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Yr10 Economics topic 1+2 (market system (Part 1 (Chapter 4: the supply…

- - - - Advalorem tax - A tax levied as a percentage of the price of a good.
      - Indirect taxes- Taxes imposed by the government on spending
      - Specific tax- A lump sum tax on the amount sold, per unit for example
      - Subsidy- A grant given to producers usually encourage production of a certain good
    - - Equilibrium price- where supply meets demand
      - Excess demand - Where demand is greater than supply
      - Excess supply- Where supply is greater than demand
      - Market clearing price- price where the amount supplied in a market matches exactly the amount demanded
      - Total revenue- The amount of money generated from the sale of goods calculated by multiplying price by quantity
    - - elastic demand - a change in
        price results in a greater change in demand
        
        inelastic demand - a change in price
        results in a proportionately smaller change in demand
        
        price elasticity of demand - the responsiveness
        of demand to a change in price
        
        perfectly inelastic demand curve is vertical.
        perfectly elastic demand curve is horizontal.
        
        factors effecting price elasticity of demand:
        
        availability of substitutes
        
        degree of necessity: essential goods have an inelastic demand, whereas luxury goods have an elastic demand
        
        proportion of income spent on a product
    - - the supply curve slopes up left to right, showing if price goes up supply also goes up.
      - when price goes down supply goes down.
      - the supply of any product can be expressed graphically .
      - as with demand when there is a price change there is a movement along the curve.
      - in some circumstances there can be fixed supply.
      - for example if there is only 15000 seats in a stadium they cannot sell anymore than that.
    - - price elasticity of supply - the responsiveness of supply to a change in price
      - factors effecting price elasticity of supply
        
        stock levels - if producers have stocks of goods that respond quickly to price the supply will be elastic
        
        production speed - goods that can be produced quickly have an elastic demand
        
        spare capacity - spare capacity will make supply more elastic
        
        ease of entry into the market - supply will be more inelastic if it is difficult to enter the industry
    - - main factors that effect demand: price, income, population, fashion, advertising, interest rates, price of substitutes and price of complements.
      - there can also be shifts in demand come from left to right or right to left.
      - price is the main factors that affect demand.
      - if incomes rise the demand will rise shifting the demand curve to the right.
    - - demand can be expressed graphically. .
      - the demand curve will slope down from left to right.
      - demand is the amount of a to be bought at a given price.
      - inverse realtionship: when price goes up quantity demanded falls.
    - - A market exists when buyers and sellers communicate and exchange goods for money.
        
        Demand- The amount of a good that will be bought at given prices over a period of time
        
        Exporters- Firms that sell overseas
        
        Market- A set of arrangements allowing buyers and sellers to communicate and exchange goods
        
        Market system or price mechanism- The automatic determination of prices and allocation of resources by the operation on markets in the economy
  - - - Finite resources
        
        Examples: Water, soil, minerals, animals, oil and people.
      - Infinite wants
        
        Examples: human survival, food, water, warmth and shelter.
      - Choice and opportunity cost
        
        Example:
      - The Economic Problem:
        
        Worlds resources are scars compared to infinite wants
      - Production possibility curves (PPCs)
        
        deciding which goods to produce to the concept of opportunity cost.
    - - Economic Problem
        
        what to produce, how to produce, whom to produce
      - Public and private sector
        
        Public: government owned Private: individually owned
      - Types of economy
        
        Market or Free enterprise, Command or planned, mixed
      - Mixed Economy
        
        both state and consumer decision
      - efficiency
        
        producing at lowest cost, minimise labour/capital, only goods needed
      - Market failure
        
        lack of efficiency
  - - - Interference In the Labour Market: Wages are determined by supply and demand but in some countries there is a minimum wage which is the minimum amount a worker can be paid for their labour/work.
      - The Labour Market: The Labour market is like any other market as it has both buyers and sellers. The sellers are the working population and the buyers are the firms the price of labour is the wage rate. If the wage rate rises the demand curve moves to the left and less workers are needed.
      - The Division of Labour: When the production Process is broken down into small parts and each worker is allocated a specific task. When the workers become more specialized in their role, this increases productivity.
- - - - Production - converting resources into goods or services
        
