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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…

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3. 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…

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cost effective as workers are specialised.




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…

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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…

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If the YeD is >+1 = Positive income elasticity
demand changes by a greater proportion than income.
Such as normal goods and luxuries

Applications of income elasticity of demand:

Judging how their product will survive in the economic cycle
judge how much they will need to produce and adjust their…

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

Characteristics:

number of firms and their size
number of potential new firms
ease of entrants
how similar are goods
to what level knowledge is shared
extent to which firms affect each other

Barriers to entry and exit

Entry:…

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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…

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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…

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

Hierarchal structure
organisation with multiple layers of management often associated with centralised
decision making and rigid rules


Entrepreneurial structure

o small business
o Loose lines of authority
o Informal
o Entrepreneur in…

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bureaucratic
strict rules
lots of paper work

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…

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