Economics Chapter 4: Factors of Production

Land, Labor, Capital, and Enterprise.

Labor involves physical and mental human effort that is essential for producing goods and services.

Opportunity cost is the value of the next best alternative foregone when making a decision on resource allocation.

<p>Division of labor splits production into different tasks, allowing workers to specialize, which increases efficiency and output.</p> Signup and view all the answers

<p>Added value is the difference between the selling price of a product and the cost of its materials.</p> Signup and view all the answers

<p>Pros of privatization include increased efficiency; cons may involve oversights on total societal costs and benefits.</p> Signup and view all the answers

<p>Working capital is used for day-to-day operations, while fixed capital is for long-term production needs.</p> Signup and view all the answers

<p>Employee training enhances skills and productivity, thereby increasing the overall value of the company.</p> Signup and view all the answers

<p>Lower quality products and higher prices.</p> Signup and view all the answers

<p>Creative and principled.</p> Signup and view all the answers

<p>To estimate how much profit is expected.</p> Signup and view all the answers

<p>By offering training and providing low-interest loans.</p> Signup and view all the answers

<p>Value of output.</p> Signup and view all the answers

<p>When two firms in the same industry and at the same production stage join together.</p> Signup and view all the answers

<p>All activities involved in marketing a product or service.</p> Signup and view all the answers

<p>It helps determine how the product will be developed and marketed.</p> Signup and view all the answers

<p>A feature that makes a product distinct from competitors.</p> Signup and view all the answers

<p>Achieving diversification and entering new markets.</p> Signup and view all the answers

<p>When consumers repeatedly choose the same brand over competitors.</p> Signup and view all the answers

<p>When a firm merges with a supplier of its resources.</p> Signup and view all the answers

<p>Because it does not account for differences in production methods.</p> Signup and view all the answers

<p>Lower average costs.</p> Signup and view all the answers

<p>It encourages consumer loyalty, assures quality, and allows for higher pricing compared to unbranded products.</p> Signup and view all the answers

<p>Packaging protects the product, provides vital information, and promotes the brand.</p> Signup and view all the answers

<p>To launch the product and create market awareness through significant promotional spending.</p> Signup and view all the answers

<p>Sales increase rapidly as the product gains market acceptance and brand loyalty is established.</p> Signup and view all the answers

<p>Competitive or promotional pricing is typically used to maintain sales amidst high competition.</p> Signup and view all the answers

<p>Sales decrease as consumer interest wanes, leading to reduced advertising and potential discontinuation.</p> Signup and view all the answers

<p>Introduce new variations of the product and sell into new markets.</p> Signup and view all the answers

<p>Pricing must align with other marketing strategies and reflect supply and demand dynamics.</p> Signup and view all the answers

<p>Cost plus pricing involves adding a profit markup to the total cost of manufacturing a product.</p> Signup and view all the answers

<p>Competitive pricing sets product prices in line with or just below competitors to capture market share.</p> Signup and view all the answers

<p>It's easy to apply and ensures profit for each sold unit.</p> Signup and view all the answers

<p>It requires extensive market research and may not suit high-quality products with few competitors.</p> Signup and view all the answers

<p>Brand awareness can lead to consumers confusing a brand with the product itself, enhancing recognition.</p> Signup and view all the answers

<p>It encourages brand loyalty and further increases product demand.</p> Signup and view all the answers

<p>To convince consumers that they need to buy the product.</p> Signup and view all the answers

<p>Informative advertising provides full information about a product, while persuasive advertising tries to convince consumers to buy it.</p> Signup and view all the answers

<p>It subtly promotes products through appearances in media.</p> Signup and view all the answers

<p>It can lead to short-term increases in sales.</p> Signup and view all the answers

<p>The stage of the product life cycle and the nature of the target market.</p> Signup and view all the answers

<p>Potential customers may not see the website.</p> Signup and view all the answers

<p>It is the online buying and selling of goods and services.</p> Signup and view all the answers

<p>It offers competitive prices and convenience.</p> Signup and view all the answers

<p>It is the combination of the four elements of marketing to achieve specific objectives.</p> Signup and view all the answers

<p>To outline how much money can be spent on marketing activities.</p> Signup and view all the answers

<p>It's a strategy where consumers share information about products online.</p> Signup and view all the answers

<p>To ensure positive influence on consumer decisions.</p> Signup and view all the answers

<p>The introduction phase.</p> Signup and view all the answers

<p>It is a pricing strategy where products are sold at high prices initially before being lowered.</p> Signup and view all the answers

<p>It can create new opportunities for product promotion.</p> Signup and view all the answers

