1
Q
Explain the economic problem. [3]
A
- People have unlimited wants
- There aren’t enough resources available to supply these wants
- Finite resources available to supply infinite wants
2
Q
What is the purpose of economic activity? [2]
A
- Saatisfy the wants and needs of society
- Tries to answer three questions: what to produce, how to produce and who to produce for
3
Q
What are renewable and non-renewable resources? [2]
A
- Renewable resources can be replenished
- Non-renewable resources are in finite supply and therefore will run out
4
Q
Explain opportunity cost
A
- This is the benefit lost of the next best alternative when making a choice
- There is an opportunity cost for all decisions made
- As all resources are scarce, we must make choices in order to allocate these resources
5
Q
Explain trade offs. [3]
A
- There may be a range of alternatives, all of which had been given up
- All these alternatives are referred to as trade-offs
- For example, you may be considering a trade-off between socialising, working and studying
6
Q
What are economic agents?
A
- These are the individuals, firms and governments that partake in economic activity, the demand for supply of goods and services
7
Q
What is a free market economy?
A
- Where firms decide what goods and services to reduce with little intervention from the government
8
Q
Explain positive and normative statements [2]
A
- Positive (economic) statements are testable as factual or false
- Negative (economic) statements depend on opinion and judgement
9
Q
How do economic agents know what to produce?
A
- Economic incentives will provide economic agents with the info required to tell them what goods and services to produce
10
Q
How do firms know how to produce?
A
- Firms will combine factors of production (land, labour, capital and entrepreneurship) in order to produce a good or service
11
Q
How do we know who to produce for?
A
- In a free market economy, we produce according to supply and demand.
12
Q
Explain profit. [2]
A
- Profit is Sales Revenue - Total Cost (SR-TC)
- This is the money a business has received after taking off costs
13
Q
Explain how sales would be measured. [2]
A
- Sales can be measured in units or value
- For example, a hairdresser’s could complete 60 haircuts for £70 each; sales revenue (value) = £4,200. Sales in units would be 60 haircuts
14
Q
List the objectives of businesses [9]
A
- Profit maximisation
- Sales maximisation
- Profit satisficing
- Survival
- Market share
- Cost efficiency
- Employee welfare
- Customer satisfaction
- Social objectives
15
Q
Explain profit maximisation. [2]
A
- To produce at a level of output where the surplus of sales revenue over total costs is at its highest
- This supports investors and funds growth
16
Q
Explain sales maximisation
A
- To achieve the highest achievable amount of sales either by volume or value
17
Q
Explain profit satisficing [2]
A
- To make enough profit to be satisfied but not purely motivated by profit
- Businesses may profit satisfice to maintain a work-life balance
18
Q
Explain a business’ objective to survive. [2]
A
- To continue to exist as a business
- This may be the most important objective in the short-term
19
Q
Explain market share [2]
A
- The proportion of total market sales that a firm has
- Market share = Business A sales/market sales x 100
20
Q
Explain cost efficiency
A
- To control costs so that the maximum value of outputs is achievable with the lowest value of inputs
21
Q
Explain employee welfare [2]
A
- To look after the economic and physical wellbeing of the workforce
- Motivation. Positive employer/employee relationship
22
Q
Explain customer satisfaction [2]
A
- To ensure that goods and services meet the needs and expectations of the customer
- Helps build customer loyalty
23
Q
Explain social objectives
A
- To behave in a way which benefits society
