Why firms may not maximise profit? Flashcards
(25 cards)
What are needs?qa
Needs- essentials required to maintain sufficient survival
What are wants?
Wants- desire, but not essential for survival
What is scarcity?
Scarcity- limited in supply
What is opportunity cost?
Opportunity cost- The benefits foregone of the next best alternative
What is the Basic Economic Problem?
Basic economic problem- Needs and wants are infinite, but resources to provide these are finite.
Why might firms not maximise profit?
-Social enterprise- generate revenue to fund a social cause such as improving human or environmental wellbeing.
-Charities-Not-for-profit organisations which raise awareness and money for a particular cause.
-Public service
-Focus on other objectives- eg better customer service to increase sales
-Managers pursue own objectives for bonuses. Eg increased revenue
What are the four factors of production?
-Land
-Labour
-Capital
-Enterprise
What is Land?
Land- encompasses all of the earth’s natural resources. It can be above, on or below the surface. Eg water
What is Labour?
Labour- skills and characteristics of the workforce. Human capital
What is capital?
Capital- Investment in the man-made resources used in the production process. Eg machinery, roads, offices, vehicles
What is enterprise?
Enterprise- Organise the other 3 factors of production and take a risk in a business venture.
What are the three sectors of the economy?
-Primary
-Secondary
-Tertiary
What is the primary sector?
Primary- The extraction of raw materials.
What is the secondary sector?
Secondary- Manufacturing/ production of products.
What is the tertiary sector?
Tertiary- Providing a service.
What is industrialisation?
Industrialisation- the growing importance of the secondary sector.
What is deindustrialisation?
De-industrialization- decline of the secondary sector.
Who are consumers?
Consumers- Individuals who purchase goods/services for personal use.
Who are producers?
Producers- An individual or company that supplies goods/services for sale.
What is the government?
Government- Act to serve the needs of society.
What is production?
Production- Process which involves converting resources into goods.
What is productivity?
Productivity- Output per unit of input over a period of time.
What is division of labour
Division of labour- Breaking down production process into smaller tasks.
What are the advantages to division of labour?
-Increased productivity
-Improved dexterity
-Time saved (not moving along production process)
-Highly specialised- better ways to achieve efficiency