<p>Competitive pricing is significant because it attracts customers by creating a sense of scarcity, encouraging them to purchase the product.</p> Signup and view all the answers

<p>Informative advertising aids promotion by educating consumers about the product and often includes free samples to encourage trial.</p> Signup and view all the answers

<p>Businesses face problems such as cultural differences, lack of knowledge, and increased transportation costs.</p> Signup and view all the answers

<p>A joint venture is a partnership between businesses to gain important local knowledge, which helps in adapting to the culture of the new market.</p> Signup and view all the answers

<p>Adding value allows a business to sell its products at a higher price than the cost of inputs, increasing profitability.</p> Signup and view all the answers

<p>Consumer protection laws ensure that businesses do not mislead consumers and that products meet required standards.</p> Signup and view all the answers

<p>Licensing allows a business to permit local companies to produce its goods, reducing transportation costs and adapting to local demand.</p> Signup and view all the answers

<p>Localized branding adapts products to meet local tastes while still maintaining a common brand image.</p> Signup and view all the answers

<p>Productivity is influenced by the quality of goods, employee efficiency, and technological advancements.</p> Signup and view all the answers

<p>A business may reduce advertising expenditures when sales have fallen and the product is declining in the market.</p> Signup and view all the answers

<p>Persuasive advertising is significant as it encourages brand loyalty among consumers, promoting repeat purchases.</p> Signup and view all the answers

<p>Automation can increase productivity by replacing manual labor with machines, thus improving efficiency and reducing costs.</p> Signup and view all the answers

<p>Risks include quality control issues and potential damage to the brand if franchisees do not meet service standards.</p> Signup and view all the answers

<p>A company may need to change packaging, promotions, and even product formulation to suit local markets.</p> Signup and view all the answers

<p>Penetration pricing involves setting a lower price than competitors to attract customers. This strategy helps new products create an impact and builds market share.</p> Signup and view all the answers

<p>Advantages include higher initial profits and establishing a high-quality brand image. Disadvantages are potential consumer discouragement due to the high price and increased competition.</p> Signup and view all the answers

<p>Promotional pricing lowers the price of a product temporarily, attracting more customers and encouraging repeat sales. This can generate brand loyalty and help clear excess stock.</p> Signup and view all the answers

<p>Psychological pricing appeals to emotions, often by emphasizing certain digits in a price that make it appear more attractive. Customers may also associate higher prices with better quality.</p> Signup and view all the answers

<p>Dynamic pricing adjusts prices based on different consumer demand levels, often used in situations like airline ticket sales during peak travel seasons. It maximizes revenue based on varying price sensitivity.</p> Signup and view all the answers

<p>The four P's are Product, Price, Place, and Promotion. They are significant because they form the foundation of marketing strategy, helping businesses define their offerings and market positioning.</p> Signup and view all the answers

<p>Packaging protects the product and serves as a marketing tool that promotes the brand and communicates product information. It can be instrumental in attracting consumer attention.</p> Signup and view all the answers

<p>The product life cycle includes Development, Introduction, Growth, Maturity, Saturation, and Decline. Each stage requires different strategies to manage sales and marketing effectively.</p> Signup and view all the answers

<p>Extension strategies are actions taken during the maturity stage to prolong the product's market presence, such as targeting new markets or introducing product improvements.</p> Signup and view all the answers

<p>Promotion raises customer awareness of a brand, which can lead to stronger connections and repeat purchases. It is crucial for differentiating products in competitive markets.</p> Signup and view all the answers

<p>Penetration pricing often results in lower profit margins per unit sold as the focus is on increasing market share rather than immediate profits. Selling at lower prices can initially reduce overall profitability.</p> Signup and view all the answers

<p>Competition influences pricing strategies significantly, as firms may need to adjust prices to remain attractive to consumers or maintain market share. This could mean employing penetration or skimming strategies.</p> Signup and view all the answers

<p>Promotional activities aim to generate awareness, drive sales, and foster brand loyalty among consumers. They are essential for establishing a strong brand image and differentiating products.</p> Signup and view all the answers

<p>Challenges include lower profit margins and the potential for a price war, which can devalue the brand over time. Additionally, low prices might lead consumers to perceive lower quality.</p> Signup and view all the answers

<p>Pricing strategies can significantly influence consumer perceptions and purchasing decisions, with tactics like psychological pricing appealing to emotions and perceived value. Competitive pricing can attract price-sensitive consumers.</p> Signup and view all the answers

<p>It requires skilled labor, making it labor-intensive and often time-consuming.</p> Signup and view all the answers

<p>Batch production offers variety in tasks as workers switch between different products made in batches.</p> Signup and view all the answers

