8137530
Description
Flashcards by Harry Lewis, updated more than 1 year ago
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Created by Harry Lewis
about 7 years ago
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| Question | Answer |
| Opportunity cost | The best alternative given up when making a choice |
| Trade-off | A balance between choices, choosing more of one and less of the other, rather than making a simple either/or choice |
| Positive statements | Economic statements testable as factual of false on the basis of observation and evidence. |
| Normative statements | Economic statements which depend on opinion and judgement, often called value judgements. |
| Satisficing | Reaching a good enough profit level, without maximising (for example, an entrepreneur earning enough to survive but still spend time with his family) |
| Creditors | Individuals or organisations to whom a business owes money |
| Tax evasion | Illegally failing to pay taxes that are due. |
| Tax avoidance | Finding legal ways to reduce tax liability |
| Creative destruction | The way in which quality-improving innovations lead to economic growth. Customers switch to new products and old products become obsolete. Innovations that cut costs and eventually, prices, will have the same effect. |
| Added value | The difference between the cost of material inputs and the eventual value of the product in terms of the price that can be charged for it. |
| Social entrepreneur | Someone who uses business methods and strategies to achieve social objectives. They seek innovative solutions to difficult social problems. |
| Working capital | The finance needed by a business to cover production costs - rent, wages and the cost of other inputs needed - until payment is received. |
| Effective demand | The combination of desire for a product or service with the ability and readiness to pay |
| Demand schedule | A table showing the quantities demanded at different price levels |
| Contraction of demand | A move up and left on a demand curve when price rises. |
| Extension of demand | A move down and right on a demand curve when price falls |
| Shift in the demand curve | When quantity demanded changes for reasons other than price, for example a change in income or tastes and fashions. |
| Short run | In supply theory, the time period in which the quantity of at least one component in production cannot be changed. |
| Long run | In supply theory, the time period in which the quantities of all factors of production can be changed. |
| Ceteris paribus | Latin for 'all other things being equal' - in economic terms, freezing all variables other than the one being studied, avoiding complications and allowing us to examine individual changes. |
| Quantitative market research | Market research giving numerical results which can be analysed statistically |
| Qualitative market research | Market research giving results which examine opinions and feelings. |
| Quota sample | Ensuring the sampling covers all the different groups of the population - groups will be representative of age, gender, occupation and other factors. |
| Stratified sample | Doing market research with people from a specific group of the population, perhaps a target market. |
| Market segmentation | Identifying different groups of consumers in a market where each group has distinctive preferences. Products and marketing strategies can be differentiated to suit individual segments. |
| Market positioning | The way a product is seen in comparison with rival products. |
| Collateral | A loan which bears no risk to the lender. If it cannot be repaid, the collateral assets (secured against the loan, most likely property) can be sold off to pay the debt |
| Financial intermediaries | Include retail and investment banks, building societies, pension funds and insurance companies. They all offer a link between investors and savers. |
| Unlimited liability | When an individual has no legal separation from their business and is therefore personally responsible for the debts of the business. Their personal assets could be used to pay business debts if the business is unable to cover them. |
| Limited liability | When a business's shareholders are legally separate from the business. The most that shareholders have to contribute towards business debts is the amount of capital originally invested in buying shares. |
| Private limited companies | A business where the owners have limited liability for business debts but cannot raise finance from the general public. They are usually small or medium-sized businesses owned by family or personal friends. |
| Public limited companies | Businesses owned by their shareholders, who have limited liability. The companies can raise finance by selling shares to the general public and large organisations such as pension funds. |
| Retained profit | Profit being reinvested in the business rather than being given to the owners of the business in the form of dividend payments. |
| Equity | Another name for shares |
| Ordinary share capital | Long-term finance raised by selling shares in a business. Share capital does not have to be repaid. Investors receive part-ownership of the business and a share of profits in the form of dividends. |
| Venture capital | Money invested in a new business by one or more individuals who believe that the business will succeed and therefore increase in value, but are willing to accept the risk that the business idea may fail. |
| Trade credit | A short-term source of finance offered when suppliers allow a time period before payment for supplies must be made. |
| Command economy | An economy that relies predominantly on public goods and services |
| Capital spending | When a business invests in premises or equipment or something of long term benefit to the business. |
| Operating costs | Also known as running costs - paid regularly by a business in the course of operating. They include fixed and variable costs and correspond to total costs. |
| Contribution | The amount each sales raises towards fixed costs or profit, calculated as: selling price-variable costs |
| Break-even point | The volume of sales (units) at which a business breaks even, so total revenue matches total costs exactly. Calculated as: Total fixed costs/contribution margin |
| Margin of safety | The volume by which sales are above the break-even point. Expected/actual sales-breakeven point |
| Sunk costs | Heavy start-up costs that cannot be recovered. |
| Statement of comprehensive income | Also called the profit and loss account, this starts with a figure for sales revenue and deducts each different group of costs to arrive at measures of profit |
| Insolvency | When a business fails because a lack of working capital means that debts cannot be repaid |
| Liquidity | Having sufficient cash available, sometimes also having assets which can quickly be converted to cash. |
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