Theme 1 Flashcards
(123 cards)
1
Q
Added Value
A
The difference between the price of a good or service and the cost of its material.
2
Q
Allocation of Resources
A
Refers to the way resources are used and shared out (i.e. distributed) within economic system.
3
Q
Assets
A
Anything of value that can be made to yield benefits.
E.g. Buildings & machines or brand name & workforce’s skill set.
4
Q
Bank Loan
A
A fixed sum of money borrowed from a bank and repaid with regular repayments with interest over time.
5
Q
Bank of England
A
The central bank of the U.K.
Responsible for monetary policy and regulation of the banking system.
6
Q
Banks
A
Channel funds from savers to borrowers as well as operating a payments system.
7
Q
Brand
A
Name or symbol that is closely associated with a product or service.
They add value, increase consumer loyalty and may attract a higher price.
8
Q
Break-even point
A
The level of output where neither a profit nor loss is made. The point at which total revenue = total costs.
9
Q
Cash flow
A
The movement of cash into and out of a business.
10
Q
Cash flow forecasts
A
Project expected flows of cash income and expenditure month by month.
11
Q
Ceteris Paribus
A
Means all other things being equal. An approach which enables economists to consider the impact of one change at a time.
12
Q
Collateral
A
Anything of value which can be seized by a lender if the loan is not repaid.
E.g. Property
13
Q
Competition
A
Causes businesses to strive for improvements that will allow them to increase sales. This leads to an efficient allocation of resources.
14
Q
Competitive advantage
A
Any aspect of a business which allows them to compete effectively.
E.g. Price, innovation, quality.
15
Q
Competitive pricing
A
A pricing strategy which consists of matching competitor’s prices or slightly undercutting them.
16
Q
Complements
A
Any good or service which are bought together.
E.g. Car and Petrol
17
Q
Consumer sovereignty
A
Describes the role of the consumer in determining the allocation of resources.
Buying more of what they like gives suppliers a indication of what to supply more of.
18
Q
Contribution
A
P - VC
Used to calculate break-even point
19
Q
Corporate culture
A
The set of important assumptions that are shared by people working in a particular business and influence the ways in which decisions are taken there.
20
Q
Corporate social responsibilities
A
Taking decisions in a way that takes into account all stakeholder’s interests.
21
Q
Costs of sales
A
Another way of describing variable costs or direct costs, they are subtracted from turnover to gross profit.
22
Q
Creative destruction
A
When new technologies lead to new or improved products that drive competitors out of business.
23
Q
Creditor
A
A person or company that the business owes money to, usually in exchange for materials or services.
24
Q
Demand
A
The quantity of a good or service that consumers are willing and able to buy, at a given price and at a given time.
25
Demand curve
A graphical representation of the relationship between price and quantity demanded.
26
Division of labour
Involves individuals in specialising in one particular type of activity in the work place.
Each employee had a specific task; repetition helps them to do it well.
27
Economic agents
Include all those who take decisions to buy, spend, produce, sell or in any way effect how resources are used.
28
Efficiency
Means using resources in the most economical way possible.
29
Entry
Refers to the way profit in a growing market attracts new businesses to produce for it. Profit acts as an incentive to enter the market.
30
Entrepreneurs
Take the risk of setting up, organising and operating a business venture.
31
Equilibrium price
The price where supply meets demand.
32
Excess demand
Occurs when the demand outstrips the supply and people who are willing to buy at the current price cannot due to lack of supply.
Price is too low.
33
Excess supply
Occurs when supply is greater than demand.
Suppliers will be unable to sell their goods at the current price.
Price is too high.
34
Exchange rate
The value of one currency in terms of another.
Usually measured in $US.
35
Exit
Exiting the market means closing down the production because of losses or low profits.
36
Exports
Are goods and services produced domestically and then sold in a foreign economy.
37
External Benefits
Benefits or positive side-effects that benefit a third party who is neither the producer nor the consumer.
