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1.2 Intro to Economics (Definition of Economics
Study of human behaviour,…
1.2 Intro to Economics
Definition of Economics
Study of human behaviour, involves making decisions/choices about how to use limited resources to satisfy needs and unlimited wants
2 Branches of Economics
Microeconomics
- operation of firms
- single industry
- output, employment
- prices, individual markets
Macroeconomics
- total value national spending
- Total value national produce
- National level unemployment
- National inflation rate
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1.7 Business Behaviour
View of Businesses
Traditional View
- Maximise Revenue
- Minimise Production Costs
Realistic Factors
- The market structure in which firms sell
- Government rules, policies and incentives
- The activities of unions
- Reports in the media
- General community atitudes
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The evolution of business
and its changing goals
Firms need to adapt
to the changing
economic, social and political
environment around them
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The need for R&D and innovation
businesses that fail to innovate will be left behind and replaced by those that do
A need for community involvement
Allows firms to give back to the community that led to their success
e.g. McDonalds' Ronald McDonald House
Gender equality
The gender bias in favour of a male boss in the workplace has dramatically transformed in the past six or so decades
The effect of technology on business behaviour
- increase speed in production
- cut costs
- improve product quality
- attract customers
e.g. improved diagnosis and treatment in the health industry
Strategies businesses may use to increase profitability
- Ensure operational excellence
- Know and develop good relations with customers
- Ensure product is technically superior
- Use multiple branding
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1.6 Consumer Behaviour
Consumer Behaviour
looks at why, how, where and when
consumers choose to purchase
or not purchase a good or service
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Behavioural Economics
psychological experiments to come
up with theories about how consumers
behave and make decisions
Nudge
consumer decisions can be influenced in particular directions through various gentle reminders.
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Traditional View
- Consumer make informed and smart decisions
- Consumers act rationally and in their self-interest
- Consumers have ordered preferences
Technological Change
- More informed on decisions
- Online shopping
- More difficult for traditional retailers
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1.4 Economic Decisions
PPD
Production Possibility Diagram - the production combinations or choices that are possible when a nation uses all resources as efficiently as technology currently permits. It shows the economy's productive potential, capacity or limit.
Point U (Inside)
- Unemployment of labour resources
- Lower incomes
- Lower material living standards
- Possible poverty
Point I (outside)
- Production levels currently unattainable
- General shortages, hence inflation
- Reduced purchasing power
- Lower material living standards
Shift Outwards
- Growth of a country's productive capacity
- Possible rise in volume or efficiency of resources
- Possible new technology
Definitions
Inflation
rate which the average price level of selected goods and services in an economy increases over a period of time
Cost-benefit Analysis
Adding up anticipated value of all costs of a particular decision, and comparing them against the total value of the anticipated benefits
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