Unit 1 Flashcards
(107 cards)
1
Q
What are the factors of production?
A
CELL (mnemonic)
2
Q
CELL (mnemonic)
A
Capital
Enterprise
Labour
Land
3
Q
Needs
A
Something essential to survive
4
Q
Wants
A
Something you would like to have, but is not essential to survival
5
Q
Resources
A
Something used to produce output
6
Q
Productivity
A
Output per worker per period of time
7
Q
Capital
A
Goods that are used to produce other goods and services
8
Q
Enterprise
A
Having ideas and taking risks in setting up or running a business
9
Q
Goods
A
Items that you can touch and see
10
Q
Service
A
Something that someone provides for you, that you cannot touch
11
Q
Primary sector
A
Where the extraction of raw materials takes place
12
Q
Secondary sector
A
Where raw materials are manufactured into goods
13
Q
Tertiary sector
A
The service sector
14
Q
Opportunity cost
A
The next best alternative foregone when making a choice
15
Q
Market
A
Where buyers and sellers meet to exchange goods and services
16
Q
Market economy
A
Where all resources are allocated by private individuals and firms
17
Q
Planned economy
A
Where all resources are allocated by the government
18
Q
Mixed economy
A
Where some resources are allocated by the government, and other resources are allocated by private individuals and firms
19
Q
Private sector
A
The sector of the economy where firms are owned and run by private individuals and groups - their main aim is profit maximization
20
Q
Public sector
A
The government sector of the economy, where organisations are owned and run by the government
21
Q
Benefits of specialisation to a firm
A
Workers become quicker at producing goods
Production becomes cheaper per good
Production levels are increased
22
Q
Benefits of specialisation to a worker
A
Specialised workers tend to get higher pay
Workers’ specific skills will be improved
More motivation from job satisfaction
23
Q
Costs of specialisation to a firm
A
Greater cost of training workers
Quality may suffer if workers get bored
More expensive workers
24
Q
Costs of specialisation to a worker
A
Boredom from doing the same job every day
Workers’ skills may suffer as they are only doing one job
Workers may eventually be replaced by machinery
25
Advantages of competitive markets to a consumer
Consumers can 'shop around' to get highest quality and lowest prices
Firms will try hard to innovate in order to provide more benefits for consumers
Firms will compete through location, opening hours and customer service
26
Disadvantages of competitive markets to a consumer
If all firms are small they can't gain economies of scale and so lower prices
Confusion over too much competition
27
Advantages of competitive markets to a firm
Firms that can successfully provide products will thrive and earn profits
It may be able to grow large and gain market share
28
Disadvantages of competitive markets to a firm
Firms that fail to satisfy consumers sufficiently will fail
29
Surplus
When more is produced than required
30
Money
What we pay in exchange for goods and services
31
Medium of exchange
To buy something in a shop, you must have money - money is the medium of exchange in this case
32
Unit of account
If I were to say that a magazine is £1, I am giving this magazine a unit of account
33
Store of value
If I put £100 in a bank and take my £100 out later, it has kept its value (store of value).
34
Means of deferred payment
When you defer a figure of payment over a few payments over a period of time (e.g. loans).
35
Competitive market
A market in which there are many buyers and sellers
36
Monopoly
When there is only one firm selling in a market
37
How can firms achieve monopoly power?
Merger and takeover
Statutory monopoly
Internal expansion
Branding
Cost barriers
38
Statutory monopoly
Key industries are given monopoly status by the government
39
Internal expansion
When a firm builds more factories and shops
40
Cost barriers
Firms with low average costs can keep prices below the price at which small firms could enter the market
41
Monopoly power
When a firm has more than 25% of the market share
42
What are the advantages of a monopoly?
R&D for a consumer
International competitiveness for a firm
Exploitation of economies of scale for a firm
43
What are the disadvantages of a monopoly?
High prices for a consumer
Poor quality for a consumer
44
Demand
The quantity buyers are willing and able to buy at a given price in a given period of time
45
Effective demand
A consumer must be both willing and able to buy the good and service when demand is effective
46
Contraction of demand
The fall in the quantity demanded due to a rise in price
47
Extension of demand
The increase in the quantity demanded due to a fall in price
48
Factors that cause the demand curve to shift
PASIFIC
49
PASIFIC
Population
Advertising
Substitutes
Income
Fashion and trends
Interest rates
Complements
50
Inferior goods
Good for which the demand falls when income rises
51
Substitutes
Goods that can be used instead of each other
52
Interest rates
The reward for saving, and the cost of borrowing
53
Complements
Goods that are in joint demand
54
Price elasticity of demand (PED)
The responsiveness of the quantity demanded to a change in the price of a good
55
PED =
% change in quantity demanded / % change in price
56
Factors that influence PED
Number of close substitutes within the market
Luxuries and necessities
Percentage of income spent on a good
Habit-forming goods
57
How do the number of close substitutes in a market influence PED?
