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Business and
Economics
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:
o No over production
o No unsold products
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 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

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Tertiary
provides services to the public
Derived V's Composite demand
o Derived demand
goods that are demanded only because they're needed for the production of
other goods
o Composite demand
goods demanded for 2+ distinct uses
o Joint supply
When 1 good is supplied for 2 different purposes
Factors causing basic economic Problems
1. Scarcity of economic goods
worlds resources are limited so firms only have access to limited resources
2.…read more

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Objectives of economic factors
consumers
they consider the satisfaction gained from consuming an extra unit of
production with its opportunity cost.
Workers
assumed to want to maximise their benefits from work, such as page
and fringe benefits
Firms
assumption is that firms are in business to maximise profits
Governments
assume to want to maximise the welfare of the citizens of their country
Price elasticity of demand
Steep demand curves are associated with goods where demand if unresponsive to a
change in price.…read more

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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 of the
good.
PeD = % change in quantity demanded
% change in price
Demand is inelastic if the value of the elasticity is greater than 1.
A small change in price leads to a large change in quantity demanded.…read more

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If the YeD is >+1 = Positive income elasticity
demand changes by a greater proportion than income.…read more

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Market structure
The characteristics of a market which determine firm are behaviour.…read more

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Key terms
Game theory
set of concepts aimed at decision making in situations of competition and conflict
under specified rules.
Brand proliferation
when a firm produces multiple products under different brand names
Contestability
market structure where there's freedom of entry and exit. Is a market structure which
must have low startup costs.
Limit pricing
price set up by a monopolist to discourage entry into a market. Illegal in some
companies.…read more

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The growth of Firms
Internal (organic) expansion of the business:
Firms can generate higher sale and increased market share by expanding their
operations and exploiting possible economies of scale.
Slower form of expansion
External growth of firms:
HORIZONTAL
where 2 firms join at the same stage of production in 1 industry
VERTICLE
Where the firm develops market dominance by merging or taking over a firm at a
different stage of production.…read more

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A visual representation of how a firm intends authority, repsonsibiltiy and info to flow
within its organisational structure.…read more

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Span of Control
number of staff working under a supervisor or manager
Advantage of a narrow span of control:
better communication
minimises uncertainty
closer management
tasks can be delegated
clear responsibilities
Disadvantage of a narrow span of control:
bureaucratic rules, policies and systems
messages get distorted
little flexibility
Delegation
authority passed down to those lower in the chain of command
Consultation
involving workers in discussions, working methods and developments.…read more

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