38
External costs
Are costs or negative side-effects imposed on a third party who is neither the producer nor the consumer.
39
Externalities
Positive or negative impact on a third party caused by a product.
40
Factors of production
Inputs:
Capital
Enterprise
Land
Labour
(CELL)
41
Fixed costs
Do not change with the level of output of the business.
E.g. Rent, interest payments, managers' salaries and business rates.
42
Free market economy
A market with no interference from outside agencies, i.e. the government.
43
Government expenditure
The money spent in the economy over a period of time on publicly provided goods and services such as education, healthcare and the civil services.
44
Government failure
When the government intervention doesn't improve the situation or worsens it.
There is mis-allocation of tax payers money.
45
GDP
Gross domestic product.
Measure of the total wealth of an economy in a given time period.
46
Gross profit
Turnover - cost of sales.
Overheads, interest rates and tax have not been taken into account yet.
47
Gross profit margin
Measure of profitability.
Gross profit shown as percentage of turnover.
48
Imports
Goods and services which are bought by buyers in one country from sellers in another.
49
Inferior goods
Sell better during a recession. Income elasticity of demand is negative.
50
Inflation
Sustained rise of average price levels or fall in the value of money in an economy.
51
Infrastructure
Includes transport facilities, communications, and access to energy and water etc.
52
Interest rate
A payment in percentage terms of a sum of money borrowed.
Can be seen as the cost of money.
53
Leasing
Long term rental agreement that allows businesses to use assets without having to pay for them outright, thereby freeing up funds for other uses.
Often used for vehicles, machinery etc.
54
Liability
Means the responsibility for the financial debts of the business. A liability is a legal claim for payment.
55
Limited liability
In the event of financial problems and the closure of a business, the responsibility for any outstanding debts is limited to the owners' original investment.
56
Loan
When a sum of money is borrowed often another person.
Usually involves regular repayments with interest.
57
Margin of safety
Difference between the actual level of output and the break even level of output.
58
Market
Any medium in which buyers and sellers can trade at an agreed price.
59
Market clearing
Means there is no excess supply and no excess demand.
60
Market failure
When there is a mis-allocation of resources.
Often due to externalities.
61
Market forces
The forces of demand and supply as they operate freely and interact to determine the allocation of resources.
(Invisible hand)
62
Market growth
An expansion of the market based on increased sales.
63
Market mapping
Using a grid showing two features of a market, e.g. price and consumer age. Individual brands are added to the grid to show potential niches or gaps in the market.
64
Market niche
A small part of an overall market which has certain special characteristics.
65
Market orientation
Where the needs of the customer are the overriding priority in the production and marketing of products and services.
66
Market positioning
Shows how individual products or brands are seen in relation to their competitors by consumers.
67
Market research
Any kind of activity which gives a business information about its product or service, its customers, its competitors or the market it operates in.
68
Market segmentation
The splitting up of the market into groups of consumers with similar characteristics. Products and services can be designed specifically for, and targeted at, a particular segment.
69
Market share
Is the percentage of the total market buying one firm's products.
70
Mass market
A large market which includes the majority of the relevant population.
71
Negative externalities
External costs that have a detrimental effect on the lives of people who neither bought nor sold the product.
72
Niche market
A small part of the overall that has cartoon special characteristics.
73
Normal goods
Sell better when incomes are rising; they have positive income elasticity of demand.
74
Operating profit
Most commonly used measure of business profit.
OP = Gross profit - overheads (FC)
75
Operating profit margins
Operating profit shown as a percentage of turnover.
76
Opportunity cost
The potential loss of alternatives when choosing to invest in one product.
77
Ordinary share capital
Money raised by selling the ordinary shares of a plc business. These are stakes in the business; shareholders will receive a dividend.
78
Over consumption
Occurs when social costs are lower than private costs due to externalities.
79
Overdraft
A facility that allows a business to borrow up to an agreed limit. A flexible and useful form of finance, it is particularly suited to dealing with cash flow problems.
80
Positive externalities
External benefits to a third party of a product.