The more substitutes are available in the market, the more elastic demand will be in response to a change in price
58
How do luxuries and necessities influence PED?
Necessities tend to have a more inelastic demand, whereas luxury goods and services tend to be more elastic
59
Supply
The quantity a producer is willing and able to produce in a given period
60
Factors that cause the supply curve to shift
PINTSWC
61
PINTSWC
Productivity
Indirect taxes
Number of firms entering market
Technology
Subsidies
Weather
Costs of production
62
Price elasticity of supply (PES)
The responsiveness of quantity supplied to a change in price
63
Factors that influence PES
Level of stocks
Production lags
Substitutability of factors of production
64
How does the level of spare capacity influence PES?
If a price were to suddenly increase and the firm had spare capacity, it would be able to react very quickly and increase supply
65
How does the substitutability of the factors of production influence PES?
If a firm can easily move the factors of production it uses in producing its goods between production lines, it will be able to respond mre quickly to changes in price
66
Equilibrium
The point where demand and supply meet
67
Indirect tax
A tax on spending
68
Specific tax
A specific amount of a good or service per unit bought
69
Ad valorem tax
A percentage of the price of a good or service
70
Subsidy
A payment given to a firm by a company
71
Minimum price
A price set above the equilibrium, and the price is not allowed to go below it
72
Maximum price
A price set below the equilibrium, and the price is not allowed to rise above it
73
Fixed costs
Costs that do not vary with output
74
Variable costs
Costs that vary directly with output
75
Total costs
All the costs of producing a good or service added together
76
Total costs =
Fixed costs + Variable costs
77
Average costs =
Total costs / output
78
Output
The number of goodsor services produced by a firm
79
Total revenue =
Price x Quantity sold
80
Profit =
Total revenue / costs
81
Production
The process of combining scarce resources to make an output
82
What are the benefits of higher productivity from competition?
Lower average costs
Lower, more competitive price
Higher profits
83
Specialisation
When an individual, firm, or country only produces a limited range of goods or services
84
Internal growth
Growth generated from an increase in sales
85
External growth
Growth through a merger or takeover
86
Merger
Agreed coming together of two firms
87
Takeover
When one firm seeks to take over another
88
Integration
The coming together of two firms through a merger or takeover
89
Economies of scale
As a firm grows larger in size, the long run average costs fall
90
Internal economies of scale
When one firm grows in size and benefits from lower average costs
91
External economies of scale
When a whole industry grows in size, so a firm within that industry benefits from lower average costs
92
The 6 types of internal economies of scale
Risk bearing
Financial
Marketing
Technical
Managerial
Purchasing
93
Risk bearing economies of scale
As a firm grows larger, it is able to spread the risk over a larger number of outlets/factories/products
94
Financial economies of scale
As a firm grows larger, it is able to obtain cheaper sources of finance
95
Marketing economies of scale
As a firm grows larger, it will be more cost-effective to advertise nationally
96
Technical economies of scale
As a firm grows larger, it will be able to invest in machinery that can increase productivity
97
Managerial economies of scale
As a firm grows larger, it is able to employ specialist managers to make workers more efficient
98
Purchasing economies of scale
As a firm grows larger, it will be able to take advantage of price reductions from suppliers, as it can buy in bulk
99
Diseconomies of scale
When a firm grows too large and average costs rise
100
Causes of diseconomies of scale
Loss of control
Lack of co-ordination / lack of co-operation
101
Reasons for the differences in wages within and between occupations
Differences in productivity of workers
Elasticity of supply of labour
Trade union power
Compensation
102
How does the elasticity of supply of labour affect a difference in wages?
The more inelastic the supply, the higher the wage
103
Why might a doctor's salary be higher than a nurse's salary?
A doctor's salary is higher because the supply of doctors is inelastic, due to the high level of qualifications needed
104
Why does compensation affect a difference in wages?
Higher pay may be a reward for risk-taking in certain jobs - working in poor conditions or unsocial hours
105
National minimum wage
A pay floor introduced by the government, which sets a wage level below which producers cannot legally go
106
What are the arguments for a national minimum wage?
Higher tax revenue
Income is more fairly distributed across the population
Poverty is reduced
107
What are the arguments against a national minimum wage?
More expensive to employ workers, so firms may cut jobs and increase unemployment
Other workers may demand higher wages to maintain pay differentials
Higher wage costs lead to rising inflation
