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Theme 2 Flashcards

(60 cards)

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1
Q

Economies of scale

A

Fall in average total cost as the scale of production increases​.

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2
Q

Internal economies of scale

A

Occur due to an increase in the scale of production of a firm​.

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3
Q

External economies of scale

A

Occur due to an increase in the scale of production within the industry in which the firm operates.

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4
Q

Forms of economies of scale

A

- Purchasing economies​
Discounts for bulk-buying​
- Technical economies​
The use of specialist equipment
- Managerial economies​
Specialist labor
- Financial economies​
Better credit ratings, lower interest rates

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5
Q

Diseconomies of scale

A

Occur when there is an increase in average total cost as the scale of production increases​
- Internal communication ​
- ​Coordination

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6
Q

Branding

A

Promotional method that involves the creation of an identity for the business that distinguishes that firm and its products from other firms​.

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7
Q

Internal growth (Organic)​

A

Opening new branches​, new product development

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8
Q

External growth (Inorganic)​

A

Mergers and takeovers​

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9
Q

Innovation

A

Development of an idea into a new product or process.

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10
Q

Product/Process innovation

A

Changing a product/process of production that already exists or developing an invention into a brand new product or process of production

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11
Q

Product life cycle​

A

Technique used to track the stages a product goes through during its life​
- Development
- Introduction
- Growth
- Maturity
- Decline
- Extension strategies

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12
Q

Digital economy​

A

Use of any form of digital technology​.
- Social media

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13
Q

Customer satisfaction

A

Can be measured by whether the product has met or surpassed customer expectations​

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14
Q

Price elasticity of demand (PED)​
​

A

Measure of how responsive demand is to a change in price
% Change in qunatity demand / % change in price
- Elastic more than proportional change in demand
- Inelastic less than proportional change in demand

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15
Q

PED coefficient​

A

0 - Perfectly inelastic​
0<1​ - Inelastic
1​ - Unitary elasticity
1>∞ - Elastic
∞​ - Perfectly elastic

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16
Q

Cost plus​

A

Percentage mark up is added to the cost of producing a good or service to calculate the selling price​.

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17
Q

Price skimming​

A

Setting a high initial price for a product in order to recoup costs​.

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18
Q

Penetration pricing​

A

Setting low initial price for a product in order to gain market share​.

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19
Q

Predatory pricing​

A

Prices are set low for a short period of time to force competitors out of the market​.

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20
Q

Competitive pricing​

A

Prices are based on the prices charged by competitors.

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21
Q

Media Advertising

A

Communication used to inform potential customers about products and persuade them to buy the products.​

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22
Q

Sales promotions

A

Short-term method designed to attract customers into purchasing a product.​

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23
Q

Distribution

A

Process of getting the firm’s product to the market​.
- Short distribution channels, producer sells either directly to the customer or through a retailer​
- Long distribution channels, more than one intermediary person.

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24
Q

Income elasticity of demand (YED)​

A

Measure of how responsive demand is to a change in income
- Elastic demand changes at a higher proportion than the increase in income.​
- Inelastic demand changes at a lower proportion than the increase in income.​

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25
YED coefficient​
-1<+1 - Inelastic < -1 or > +1 - Elastic
26
Productivity
Output in relation to units of input in a given time period​. - Total output/number of employees
27
Economic Growth
An increase in the long-run productive capacity of an economy.​
28
Capacity Utilization​
Measure of the percentage of potential output being achieved​ - Current output / maximum possible output x 100​
29
Lean production​
Working practices that focus on cutting waste whilst maintaining, or improving quality
30
Lean Production technique: Just-In-Time (JIT)
Technique used to minimize stock holdings at each stage of the production process.
31
Lean Production technique: Kaizen
Technique that focuses on small, but frequent, improvements in every aspect of the production process ​
32
Quality
Ability of a product or service to meet customers expectations.​
33
Quality systems:​ Quality control
Checking of a good or service before it is delivered to a customer.
34
Quality systems:​ Quality assurance
Checking of a product or service at each stage of its production.
35
Quality systems:​ Quality circles​
Informal groups of workers who volunteer to meet on a regular basis to discuss issues relating to the workplace.
36
Quality systems: Total Quality Management​
Sees quality as the responsibility of all employees​.
37
Productive efficiency
Occurs where no additional output can be produced from the inputs available at the lowest possible unit cost​.
38
Globalization
Process of greater integration and inter-connectedness between countries.
39
Characteristics of globalization
- Increased investment flows​ - World trade rising as a proportion of world (GDP) - Increased migration
40
​Factors contributing to globalization ​
- Trade liberalization​ WTO assisted in the reduction or removal of trade barriers - Capital market liberalization​ Relaxation on the rules surrounding the movement of capital - Political change - Reduced costs of transportation and communications​ - Increased significance of global (transnational) companies​ ​ ​ ​ ​
41
Indicators of growth​
**GPD per capita** - National income/ population **Health** - Absence of injuries **Literacy** - Ability to read and write
42
The Human Development Index (HDI)
Measures progress through the achievement of people rather than through income and growth figures. - Life expectancy at birth​ - Years of schooling​ - Real Gross National Income per capita
43
Absolute Advantage​
When a country can produce a good or service using fewer resources than another country.
44
Comparative Advantage​ ​
When a country can produce a good at a lower opportunity cost than another​.
45
Trading bloc
When the governments of a group of countries agree to trade together freely with no barriers.
46
Types of trading blocs​
**- Preferential trade areas** Reduced barriers on select number goods **- Free trade areas** Reduced barriers on all goods **- Customs unions​** Reduced barriers, common approach with countries outside the bloc **- Common markets** Reduced barriers, freedom of movement on factors of production, common economic policies **- Economic unions** Custom unions common market
47
Aggregate Demand
Total demand for goods and service within the economy. C + I + G + (X-M)​
48
Aggregate Supply
Total supply for goods and service within the economy.
49
Circular Flow of Income
Shows the flow of goods and services, the factors of production and payments between households and firms in an economy.
50
Injections/Withdrawals
**Withdrawals** - Savings​ - Taxes​ - Imports **Injections** - Government expenditure​ - Investment​ - Exports
51
Demand-Pull Inflation​
Caused by excessive demand in the economy for goods and services​ - Too much money chasing too few goods and services​
52
Cost-Push Inflation​
Firms respond to rising costs of production by increasing prices
53
Deflation
Decrease in the general price level​
54
Disinflation
Fall in the rate of inflation​, prices are rising at slower rate.
55
Causes of unemployment
- Structural unemployment​ - Occupational immobility​ - Geographical immobility​ - Technological unemployment​ - Cyclical unemployment
56
Macroeconomic objectives
-Economic Growth​ - Unemployment​ - Inflation​ - Balance of Payments​
57
Fiscal Policy
Manipulation of government spending, taxation and government borrowing to influence the level of economic activity. - Expansionary, contractionary
58
Monetary Policy
Manipulation of the rate of interest, the money supply and exchange rates to influence the level of economic activity. - Expansionary, contractionary
59
Supply-side policy
Policies that seek to improve the long run productive potential of the economy.
60
Supply-side policies options
- Cutting Income Tax​ - Cutting Corporation Tax​ - Modification of Welfare Payments​ - Investment Grants​ - Subsidies - Deregulation​ - Privatisation​ - Immigration - Training and Education​

Economics (4 decks)

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