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Flashcards by silverbubble98, updated more than 1 year ago
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Created by silverbubble98
almost 9 years ago
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| Question | Answer |
| Adding Value | The value of output minus the cost of inputs. Adding value can enhance the attractiveness of the product to consumers and increase profit |
| Aggregate demand | The total of all the demand in an economy, (from consumers, investment, government expenditure and the balance between exports and imports) |
| Aggregate demand Curve | represents the total level of demand in the economy at different price levels, displayed as a diagram |
| Aggregate supply curve | The total quantities of output in the economy at different price levels. Displayed as a diagram |
| Bank rate | The rate of interest, generally set by central banks and other interest rates tend to be set around it. It is sometimes called base rate. |
| Bankruptcy | A situation where an individual of a business has insufficient cash or other assets with which to settle debts. A business will be forced to crease trading. |
| Barriers to entry | Obstacles which make it difficult for new firms to enter a market. For example: High start-up costs requiring heavy investment. |
| Boom | A time of rapid economic growth, typically linked with lower unemployment and rising inflation. |
| Brand loyalty | Customers may make repeat purchases and avoid competing products. This may make demand for the brand less price elastic. |
| Bulk buying economies | Occur when businesses are purchasing large enough quantities to be charged a lower price per unit (either because unit supplier costs are reduced or because the buyer has market power). |
| Capital goods | Productive assets, acquired by investment, which are expected to make a contribution to future output. |
| Capital Intensive | Production uses large amounts of capital equipment and relatively little labour. Productivity will usually be high. |
| Cell production | Involves splitting a production process into sizeable steps, each of which becomes the responsibility of a team of employees. |
| Chain of command | The sequence of authority down which instructions are passed in an organisation. |
| Choice | Involves deciding on priorities in the light of what can be afforded. (Consumers’ choices are based on what can be afforded with the available income.) |
| Competitive advantage | Any quality which gives the business an edge over rivals. For example Lower costs, or better technology. |
| Complementary goods | Products that tend to be used to together or compliment each other. (For example MP3 players and music downloads) |
| Consumer sovereignty | Consumers ultimately control the allocation of resources by choosing what to buy. |
| Consumer price index (CPI) | An index based on a weighted collection of goods and services, intended to reflect the impact of price changes on a typical household. |
| Contingency planning | Preparing for unwelcome or unlikely but possible problems. |
| Corporate social responsibility | Accepting that organisations must take account of their impacts on the community and environment, show consideration and behave ethically. |
| Cost differential | A difference in cost compared to rivals. This can be a lower cost advantage. |
| Cyclical unemployment | Occurs because of falls in aggregate demand during the downturn of the trade cycle and subsequent recession. |
| Decentralisation | Occurs when decision-making powers are given to local branches or individual divisions within the business, rather than deciding everything at the head office. |
| Delayering | Involves the removal of one or more levels from a hierarchical management structure. |
| Delegating | Allowing people who are lower down in the chain of command to make decisions. |
| Demand curve | Graphical representation of the relationship between quantity demanded and price, for a product in a market. (Non-price factors influencing demand are assumed to be fixed; any change in them causes a shift to a new demand curve) |
| Depreciation | The loss of performance and value in capital equipment over time. Part of gross investment is to offset depreciation. |
| Differentiate | Making your product stand out from others, either by distinctive features of persuasive advertising. A differentiated product may have a competitive edge. |
| Diseconomies of scale | Increases in unit cost that occur as a business grows larger, often associated with communications issues or costs of coordination. |
| Diversification | Spreading business risks by developing the range of products, the markets it is sold in, or both. |
| Economic cycle | Tendency of national or global economic activity to fluctuate between upswing, boom, downturn and recession. |
| Economies of scale | Ways in which increased in output and capacity can reduce costs per unit of output and increase efficiency |
| Effective demand | The combination of desire for a product or service with the ability and readiness to pay. |
| Entrepreneur | People who take the risk and responsibility to set up a business |
| Equilibrium price | The price at which quantity supplied and quantity demanded are equal in a market, leaving neither excess supply nor excess in demand |
| Exchange Rates | The price of one country’s currency expressed in terms of another |
| External economies | Reductions in unit costs that occur as output rises and are shared by a whole industry rather than limited to a single firm. |
| Financial economies | When lenders offer big businesses lower interest rates because they look less risky. |
| Free market economy | Where activity is directed by entrepreneurs and private organisations rather than the state. There are no totally free market economies, but the private sector is larger than the public sector in many economies. |
| Frictional unemployment | Unemployment due to movement between jobs in a dynamic economy. Frictional unemployment is normally regarded as relatively short term and less problematic than other types of unemployment. |
| Gross domestic product (GDP) | The sum of the value of a country’s output over the course of a year. |
| Hedging | Signing contracts for future completion (e.g for delivery of materials) at prices fixed now. This can reduce uncertainty over future costs and can be used to spread risks by mixing future with spot contracts. |
| Hierarchical structure | An organisation with multiple layers of management often associated with centralised decision-making. |
| Homogenous products | Products are identical to one another. It is impossible to distinguish one producer’s output from another’s. |
| Human capital | Refers to the knowledge and skills embodied in people. These are now known to increase productivity very markedly. |
| Imperfect competition | Covers any market situation between the extremes of perfect competition and monopoly. Most real-world markets show characteristics of imperfect competition. Competition may be quite strong but producers are never without an element of market power. |
| Incentive | A reward which stimulates activity. (The rewards are often, but not always financial.) |
| Income | The flow of money received by an individual or a household over time. (Incomes are often a reward for economic activity.) |
| Inferior goods | Consumers switch away from them as rising incomes allow them to buy more attractive alternatives. Sales of inferior goods are likely to increase when incomes fall. (An example might be supermarket value lines as opposed to leading brands.) |
| Informative advertising | Paid for communication about product availability, features, and price. It is essentially factual (though boundaries can become blurred). |
| Inflation | A sustained rise in the average prices of goods within an economy / a fall in the purchasing power of money. Two types: cost-push inflation and demand-pull inflation. |
| Internal economies | Long run reductions in costs per unit resulting from expansion of a single business. |
| Interest Rates | The cost of borrowing money or the reward for saving. |
| Kaizen | Carefully scheduling the arrival of material and components to the production process in small quantities as they are required. This reduces the cost of stock holding and the space required. |
| Kanban | A card system used to guide progress through the production system to exact specifications with precise material and components supplies. |
| Knowledge economy | Intellectual skills, command of knowledge, understanding and ideas have all become central to economic activity, and more important than physical effort. |
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