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Business and
Economics

Unit 2
Multiple Choice
o definition
o why yes
o why no
Long Questions
o Knowledge
o Application
o Analysis
o Evaluation



Supply and Demand
MARKETS ARE DYNAMIC
Market clearing point

the balance between demand and supply for a product within the economy

This is efficient because:…

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Aggregate
the total of something within a market/ the economy

Key markets within the economy

Consumer markets sell to the end user
Commercial market business to business selling
Financial market mechanism that allows people to buy and sell financial
securities
Commodity markets where aw or primary products are exchanged
National…

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renewable can be used and replaced
sustainable resources ones which are exploited economically and replaced
so as to maintain their numbers
non sustainable resources ones which are exploited economically and may
run out
human capital education and training increases the value of the workers
working capital stocks of material that…

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Steep curve/inelastic:

Highly addictive
Necessity
Few alternatives
Highly fashionable


Shallow curve/elastic:
Luxury
Many alternatives
Brand loyalty
Not addictive

Demand Elasticity

Elasticity is a measure of how much the quantity demanded will be affected by a
change to price.

PeD

measures the responsiveness of quantity of demanded to changes in price…

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If the YeD is negative = Negative income elasticity
demand will fall as income rises. Such as inferior goods.

If the YeD is 0 = Zero income elasticity
demand doesn't change when income rises

If the YeD is between 0 and +1 = Income elasticity
demand rises by a smaller…

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how similar are goods
to what level knowledge is shared
extent to which firms affect each other

Barriers to entry and exit

Entry:

competition
high startup costs
saturated market
patents and legal barriers
pricing
branding
loyalty
advertising
marketing
trade restrcitions

Exit:

asset write offs
closure costs
loss of business reputation…

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Limit pricing
price set up by a monopolist to discourage entry into a market. Illegal in some
companies.

Collusion
a secret agreement to fix pricing or marketing strategy

Firms in a competitive market will:

lower prices to compete with other products
differentiate their products
control costs
easy entrance and exit…

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What affects organisation structure:

Skills of workers
Function of business
Success of business
Size of business
Finance
Environment
Market and competitors

Why?

A management decision to remove a layer of hierarchy may cause problems
for a firm in the short term as it may cause miss communication and
employees to…

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o Enables experts to work together
o Improved communication
o Difficult to supervise
o Non useful for large organisations
o Suitable for organisations with fast changing situations

Levels of hierarchy
levels of management within a business organisation from lowest to highest.

Chain of command
the way power is passed down…

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Empowerment
providing sufficient freedom and selfregulation for subordinates to make a
contribution to shaping their working life's

Job enrichment
involves giving employees the opportunities to use their abilities on meaningful tasks
rather than repetitive actions.

Job enlargement
means increasing the work range of tasks involved in a job.

Centralised
approach…

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