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Economics > Unit 3: Microeconomics decision makers > Flashcards

Unit 3: Microeconomics decision makers Flashcards

1
Q

Define inflation

A

Inflation is the persistent rise in general level of prices .

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2
Q

Define barter

A

Exchanging one good or service for another

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3
Q

Define money supply

A

The sum of notes, coins and deposits in banks and financial institutions

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4
Q

Define Liquidity

A

The ability for an item to be exchanged for cash with no loss of value .

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5
Q

List the 4 functions of money.

A

Money is a medium of exchange
Money is a unit of account
Money is a store of value
Money is a means of deferred payment

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6
Q

List the 5 characteristics of a good money

A

money is acceptable, durable, portable , divisible and is scarce

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7
Q

List the 5 types of banks

A

Commercial banks, have retail branches
Credit unions , non profit organisation
Mutual societies, savings or loans association
Investment banks - help large business organisations to raise finance
Islamic banks - no interest charges and payments

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8
Q

List the 7 roles of a central bank

A

Issues new notes and coins
Manages payment to and form the government
Manages the national debt
Supervises the banking system
Lender of last resort
Stabalizes the value of national currency
Operates the government monetary policy , changing the interest rates to influence demand

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9
Q

List the 3 types of account

A

Deposit account
Current account
Savings account

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10
Q

List the 3 methods of payments

A

Cast
Direct debit
A cheque

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11
Q

List the 4 types of loan

A

An overdraft ( short-term )
A personal loan
A commercial loan ( business )
A mortgage ( property )

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12
Q

What is the propensity to consume?

A

The percentage of income that is spent on goods and services

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13
Q

Define dissaving

A

withdraw of savings

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14
Q

Define default

A

fail to pay back loans

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15
Q

Factors that affect spending

A

Disposable Income
Wealth
Consumer Confidence ( optimistic about their jobs and income, borrow more and spend more )
Interest rates ( ppl save more, spend less )

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16
Q

Factors that affect saving

A

Interest rates
Consumer confidence ( unemployed in the future?)
Availability of saving schemes
Saving for future consumption ( to make bigger purchases later on )

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17
Q

Factors that affect borrowing

A

Interest rates ( high interest rates , less borrow cuz more costly to repay loans )
Wealth ( more able to borrow )
Consumer confidence ( think losing a job in future, borrow less)
Ways of borrowing money and availability of credit

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18
Q

How to calculate the propensity to consume ?

A

Average amount spent/ average amount earned

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19
Q

List 5 functions of the commercial bank .

A 
Accept deposits and savings
Provide short/long term loans
Buy and sell shares 
Provide insurance cover and pension funds 
Stores valuables
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20
Q

What is a stock market ?

A

A stock market is a global market for buying and selling of new and second-hand government stocks and company shares

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21
Q

List the 4 functions of stock exchange

A

Brings together buyers and sellers of new and second-hand stock
Supervises the conduct of firms of brokers that buy and sell stocks
Provides up-to-minute information
Enables government to raise finance from stocks and shares.

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22
Q

List the wage factors

A

Time rate
Piece rate
Fixed annual rate
Performance-related payments

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23
Q

List the non-wage factors

A

Training opportunities
Fringe benefits
Qualifications required
Holiday entitlement

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24
Q

Define net advantages .

A

Net advantages are all the wage and non-wage factors that affect the attractiveness of a particular job/occupation.

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25
Q

What is derived demand?

A

Demand for one thing is dependent on the other ( firms want labour to produce goods that consumers are willing to pay for)

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26
Q

Factors that affect the demand for labour

A

changes in consumer demand
changes in productivity of labour
changes in price and productivity of capital
changes in non-wage employment costs

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27
Q

Factors that affect the supply of labour

A 
changes in net advantages of a job
changes in the quality of training 
demographic changes ( size and age distribution of the population)
28
Q

Occupational wage differentials . Why?

A 
different qualifications
dirty jobs 
job satisfaction
lack of information
labour immobility 
fringe benefits
29
Q

Earnings differ in the same job . Why?