        Factors of production
        
        Labour - workforce in the economy
        
        Capital - artificial resource
        
        Land - location of a business's premises
        
        Enterprise - an undertaking that is usually risky
        
        Intensive production
        
        Labour intensive - more labour than capital
        
        Capital intensive - more capital than labour
      - Productivity - output per unit of input
    - - Primary sector - extracting raw materials
      - Secondary sector - converting raw materials into finished or semi-finished goods
      - Tertiary sector - provision of services
      - De-industrialisation - the decline in manufacturing
    - - Fixed costs - cost that don't vary with the level of output
      - Variable costs - costs that rise as output levels are increased
      - Total costs - all output over a period of time
        
        TC = FC + VC
      - Average costs - the cost per unit of output
        
        Average cost = total cost / quantity produced
        
        Average cost curve
    - - If an economy can improve productivity the country will become wealthier
        
        Production possibility curve
      - Improving productivity of land
        
        Fertilizers and pesticides
        
        Irrigation
        
        Drainage
        
        Genetically modified crops
      - Labour productivity - LP = total output / number of workers
        
        Improving labour productivity
        
        Education and training
        
        Improving motivation of workers
        
        Job rotation
        
        Team working
        
        Empowerment
        
        Improving working practices
        
        Changing factory layout
        
        Increasing labour flexibility
        
        Adopting lean production
      - Capital and improvement in productivity
        
        Tech in secondary sector
        
        Robots
        
        CNC machines
        
        Computer integrated manufacturing
        
        Tech in tertiary sector
        
        Retailing
        
        Financial services
        
        Health care
        
        Tech in primary sector
        
        Tools (e.g. tractors, combine harvesters)
        
        Agrochemicals
    - - Social benefit - the benefit of an economic activity to society as well as to the individual or firm
      - Social cost - the cost of an economic activity to society as well as to the individual or firm
      - Private cost - the cost of an economic activity to the society as well as to the individual or firm
      - Private benefit - the rewards to individuals or firms of an economic activity such as consumption or production
      - Externalities - the spillover effects of consumption or production
        
        Government policies to deal with externalities
        
        Subsidies
        
        Fines
        
        Taxation
        
        Government regulation
    - - Economies of scale - falling average costs due to expansion
        
        Internal economies of scale - the cost benefits that an individual firm enjoy when it expands
        
        Technical economies
        
        Financial economies
        
        Marketing economies
        
        Managerial economies
        
        Purchasing economies
        
        Risk-bearing economies
        
        External economies of scale - the cost benefits that all firms in the industry can enjoy when the industry expands
        
        Ancillary and commercial services
        
        Co-operation
        
        Infrastructure
        
        Skilled labour
      - Diseconomies of scale - rising average costs when a firm becomes too big
        
        Bureaucracy
        
        labour relations
        
        Control and co-ordination
  - - - features:
        
        firms have no control over price charged
        
        products sold are close substitutes
        
        large numbers of buyers and sellers
        
        low barriers to entry
        
        free flow of market information
      - Competition and the consumer
        
        Advantages: lower prices, more choice, better quality
        
        Disadvantages: market uncertainty, lack of innovation
  - - - Owner ship and control
        
        The public sector
        
        Local authority services - delivered by local councils
        
        Other public sector organizations
        
        Central government departments - usually controlled by teams led by a government minister
        
        The private sector
        
        partnerships
        
        companies
        
        sole traders
      - Private sector aims
      - Public sector aims
    - - Need for government regulation
        
        firms exploiting consumer
        
        Restricting consumer choice
        
        Raise barriers to entry
        
        Increasing prices
        
        Markting sharing
    - - effects?
        
        government
        
        focus more sharply on the business of government, huge revenue generated, expensive advertising, sale
        
        firms
        
        more/less profit, increased/decreased investment, mergers and takeovers
        
        economy
        
        lower prices, improved quality and quantity, more innovative and efficient, no competition -> private monopolies
        
        workers
        
        job losses, raising productivity
        
        consumers
        
        prices decreased/increased
      - why?
        
        generate income
        
        nationalized industries were inefficient
        
        reduce political interference
      - what?
        
        transferring public sector resources to the private sector
        
        sale of nationalized industries
        
        contracting out
        
        sale of land and property