IGCSE Economics > Unit 3 - Chapter 16-20 > Flashcards

Unit 3 - Chapter 16-20 Flashcards

Microeconomic Decision makers (66 cards)

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1
Q

Money

A

Any item/verifiable record that is widely accepted as payment for goods and services

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2
Q

What is money used for

A

medium of exchange

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3
Q

Forms of money

A

(1) Physical/Commodity Money
(2) Fiat Money
(3) Electronic Money

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4
Q

What is commodity money

A

Physical good used as money

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5
Q

What is fiat money

A

Currency with value -> government declares it as legal tender

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6
Q

What is electronic money

A

Digital used for online transactions

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7
Q

Functions of money

A

(1) Medium of exchange
(2) Unit of account
(3) Store of value
(4) Standard of deferred payment

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8
Q

What is medium of exchange

A

Money functions as a way to conduct trade, eliminating need for barter

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9
Q

What is unit of account

A

Measures the market value of different goods and services

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10
Q

What is store of value

A

preserves value over time ( store more wealth )

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11
Q

What is standard of deferred payment

A

used to settle debts

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12
Q

What are characteristics of money

A

Durability (withstand)
Portability (transport)
Divisibility
Uniformity
Acceptability
Stability

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13
Q

What is Bartering

A

Act of swapping items in exchange for other items through process of bargaining and negotiation (due to absence of money in economy)

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14
Q

What is Banking

A

Activities conducted by banks including; accepting deposits, providing loans, facilitating payments, and investments

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15
Q

Types of Banks

A

(1) Central Banks
(2) Commercial Banks

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16
Q

What is a central bank

A

The monetary authority that oversees/manages the economy’s money supply and banking system

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17
Q

What is a commercial bank

A

Private or public financial institutions that provide services to individuals, businesses, and governments

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18
Q

Role & Importance of Central Bank

A

Monetary policy
Issuing currency
Regulating banking system
Lender of last resort
Managing foreign reserves

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19
Q

Role & Importance of Commercial Banks

A

Accepting deposits
Providing loans
Facilitating payments
Wealth management
Supporting economic growth
Serving government needs

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20
Q

Disposable income

A

Amount of income a person has available to spend on goods and services after compulsory decisions
(such as income tax)

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21
Q

Households financial decisions are influenced by…

A
  • Income -> determines how much you save or spend
  • Interest rates -> affect the cost of borrowing and benefits of saving
  • Confidence -> feel about the economy affects spending habits
  • Economic downturns -> tend to save more
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22
Q

What happens if interest rates go up

A

spending decreases

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23
Q

What happens if interest rates go down

A

spending increases

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24
Q

What are the factors influencing occupation choices for workers?

A
  • Salary
  • Job Stability
  • Market demand
  • Societal expectations
  • Skills
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25
Wage factors
refer to the financial rewards that workers receive in return for their labor services
26
Wage determination
- supply & demand - government policies - bargaining power
27
Earning differences
- skill levels - discrimination - industry sectors
28
Division of Labour
Involves splitting work into specific tasks, increasing efficiency and productivity
29
Trade Union definition
- An organization which aims to protect the interests of its worker members - strive to improve wages, workhours, and workplace safety - collective power to influence policies/practices that impact the workforce
30
Collective bargaining
Negotiation between employees and employers
31
Employment protection
Safeguards for job security
32
Government policy influence
Impacting laws affecting workers
33
Advantages of Trade Union
- improve wages - improve job security - enhance workplace safety - influence policy
34
Disadvantages of Trade Union
- increased labour costs for firms - potential strikes - inflexible work practices
35
Factors influencing union strength
- political support - economic conditions - social attitudes - increased globalisation - automation
36
How are firms classified
- By sector - By size - By ownership
37
primary sectors
firms involved in natural resource extraction
38
secondary sector
firms engaged in manufacturing goods and raw materials
39
tertiary sector
firms that provide goods/services to general public
40
small firms
generally employ fewer people have lower levels of revenue and capital
41
large firms
employ a larger workforce and have a more significant market presence
42
public sector
economic activity directly involving the government
43
private sector
economic activity of private individuals and firms
44
Relative size for firms measured by
- number of employees - market share - sales revenue of a firm - market capitalization of a firm
45
Advantages of small firms
- flexibility - close relationship with customers - personalized service and innovation
46
Disadvantages of small firms
- limited access to capital - vulnerable to competition from larger firms - less ability to absorb economic shocks
47
Reason for existence
- opportunity for entrepreneurs - meeting niche market demands - innovation of specialised products
48
Type of growth
internal & external
49
Internal growth
- increase in market share -> expanding customer base through marketing and improving product quality - product diversification -> adding new products of services to existing offerings - geographical expansion -> opening new locations or entering new markets
50
External Growth
- Mergers -> company grows by merging with another company - Strategic alliances -> collaborate to achieve common goals without merging
51
Types of mergers
Horizontal Merger Vertical Merger Conglomerate Merger
52
Horizontal merger
Same industry Same stage of production
53
Vertical merger
Same industry Different stage of production
54
Conglomerate merger
Different industry
55
Advantages & Disadvantages of horizontal mergers
Advantage - higher market share - skilled employees - taking advantage of economies of scale Disadvantage - culture clashes - duplication of resources -> Job redundancies
56
Advantages & Disadvantages of Vertical Merger
Advantage - price of raw materials falls Disadvantage - transport costs
57
Economies of scale
Cost-saving benefits of large-scale operations which reduce average costs of production
58
Internal economies of scale
Cost savings that arise within the business as it grows
59
Examples of internal economies of scale
- Purchasing (bulk-buying) economies of scale - Technical economies of scale - Financial economies of scale - Managerial economies of scale
60
Purchasing (bulk-buying) economies of scale
Occur when the cost of raw materials, components, or finished goods fall when they are brought in large quantities
61
Technical economies of scale
Occur when large firms purchase expensive pieces of machinery and automated equipment for the production process
62
Financial economies of scale
Occur as large firms are able to borrow money from banks more easily then small firms because they are perceived by financial institutions to be less risky
63
Managerial economies of scale
Occur if large firms have the resources to employ specialist managers to undertake functions within the firm
64
External economies of scale
Are economies that arise due to the location of the firm
65
examples of external economies of scale
Proximity to relayed forms -> Firms benefit from shared suppliers, knowledge spillovers, and collaboration. Availability of skilled labour -> Firms can hire more easily and reduce training costs. Reputation of the geographical area -> Firms benefit from being associated with the region's brand image. Access to transportation networks -> - Being near ports, railways, or airports reduces shipping time and cost. - Also helps with faster supply chains and exporting.
66
Diseconomies of scale
Occur when average costs of production start to increase as the size of a firm increases

IGCSE Economics (4 decks)

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