81
PLC
Stands for Public Limited Company, this is a form of company organisation with limited liability but it's shares are available to the public and are quoted on the stock exchange.
82
Primary research
Gathering original information about the market from first hand sources.
83
Private Limited Company
Have limited liability but cannot raise share capital from the public.
84
Private sector
The part of the economy which is run for private profit and is not controlled by the state. It is owned by individuals.
85
Product differentiation
Using specific design features to distinguish your product from competitors'.
86
Profit
The difference between total costs and total revenue.
87
Profit margins
Profit as a percentage of turnover.
88
Profit maximisation
Important business objective but more important to some than others.
89
Profit signalling mechanism
The means by which the incentive of profit induces businesses to produce what consumers want.
90
Public sector
Industries or services provided or funded by the government and not owned by private individuals.
91
Qualitative research
A market research method which involves finding out about the motivation and preferences of consumers.
92
Quantitative research
A market research method that involves numerical measurement.
93
Retained profit
An important source of finance for business expansion.
It is the profit left after interest, tax and dividends have been deducted from operating profits.
94
Revenue
The income of a business raised by selling its goods.
95
Risk
Measures the likelihood that a particular event may or may not happen.
96
Sales maximisation
Selling as much as possible.
97
Sampling
During market research, a small section or sample of the market is chosen as being representative of the whole market.
98
Satisficing
Occurs when a business earns enough profit to keep the owners happy but no attempt is made to maximise profit.
99
Secondary research
The use of information about the market that already exists.
100
Shareholders
Are part-owners of the business. They may have played a part in financing the business directly or have bought shares from someone else or on the stock exchange.
101
Skill shortages
Occur when demand for people with scarce skills exceed the supply of people who have them.
102
Adam Smith
1800s economist who explained the need for specialisation.
103
Social benefits
The total benefits of producing goods and services.
Private + external costs.
104
Social costs
The total costs of producing goods and services, calculated by adding together the private and external costs.
105
Sole trader
The simplest form of business organisation that is owned and operated by an individual. The owner has unlimited liability.
106
Specialisation
Refers to the way in which people, organisations and economies concentrate on specific economic activities, often because they have some advantages in that field.
107
Stakeholder
Any individual or group with an interest in the actions of a business.
Stakeholders include: employees, owners, customers, suppliers, and the local community.
108
Statement of comprehensive income
Shows how a company's net profit or loss, over a given time period.
109
Structural change
When patterns of demand change, some industries grow while others shrink and some businesses will exit the market.
110
Substitute
A good or a service that can be used in place of another.
E.g. Fruit instead of fast food, or different brands of phone.
111
Supply
The amount of a good or service that producers are willing and able to provide at a given price.
112
Supply curve
A graphical representation of the relationship between price and quantity supplied.
113
Taxation
Payments made to the government by individuals and businesses, to provide revenue for government spending.
Commonly used taxes include: income, VAT and corporation.
114
Trade credit
The time allowed by a supplier before a business must make payment.
Commonly 30-60 days, it helps the customer's cash flow at the expense of that of the seller.
115
Trade-off
A situation where having more of one thing leads to less of another. It is linked to the concept of opportunity cost.
116
Turnover
Sales revenue, i.e. total income generated by a business selling its goods and services over a period of time.
117
Unemployment
Occurs when people who are willing and able to get a job are unable to find a paying job.
118
Underconsumption
Occurs when products that are socially desirable are too expensive for everyone to cover the costs themselves.
119
USP
Unique selling point.
A single feature which is noticeably different from those of all competing products.
120
Unlimited liability
The owner of the business is responsible for all the debts of the business should it fail. This applies to sole traders and partnerships.
121
Variable costs
Costs of production that vary with the level of output.
E.g. Raw materials and distribution costs.
122
Venture capital
A form of business finance, unsecured funding provided by individuals or specialist firms in return for a proportion of the company's shares.
123
Working capital
Finance to cover business costs when sales revenue is slow to come in.
