by business to behave ethically and contribute to economic developments while improving quality of life of workforce, community and society.

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11
Q

Entrepreneur

A

Someone who spots an opportunity and is willing to take risks in order to benefit form the potential reward.

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12
Q

Creative destruction

A

When something new kills something old​.

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13
Q

Factors of production

A

Capital - machinery to produce
Enterprise - ideas
Land - resources, space to produce
Labor - right people to produce

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14
Q

Added value​

A

Value of the output is higher than the sum value of all inputs.
Cand add value by: USP, customer experience, marketing, brand

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15
Q

Entrepreneurial motives​

A

Financial motives:​
- Profit maximization​
- Profit satisficing​

Non-financial motives​
- Ethical stance​
To behave in a manner deemed to be morally correct​
- Independence​
Be own boss
- Homeworking​
Work life balance​
​

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16
Q

Specialization

A

Occurs when economic units such as firms, governments, individuals focus on producing specific goods or services.

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17
Q

Division of Labor

A

Specialized use of workers within an organization

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18
Q

The wider economic environment​

A

Key economic factors that influence the behavior of businesses and their customers​

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19
Q

Interest rates​

A

Price of money, cost of borrowing or reward for saving.

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20
Q

Exchange rates​

A

Price of one currency in terms of the other.
SPICED
WPIDEC

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21
Q

Taxation​

A

Charges placed on firms and individuals, government uses to finance their spendings.

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22
Q

Unemployment​

A

Number of people who are looking for work but can’t find a job at a point in time​.

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23
Q

Inflation

A

General rise in prices or fall in the value of money.

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24
Q

Business cycle​

A

Boom
Recession
Slump
Recovery

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25
Normal goods
Price increases demand falls.
26
Demand
Amount of good or service that consumers are willing and able to buy at any given price.
27
Substitute products
Act as an alternative.
28
Complementary products
Bought together.
29
Inferior good
As income increases demand decreases.
30
Supply
Amount of a good or service that producers are willing and able to sell at any given price​.
31
Direct taxes
Placed on individuals, firms.
32
Indirect taxes
Placed on goods and services made by firms and individuals.
33
Subsidies
Finances provided to producers to encourage them to produce goods and services.​
34
External shocks​
Unexpected events that are outside of the businesses control but have a direct impact on the level of supply​.
35
Economic incentives
Reasons for economic agents to provide goods and services​. Rationing Signaling Incentive
36
Price mechanism
Method by which prices for goods and services are achieved​
37
Rationing function
Increased demand or reduced supply of a product will lead to a price rise​.
38
Signaling function
Occurs because changing prices give a signal to consumers and producers as to whether to leave or enter a market.
39
Incentive function
Occurs because a consumer or producer is motivated to a course of action e.g. higher prices will incentivize a producer to supply more
40
Allocative efficiency
Occurs when society is producing goods to match the needs of consumers.​
41
Mass market
Targets all customers, market not segmented.
42
Niche market
Identifies small gaps in the market​, segmented.
43
Market research
Collection and analysis of data and information to inform a business about its market​. - Primary research - new - Secondary research - already exists - Quantitative research - data, statistics - Qualitative research - non statistical
44
Types of sampling techniques​
Random​ - Individual is chosen randomly Quota​ - Population segmented into subgroups, then judgement is made Stratified​ - Population segmented into subgroups, then randomly selected
45
Market segmentation​
Market is split into subgroups of consumers with similar characteristics​. - Demographic​ - Geographic​ - Income​ - Behavioral
46
Positioning
Where a product is placed in the market relative to its competitors​.
47
Market mapping​
Diagrammatic technique that enables businesses to display the perceptions of customers​.
48
Competitive advantage
Feature of a business that allows it to perform more successfully than others in the market​.
49
Product differentiation​
Having a unique feature that makes a product stand out from other products in the marketplace​.
50
Unique selling point (USP)
Feature that distinguishes a firm’s product from those of its competitors​.
51
Dynamic markets​
Markets are always changing.
52
Online retailing
Process of buying and selling goods and services over the internet​.
53
Risks
Possible to add a probability to find a degree of risk, is measurable.
54
Uncertainties
It is not measurable​.
55
Credit
Legal agreement between a borrower and a lender​.
56
Types of credit: Loans​
Set amount of money provided for a specific purpose, to be repaid with interest, over a set period of time​.
57
Types of credit: Overdrafts​
Facility to overspend on a current account up to an agreed sum​.
58
Types of credit: Trade credit​
Paying suppliers a period of time after the goods or services have been received.
59
Other types of finance: Venture capital​
Investment from an established business into another business in return for a percentage equity in the business.
60
Other types of finance: Share capital​
Finance raised from the sale of shares​.
61
Other types of finance: Leasing​
Allows a business to benefit from the use of an asset without owning it or buying it outright​.
62
Other sources of finance: Owner’s capital, personal savings​
When an entrepreneur invests their own money in a business​.
63
Other sources of finance: Retained profit​
Profit kept within a business from profit for the year to help finance future activities.
64
Other sources of finance: Sale of assets​
Assets are items of value owned by a business​ - Current assets change in value in the short run - Fixed assets will stay in the business for more than a year e.g. machinery and vehicles​
65
Market failure
Occurs when the market is unable to efficiently allocate scarce resources to meet the needs of society​
66
Externalities
Costs and benefits to a third party created by economic agents when undertaking their activities​.
67
Negative externalities
Costs to a third party that are not included in the price of the economic activity​ - Private costs are costs of consuming or producing goods or services that have to be paid by 3rd parties - Social costs are paid by society​
68
Positive externalities
Benefits to a third party that are not included in the price of the economic activity​ - Private benefits are benefits of consuming or producing goods or services that are received by 3rd parties - Social benefits are received by society​
69
Purpose of government intervention in markets​
- To reduce market failure to - To reduce income inequalities in the distribution of income and wealth - To support UK industry
70
Ways in which governments intervene
- Regulation​ - Legislation​ - Indirect taxation​ - Grants and subsidies​
71
Government failure
Occurs when government intervention leads to worsening of market failure.​
72
Sales Revenue formula
Sales Revenue / Selling Price * Selling Volume
73
Contribution per unit
Difference between selling price per unit and variable cost per unit.
74
Break even formula
Contribution = selling price – variable costs​ Fixed cost / contribution = break-even point
75
Gross profit
Sales revenue – cost of sales​.
76
Operating profit​
Gross profit – expenses​.
77
Profit Margins calculations
Gross, operating, year profit / Sales revenue * 100

Economics (4 decks)

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