Business

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Trade-off and opportunity cost
A trade-off describes what you sacrificed to get something else and an opportunity cost is what you could have done
1 of 95
Purpose of economic ativity
Choice, wants, needs, economic welfare, free market economy
2 of 95
Reasons for business objectives
Profit maximisation, satisficing, survival, market share
3 of 95
SMART
SPECIFIC, MEASURABLE, ACHIEVABLE, REALISTIC, TIMED
4 of 95
Added value
Enhancing the customer experience, unique selling point or product differentiation
5 of 95
Characteristics of an entrepreneur
Creative, self motivated, enthusiastic, showing initiative
6 of 95
Non-financial motives for entrepreneur
Independance, homeworking
7 of 95
Specialisation
Likely to lead to increased output per worker (productivity)
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Division of labour (positive)
Cuts down production costs, improves workforce
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Division of labour (negative)
The work can become boring (monotonous), workers become more absent
10 of 95
SPICED
Strong Pound Imports Cheap Exports Dear -- firms that import will be able to buy cheaper raw materials and finished goods
11 of 95
WPIDEC
Weak Pound Imports Dear Exports Cheap -- there will be a greater demand from abroad for UK goods
12 of 95
Taxation
Businesses are charged corporation tax on profits, consumers are charged VAT on goods
13 of 95
Unemployment
There may be a mismatch between the skills of those people unemployed and the skills required for job vacancies
14 of 95
Inflation
Increased costs due to higher inflation. If a firm exports then it will see customers move to companies abroad when prices are not rising as fast
15 of 95
Demand curve
As price falls quantity demanded rises, whereas as price rises quantity demanded falls
16 of 95
External shocks
Natural disasters, terrorist attacks, disease
17 of 95
Relationship between price and quantity
As the price of a product rises the quantity supplied will increase, whereas as the price of a product falls the quantity supplied will fall also
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Supply curve shift
Changes to the cost of production, introduction of new technology
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Market equilibrium
All buyers can get the exact amount they want to buy at this price and all sellers provide exactly the amount that they want to sell at this price
20 of 95
Equilibrium
A change in price will lead to a movement along the supply or demand curve
21 of 95
Limitations of the curve
Supply and demand looks at competitive markets. In the real world the degree of competition in the market varies
22 of 95
Rationing function
Excess demand for a good or service will lead to a rise in the price of a good or service. This is due to the scarcity of the product
23 of 95
Incentive function
Higher prices act as a motivator for producers to increase the supply of a good or service, due to greater contribution per unit
24 of 95
Signalling function
An increase in price will give an indication to producers that they should increase supply, for consumers it means they should reduce demand
25 of 95
Allocative efficiency
When demand increases prices rise signalling to firms that they should increase supply to maximise profit
26 of 95
Niche market
This form of specialism means that the firm can often charge higher prices
27 of 95
Market research
Used to identify and anticipate needs and wants, gain insight to customer behaviour
28 of 95
Primary research
Surveys and questionnaires, telephone, online
29 of 95
Secondary research
Newspapers or magazines, trade unions, professional bodies
30 of 95
Quantitative research
Statistics, numbers
31 of 95
Qualitative research
Non-statistical, opinions
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Market segmentation methods
Demographic, geographic, income, behavioural
33 of 95
Benefits of segmentation
Target advertising, the most profitable and least profitable customers are identified
34 of 95
Market map positioning
Is influenced by market conditions (degree of competition) and also external environment eg. state of economy
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Competitive advantage
Product differentiation, ability to add value, operational efficiency
36 of 95
Sole trader
One owner, very risky, and limited ideas
37 of 95
Partnership
2-20, less risky, multiple ideas
38 of 95
The government intervene to reduce market failure to...
Reduce or eliminate negative externalities, to increase positive externalities
39 of 95
The ways government intervene...
regulation, indirect taxation, grants and subsidies
40 of 95
government failure can occur through...
conflicting objectives, inadequate information
41 of 95
equation for sales revenue
selling price x quantity sold
42 of 95
equation for sales volume
sales revenue / selling price
43 of 95
equation for revenue
revenue = selling price x quantity sold
44 of 95
revenue
