Economics and Business B. Definition of terms. F-P

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Factors of production
are the inputs; land, labour, capital and enterprise.
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Fixed costs
do not change with the level of output of the business. Examples include rent, interest payments, managers salaries and business rates.
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Free market economy
is one where there is no interference from outside agencies , such as the government.
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Government expenditure
the money spent in the economy over a period of time on publically provided goods and services such as education, healthcare, social welfare and the civil service.
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Government failure
occurs when governments try to deal with market failure, but in doing so create further problems.
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Gross domestic product (GDP)
a measure off the total value of all goods and services produced, ie total income created within the economy within one year.
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Gross profit
turnover minus cost of sales. overheads 9fixed costs) interest, and tax have not been taken into account.
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Gross profit margin
a measure of profitability. Gross profit is shown as a percentage of turnover.
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Imports
Goods and services brought into one country from sellers in another country.
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Inferior goods
sell better when incomes are falling. Their income elasticity of demand is negative
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Inflation
a sustained rise in the general price level or a fall in the value of money
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Infrastructure
includes transport facilities, communications, and access to energy and water
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Interest rates
a payment in percentage terms for the use of a sum of borrowed money. It can be seen as the price of money
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Leasing
a long term rental agreement that allows businesses to use assets without having to pay for them outright., thereby freeing up funds for other uses. often used for vehicles, machinery etc
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Liability
means responsibility for the finacial debts of the business. A laibility is a legal claim for payment.
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Limited liability
in the event of finacial problems and the closure of a business, the repsonsibility for any outstanding debts is limited to the owner(s) orignial investment.
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Loan
the use of someone else's money for a period of time. Usually involves regular payments and the payment of interest.
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Margin of safety
the difference between the actual level of output and the break-even level of output
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Market
any medium in which buyers and sellers interact and agree to trade at a price.
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Market clearing
means there is no excess supply and no excess demand
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Market failure
occurs when social costs exceed social benefits. This frequently happens when there are no negative externalities.
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Market forces
are the forces of demands and supply as they operate freely and interact to determine the allocation of resources
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Market growth
an expansion of the market based on increased sales
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Market mapping
using a grid showing two features of a market, eg price and consumer age. Individual brands are added to the grid to show potential niches or gaps in the market.
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Market niche
a small part of an overall market which has certain special characteristics
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Market orientation
where the needs of the customers are the overriding priority in the production and marketing of products and services
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Market positioning
shows how individual products orr brands are seen in relation to their competitors by consumers
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Market research
any type of activity that gives a business information about its product or service, its customers, its competitors or the market it operates in.
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Market segmentation
the splitting up of the market into groups of consumers with similar characteristics. products and services can be designed specifically for , and targeted at, a particular segment.
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Market share
is the percentage of the total market buying one firm's products.
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Mass market
a large market which includes the majority of the relevant population.
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Negative externalities
are external costs that have a deterimental effect on the lives of people who neither bought or sold the product.
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Niche market
a small part of the total market that has certain specific or special characteristics
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Normal goods
sell better when incomes are rising. they have a postive income elasticity of demand
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Operating profit
the most common way of identifying/assessing the profit of a company. this can be calculated by subtracting the overheads cost, and other fixed costs from the gross profit
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Operating profit margin
this is the operating profit shown as a percentage of the turnover
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Opportunity cost
represents cost in terms of an alternative to that chosen. e\very decision has an opportunity cost ie the item or service foregone in order to get the preferred product
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Ordinary share capital
the money raised by selling shares of a plc business. these represent stakes in the company or service . Shareholders receive a dividend if the business is profitable
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Over-consumption
this occurs when social costs are greater than private costs because of negative externalities
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Overdraft
a facility that allows a business or individual to borrow upto an agreed limit. A flexible and useful form of finance, particularly useful when there are cash flow problems.
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Card 2

Front

do not change with the level of output of the business. Examples include rent, interest payments, managers salaries and business rates.

Back

Fixed costs

Card 3

Front

is one where there is no interference from outside agencies , such as the government.

Back

Preview of the back of card 3

Card 4

Front

the money spent in the economy over a period of time on publically provided goods and services such as education, healthcare, social welfare and the civil service.

Back

Preview of the back of card 4

Card 5

Front

occurs when governments try to deal with market failure, but in doing so create further problems.

Back

Preview of the back of card 5
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