economics theme 1

Objectives of business

• Profit maximisation

• Sales maximisation

• Satisficing

• Survival

• Maker share

• Cost efficiency

• Return on investment

• Employee welfare

• Customer satisfaction

• Social objectives

Economic agents + examples

Economic agents are the individuals firms and government that partake in economic activity.

• government

• Firms

Creative destruction

A term (created by Joseph Schumpeter) which states that the process of innovation will incessantly destroy the old economic structure. Creating a new one

Factors of production

• land

• Labour

• Capital

• Entrepreneurial skill

Methods of adding value

• building a brand

• Delivering excellent service

• Product features and benefits

• Offering convenience

Non- financial motives

• ethical stance

• Social entrepreneurship

• Independence

• Homeworking

What is capital

AIDS that are used in the production process.

• machinary, tools

• Factories , offices

what is land

Raw materials that are used to make goods

What is labour

Includes all the workforce of the company

Labour productivity formula

Output per period devided by number of employees at work

Division of labour

When workers are assigned specific tasks to do in the workplace. This leads to more efficiency.

Specialisation

When economic units concentrate on producing specific goods or services.

Employee disadvantage of division of labour

• work becomes repetitive= low motivation

• High turn over rates for firms which means workers are dissatisfied

Advantages for employees with division of labour

• less responsibility

• More specialised = more power = more money

Spiced

• strong

• Pound

• Imports

• Cheaper

• Exports

• Dearer

Wpidec

• weak

• Pound

• Imports

• Dearer

• Exports

• Cheaper

Interest rates

The price of money. Cost of borrowing or the reward for saving

Retail price index

A measurement of a basket of goods and services representative of what people buy in the uk

Consumer price index

Same as RPI but excluding housing costs

4 stages of the business cycle

• boom

• Recession

• Slump

• Recovery

Effects on business for high unemployment

• excess available workers

• Can attract workers for less money

• Mismatch between skills of those people unemployed and skills required for the job

Types of unemployment

• frictional

• Structural

• Geographic

• Seasonal

• Real wage

• Voluntary

• Demand

What is frictional unemployment

When someone is between jobs.

What is real wage unemployment

When someone cannot find work due to their wage demand being to high

What did William beverage do

Defined unemployment as a workforce being 3% unemployed

What is a social enterprise

A “normal” business but half of their profit goes into benefiting the community

Who was Adam smith

Created decision of labour and wrote the wealth of nations book