Economics

get a hint

hint

When you undertake an economic transaction that usually involves the exchange of money. Examples: buying food, topping up myki, school fees, paying taxes to maintain public parks

When you undertake an economic transaction that usually involves the exchange of money. Examples: buying food, topping up myki, school fees, paying taxes to maintain public parks

What is economic activity? What are some examples

Any individual, group or body involved in economic activity. Main economic agents are consumers, producers and government

What are economic agents? What are the three main economic agents

Necessary to live and function. Examples: food, water and shelter

What is a need? Name some examples

Only some services are transferable. Example: A student can share notes with a student absent while a neurosurgeon's skills are not transferrable.

Define services. Name some examples

Something to improve the quality of life, not necessary. Examples: croissants, airpods, holidays

What is a want? Name some examples

Not having enough resources to fulfill all our wants and needs

What is relative scarcity?

Resources that occur in nature

What are land/natural resources

Mental and physical effort by humans in the production process

What is labour?

Resources that have been made by combining labour and natural resources.

What is capital?

A decision making process that is based on making choices that result in an optimal level of benefit or utility

What is rational economic decision making?

Those who make purchasing decisions have access to relevant and accurate information

What is informed decision making?

the most desirable alternative given up as the result of a decision

What is opportunity cost?

a law of economics stating that as a person increases consumption of a product while keeping consumption of other products constant, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

What is diminishing marginal utility?

When economic agents make decisions limited by how much information is actually available, how complex the decision is. The economic agent will make a decision that are 'good enough' but consumers are succumb to decision making 'errors' and 'biases' that limit their ability to consistently rational decisions

What is bounded rationality?

Optional extras on a large purchase that makes it appear like it is a bargain. E.g. car, house

Define the decision making factor; anchoring effect. Name some examples

Overestimate ability to make good decisions. E.g. debt

Define the decision making factor; overconfidence bias. Name some examples

Following the decision of our peers. E.g. clothes shopping

Define the decision making factor; herd behaviour. Name some examples

Influenced by the way choices are framed. E.g. Low fat food, low sugar food

Define the decision making factor; framing bias. Name some examples

Following the same decision we've made in the past. E.g. supermarket shopping

Define the decision making factor; status quo bias & habitual behaviour. Name some examples

When consumers do not have the perfect self-control and this will limit our ability to always choose the optimum option

What is bounded willpower?

When buying practices are driven by a commitment to making purchasing decisions that have a positive social, economic and environmental impacts. Consumers vote with their dollars by buying ethical products

What is conscious consumption?

An economic system in which assets or services are shared between private individuals, either free or for a fee, typically by means of the Internet.

What is the sharing economy?

The buying and selling of goods and services over the internet. E.g. online shopping

What is ecommerce?

Is that consumers are rational and act in self to maximise their utility or satisfaction. They have ordered preferences and makes informed decisions and experiences diminishing marginal utility

What is the traditional view of economics?

The maximisation of sales of a business using measures such as advertisement, sales promotion, demos, test samples, campaign, references

Define maximising revenue

Firms maximising their productivity or using the lowest cost amount of inputs to produce a specific output

Define minimising production costs

Logos, music to differentiate products at stores, online and on television. An important part of market structure in capitalist economies, i.e. the shopping centre market is the best place to see advertising working at its best. Also, there is the online market and social media apps such as instagram

Define the advertising strategy. Name some examples

Involves a business charging consumers different prices for the same product. It enables businesses to maximise revenue by imposing a higher price for high value customers (namely those with an ability and preparedness to pay more) and a lower value customer (namely those unable or unwilling to pay a higher price) The purchase of cinema tickets: different prices for children, students, adults, and pensioners

Define the price discrimination strategy. Name some examples

Involves businesses marketing their products under separate and distinct brands. For example Coca Cola company produces numerous soft drinks: Coke, Fanta, and Sprite. Cadbury produces a number of chocolate brands: Dairy Milk, Roses, Flake. Kellogg produces a number of cereal brands: Rice Bubbles, Special K and Cornflakes

Define the multi-branding strategy. Name some examples

Planned obsolescence is a business strategy in which the obsolescence (the process of becoming obsolete, that is, unfashionable or no longer usable) of a product is planned and built into it from its conception, by the manufacturer

Define planned obsolescence? Name some examples

The consumer credit system allows consumers to borrow money or incur debt and defer repayment of that money over time. Having this system enables consumers to buy goods or assets without having to pay for them in cash at the time of purchase

Explain the link between consumer credit and consumerism

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs

What is sustainable development?