A

Length of service ( experience and skill)
Regional differences in labour demand and supply
Discrimination
Fringe benefits

30
Q

What are the advantages of division of labour & specialisation?

A

Higher productivity
time saved
full use of employees ability
allows the use of machinery

31
Q

What are the disadvantages of division of labour ?

A

Work may become boring.
Workers may feel alienated, less motivation and interst
products become too standardized
the firms will become less flexible

32
Q

Define trade unions.

A

An organisation of workers that negotiate wages , working conditions and hours through collective bargaining .

33
Q

List the four functions of trade unions.

A

Negotiate wages and other conditions
Defend employee rights
Develop the skills of union members by providing training
Provide social amenities for members

34
Q

What are the types of trade unions?

A 
Craft unions ( small, represent workers with the same skill across different industries ) 
General unions ( different industry )
Industrial unions ( same industry )
Non-manual unions ( professional occupations )
35
Q

How trade unions representation in the labour market?

A 
Closed shop ( compulsory condition )
Open shop ( both unionised & non-unionised labour )
Single Union agreement ( single union representing all its employees )
36
Q

What is collective bargaining ?

A

The process of negotiating over pay and working conditions between trade unions and employees.

37
Q

How trade unions influence the labour market?

A

Go slow, work to rule , over time ban, strike

38
Q

Type of private sector firms .

A

Sole trader ( one person, unlimited liability )
Joint-stock company ( shareholders, many directors )
Cooperative ( owned by its members )
Charity ( run by a private individual/organisation )

39
Q

How to compare the size of firms?

A

No. of employees employed
No. of layers of management
No of capital employed

40
Q

What are the advantages of small firms?

A

Main owner, take all profit
Can react to changes quickly
Close contact with employees
easy to set up

41
Q

What are the disadvantages of small firms?

A

owners need to be multi-skilled
can struggle to get finance
average costs are higher
unlimited liability if they fail

42
Q

How firms grow?

A

through organic/ inorganic growth

43
Q

What is organic growth

A

Its when the firm expand by purchasing additional equipments and technology

44
Q

What is inorganic growth

A

It is merging or acquisition of another firm.

45
Q

Horizontal Integration?

A

Acquisition of merger of related business

46
Q

Forward vertical integration?

A

Buying a firm at a later stage of production

47
Q

Backwards vertical integration?

A

Buying a firm at an earlier stage of production

48
Q

Lateral / Conglomerate integration?

A

Acquisition or merger of unrelated industries.

49
Q

List the internal economies of scale .

A

Marketing economies
Purchasing economies
Financial economies ( borrow loans at lower interest rates due to security)
Technical economies ( highly skilled labour)
Risk-bearing economies ( multiple markets)

50
Q

List the external economies of scale

A 
Skilled workers 
Shared infrastructure
Supplier economies
Specialist service providers
Agglomeration economies
51
Q

List the diseconomies of scale

A 
Management diseconomies
Labour diseconomies ( demotivation , less efficiency)
Supply constraints 
Skill shortages ( need training ) 
Regulatory risks ( red tape )
52
Q

Define production

A

Is the process of making products

53
Q

Define productivity

A

The output per factor of production per period of time

54
Q

How to increase labour productivity

A

Training
Performance related pay
Improve job satisfaction

55
Q

Define labour intensive

A

more labour is employed than capital

56
Q

Define capital intensive

A

more capital is employed than labour

57
Q

Formula for total variable cost

A

variable cost per unit * no of units

58
Q

Formula for total cost

A

total fixed cost + total variable cost

59
Q

Average cost

A

total cost/ total output

60
Q

Revenue

A

price per unit * quantity sold

61
Q

Average revenue

A

total revenue/ total units sold

62
Q

Profit

A

total revenue - total cost

63
Q

break even

A

when total revenue = total cost

total fixed cost/ price - variable cost

64
Q

Define x-inefficiency

A

lack of competition

65
Q

Define full-line forcing

A

a dominant firm tells its retailers to stock all their products if they want to sell a single product

Economics (3 decks)

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