Basic Edexcel Business and Economics for AS Unit 2b

Basic Edexcel Business and Economics for AS Unit 2b from the year 2012

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  • Created on: 16-05-12 19:09
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Business and
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
Market clearing point
the balance between demand and supply for a product within the economy
This is efficient because:
o No over production
o No unsold products

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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
Commodity markets where aw or primary products are exchanged
National markets trade within a country
International markets trade between countries
Sectors of the Economy
1. primary
extraction of raw materials
2. Secondary
processing of raw materials
3.…read more

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the production of a limited range of goods by a firm in cooperation with others
to complete a range of goods.
division of labour
more productive as workers can focus on specific tasks and gain skills in a
narrow range of tasks
cost effective as workers are specialised.
Objectives of economic factors
they consider the satisfaction gained from consuming an extra unit of
production with its opportunity cost.…read more

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Steep curve/inelastic:
Highly addictive
Few alternatives
Highly fashionable
Shallow curve/elastic:
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.
measures the responsiveness of quantity of demanded to changes in price of the
PeD = % change in quantity demanded
% change in price
Demand is inelastic if the value of the elasticity is greater than 1.…read more

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

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Barriers to entry and exit
high startup costs
saturated market
patents and legal barriers
trade restrcitions
asset write offs
closure costs
loss of business reputation
Implications for Perfect Spectrum
subnormal profits become impossible to achieve in the long run
normal profits may not be regarded as sufficient by some to remain in the
attempts made by firms differentiate in order to make above normal profits
Key terms
Game theory
set of concepts aimed at decision making…read more

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Limit pricing
price set up by a monopolist to discourage entry into a market. Illegal in some
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 to the market
normal profits
price takers
Efficient markets:
Allocated efficiency
when resources are allocated in an industry that matches the
requirements of consumers.…read more

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What affects organisation structure:
Skills of workers
Function of business
Success of business
Size of business
Market and competitors
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 be more stressed.…read more

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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.…read more

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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.…read more


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