increases with the amount of units sold
45 of 95
average cost
total cost / output
46 of 95
percentage change is calculated by...
original - new / original x 100
47 of 95
contribution equation
selling price - variable costs
48 of 95
break-even point equation
fixed costs / contribution
49 of 95
contribution example
selling shirts at 11.50, each one costs 4.00 to make, when one is sold a contribution of 7.50 is made ( SP 11.50 - VC 4.00)
50 of 95
profit equation
total revenue - total costs
51 of 95
3 types of profit
gross profit, operating profit, net profit
52 of 95
gross profit is the relationship between...?
gross profit and sales revenue
53 of 95
operating profit is the relationship between...?
net profit and sales revenue
54 of 95
net profit the relationship between...?
net profit and sales revenue
55 of 95
organic growth occurs when...
a business expands in size by opening new stores, branches. (no risk of losing control)
56 of 95
inorganic growth occurs when...
a business takes over another one (inorganic is difficult to control because of so many stores
57 of 95
price elasticity of demand
PED is price inelastic as the fall in demand is less than the fall in price
58 of 95
price elasticity of demand
PED is price elastic as the fall of demand is greater than the fall in price
59 of 95
PED equation
%change in quantity demanded / %change in price
60 of 95
cost plus equation
variable cost per unit + fixed cost per unit + a percentage mark-up
61 of 95
productivity
increased productivity will reduce unit costs
62 of 95
globilisation
trade liberalisation - the WTO assisted on making greater trade agreements across the world
63 of 95
globalisation
capital market liberalisation - rules and regulations surrounding the movement of capital which can move either freely or very low cost quickkly around the world
64 of 95
equation for GDP per capita
national income / population
65 of 95
specialisation (in countries)
if a country specialises in one thing trading would be much easier
66 of 95
world economy
a strong economy will import goods and services in order to meet it's needs, this might lead to an increase in domestic consumption
67 of 95
impact of cheap imports on living standards
low wage economies have produced goods such as textiles and cheaper electronics that have undercut UK based firms and led to a decline in these industries in the UK
68 of 95
SPICED
strong pound imports cheap exports dear
69 of 95
WPIDEC
weak pound imports dear exports cheap
70 of 95
aggregate demand equation
consumption + investment + gov spending (imports - exports)
71 of 95
a boom is characterised by...
high rate of economic growth, low unemployment, high demand
72 of 95
recession is characterised by...
demand falls, unemployment falls, inflation starts to rise
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slump is characterised by...
low or negative growth, unemployment is high, demand is low
74 of 95
recovery is characterised by...
demand increases, unemployment falls, inflation starts to rise
75 of 95
land
for buildings
76 of 95
labour
for output
77 of 95
capital
for investment
78 of 95
rent
for land
79 of 95
wages
for labour
80 of 95
interest
for capital
81 of 95
profit
for entrepreneurship
82 of 95
equation for real national output
nominal national output / average price level
83 of 95
demand-pull
caused by excessive demand in the economy for goods and services
84 of 95
cost push
when firms respond to rising costs of production by increasing by increasing prices
85 of 95
structural unemployment
when long term shifts to the structure of the economy impact upon the job markets
86 of 95
technological unemployment
when improved capital which may be more productive and efficient than labour replaces labour as a factor of production
87 of 95
cyclical unemployment
when economic growth is below the trend rate of growth
88 of 95
effects of unemployment on consumers and firms
reduced demand for goods, reduced profitability, increased government spending
89 of 95
economic growth
rate of changes in a country's output
90 of 95
unemployment
represents rate of resources
91 of 95
inflation
rate of change of average prices in an economy
92 of 95
balance of payments
measures the UK's record of economic activities with other countries
93 of 95
government spending
more government spending means more employment, however may cause high inflation (high aggregate demand)
94 of 95
tax
higher tax - less disposable income - lower aggregate demand - keeps inflation at same rate
95 of 95

Other cards in this set

Card 2

Front

Choice, wants, needs, economic welfare, free market economy

Back

Purpose of economic ativity

Card 3

Front

Profit maximisation, satisficing, survival, market share

Back

Preview of the back of card 3

Card 4

Front

SPECIFIC, MEASURABLE, ACHIEVABLE, REALISTIC, TIMED

Back

Preview of the back of card 4

Card 5

Front

Enhancing the customer experience, unique selling point or product differentiation

Back

Preview of the back of card 5
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