Positive externalities is when the benefit spills over to a third party. E.g. Education, vaccinations, bees

What are positive externalities. List some examples

Negative externalities usually come at the cost of individuals, while positive externalities generally have a benefit. E.g. Taxpayers, third party smoker, innocent kids from guns, people on the road affected from drunk driving,

What are negative externalities. List some examples

The quantity of a good a service that consumers are willing and able to purchase at each price.

What is demand?

As price increases, demand decreases. As price decreases, demand increases

What is the law of demand?

When only price changes, we say there is an increase or decrease in the quantity demanded => We see a shift or movement along the demand curve (right or left)

What is a demand curve?

When a factor of demand other than price changes, there is either an increase or decrease in demand and we see a shift (left or right) of the demand curve

What is a shift in the demand curve?

An increase in incomes of buyers will increase their ability to purchase goods and services.

Define the demand factor; incomes of buyers. Name some examples

An increase in the price of a substitute good (e.g. chocolate slice) will lead to an increase in the demand for muffins. A decrease in the price of a substitute good (chocolate slice) will lead to a decrease in the demand for muffins

Define the demand factor; the price of substitute goods. Name some examples

An effective advertising campaign will tend to increase demand, fashion trends

Define the demand factor; consumer tastes/preferences. Name some examples

Demand for certain goods will increase at certain times of the year, seasons. E.g. When in winter, there will be an increase in warm soups

Define the demand factor; weather/time of year. Name some examples

The quantity of a good or service that producers are willing and able to supply at each price

What is supply?

As price rises, supply rises and as price falls, supply falls

What is the law of supply?

Only price changes we say there is an increase or decrease in the quantity supplied => We see a movement along the supply curve

What is the supply curve?

When a factor of supply other than price changes => We say there is an increase or decrease in supply and see a shift of the supply curve

What is a shift of the supply curve?

An increase in costs of production will make it more difficult for producers to supply goods

Define the supply factor; costs of production. Name some examples

Improved availability of resources will make it easier to supply of goods will increase

Define the supply factor; availability of resources. Name some examples

Increased use of technology (such as farm machinery) will increase supply/production

Define the supply factor; technology used in production. Name some examples

An increase in productivity of the workforce will lead to increased supply

Define the supply factor; productivity/efficiency of production. Name some examples

When the price at which consumers demand is the same as the supply of goods. The price allows enough profit to motivate producers to continue supplying and the price is what consumers are willing to spend their money

What is equilibrium price?

Consumers consider marginal benefits from each purchase, marginal utility is a term used to describe the extra satisfaction gained from consuming additional quantities of a good or service

Define the economic factors influencing consumer decision making; utility maximisation by consumers

The money earned or coming into the household that is available for spending or consumption. Because this is limited, all of us must make choices and 'live within our means'

Define the economic factors influencing consumer decision making; budget constraints of consumers

Personal internal factors can affect consumer choices, these might include; personality types, habits, lifestyle and occupation, values, appetite for risk

Define the economic factors influencing consumer decision making; internal influences

External influences are those that are outside the control of individual consumer like; feedback gained from family, friends, demographic and social status, culture and ethnicity

Define the economic factors influencing consumer decision making; external influences

Inputs that are used in the production of goods or services. There are three main types in an economy - natural, labour (entrepreneurship) and capital (machinery, equipment, tools, tractor and factories)

Define resources

Production --> Income --> Expenditure and repeat

What is the circular flow of income in the economy?

Where firms in an industry collaborate to set prices or impose minimum resale prices

Define the illegal business strategies; price fixing

Where companies refuse to supply their products or services to one or more firms

Define the illegal business strategies; exclusive dealing

When in submitting a quote for the completion of works or to supply goods or services, supposedly competing firms meet secretly beforehand to agree whose quote should be most attractive, cheapest and likely to win the contract

Define the illegal business strategies; collusive bidding

Where dominant firms conduct a price war involving big cuts in prices with the intention of driving rival firms bankrupt, and then later enjoying the market without competition

Define the illegal business strategies; predatory pricing