economics

What is an economy

The system which resources are produced, distributed and consumed goods and services within a country

How can an economy be measured and what is is

GDP ( gross domestic product ) - its the country’s wealth measured through all goods and services

What are the factors of production

Capital, land, labour, enterprise

What is specialisation

The process by which individuals, firms and economies concentrate on producing those goods and services in which they have an advantage e.g India specialises in IT

2 advantages of specialisation

Increased efficiency/productivity - due to effective management of resources

Reduced cost per unit (economies of scale)

2 disadvantages of specialisation

Risk of over reliance on one product/market (demand shock)

Less flexible workers if too specialised

What is division on labour

The process whereby the production process is broken down into a sequence of stages with workers assigned to particular stages

2 advantages division of labour

Faster production/efficiency/productivity- reduces cost per unit

Lowers training costs due to only needing one role

2 disadvantages of division of labour

Demotivating due to repetitive tasks which could lead to a strike or quality issues

Over specialisation can prevent flexible working

What is profit maximisation

When a firm priorities maximum profit which rewards owners, pays dividends, financial investment and retention for a safety net

What is sales maximisation

When a firm priorities increasing sales revenue rather than profit to increase market share - the could reduce profit margins due to the initial low price

What is market share

Increasing brand recognition, power and opportunities for economies of scale

Sales of the business / total sales in market x 100

What type of businesses would have survival as its main objective

New businesses

Competitive

Increasing costs

What is cost efficiency

Cutting costs to reduce total costs by training, reduction of waste, economies of scale

But these can reduce quality, customer service and innovation

What is return on investment

It allows a business or investor to consider the return generated relative to investment made

What is satisficing

When and owner accepts a satisfactory level of profit while pursuing other objectives

What are some reasons objectives change and why?

Ownership - a business may focus on return on investment compared to sole trader where survival is more important

Size - diffrent priority’s

Age of business

Ethics and values

Economic conditions

What is an entrepreneur

Someone who identify a business opportunity, takes risks and makes decisions in order to produce and sell goods or services

What is creative destruction

The process where an entrepreneur introduces a new product, technology or method of production causing an older product and business to decline and disappear e.g iphones

Why does and entrepreneur need to operate, expand and develop

Establish key information such as workers, pricing, advertisement, what to produce

Understand whether expansion is domestically or internationally and how many workers

Create new products and changing diffrent models