<p>Flow production has lower unit costs, which allows for lower prices for consumers.</p> Signup and view all the answers

<p>Lean production aims to cut down on waste and increase efficiency in manufacturing processes.</p> Signup and view all the answers

<p>Kaizen encourages continuous improvement through employee input, leading to increased productivity and morale.</p> Signup and view all the answers

<p>JIT minimizes or eliminates the need to hold inventory, reducing costs and freeing up cash flow.</p> Signup and view all the answers

<p>Raw materials, partly finished products, and finished products.</p> Signup and view all the answers

<p>Seasonal businesses build up stock in anticipation of high demand during specific times of the year.</p> Signup and view all the answers

<p>One significant disadvantage is the potential for increased unemployment as machines replace routine jobs.</p> Signup and view all the answers

<p>Heavy reliance on machinery can lead to significant production downtime if machines break down.</p> Signup and view all the answers

<p>The main focus is to record transactions, forecast cash flow, and prepare financial accounts for decision-making.</p> Signup and view all the answers

<p>Lead time refers to the duration between when stock is ordered and when it is received.</p> Signup and view all the answers

<p>Lean production leads to cost savings and quicker production of goods or services.</p> Signup and view all the answers

<p>Worker training helps employees become skilled in new technologies, enhancing overall output quality.</p> Signup and view all the answers

<p>Tariffs and import quotas.</p> Signup and view all the answers

<p>Increased tax revenue.</p> Signup and view all the answers

<p>By establishing operations in multiple countries to reduce the impact of import restrictions.</p> Signup and view all the answers

<p>It means the value of the currency rises, allowing it to buy more of the other currency.</p> Signup and view all the answers

<p>Creation of unskilled assembly-line jobs.</p> Signup and view all the answers

<p>Tariffs raise tax revenue for governments by taxing imported goods.</p> Signup and view all the answers

<p>Powerful influence over government policies.</p> Signup and view all the answers

<p>Depreciation decreases the currency's value, meaning it buys less of another currency.</p> Signup and view all the answers

<p>Start-up capital is the finance needed by a new business to cover essential assets and expenses before launching. It is crucial for ensuring that the business can operate from the outset without financial hindrance.</p> Signup and view all the answers

<p>Working capital ensures that a business can meet its short-term obligations and continue day-to-day operations. It covers immediate expenses such as salaries, rent, and utility bills.</p> Signup and view all the answers

<p>Revenue expenditure refers to funds used for day-to-day operational costs, while capital expenditure is money spent on long-term assets that will benefit the business for over a year.</p> Signup and view all the answers

<p>Retained profits are the profits kept in a business after distributing dividends. An advantage is that they do not require repayment, making them a cost-effective source for funding.</p> Signup and view all the answers

<p>Issuing shares raises external finance by selling ownership stakes in the company. It provides access to capital without having to repay it with interest.</p> Signup and view all the answers

<p>A disadvantage of bank loans is that they must be repaid with interest, which adds financial burden to the business. Additionally, collateral may be required.</p> Signup and view all the answers

<p>Trade credit allows businesses to delay payments to suppliers, which improves cash flow by giving them time to collect funds from customers first.</p> Signup and view all the answers

<p>Hire purchase is an agreement where a business pays for an asset in installments while using it. An advantage is that the business does not need a large sum upfront to acquire needed equipment.</p> Signup and view all the answers

<p>Crowdfunding allows entrepreneurs to raise capital from a large number of individuals, typically through online platforms, by pooling small contributions. It's beneficial for projects that may be too small for traditional banks.</p> Signup and view all the answers

<p>Factoring of debts involves selling claims on debtors to a third-party agency for immediate cash. This provides businesses with instant liquidity while transferring the risk of debt collection.</p> Signup and view all the answers

<p>A disadvantage of microfinance is that the loan amounts are typically small, which may deter businesses from significant growth opportunities. Additionally, terms can be less favorable than traditional loans.</p> Signup and view all the answers

<p>Selling existing assets can provide quick capital without ongoing maintenance costs, freeing up resources for investment in new opportunities. However, it may take time to find buyers.</p> Signup and view all the answers

<p>An advantage of leasing is that it allows access to the latest equipment without a large upfront cost. A disadvantage is that over time, leasing can become more expensive than outright purchasing.</p> Signup and view all the answers

<p>Government grants provide financial assistance that does not usually need to be repaid, which can significantly reduce startup costs. However, these grants often come with restrictions and conditions.</p> Signup and view all the answers

<p>Leasing does not require a large upfront payment for maintenance.</p> Signup and view all the answers

<p>Ownership can change, which may affect control of the business.</p> Signup and view all the answers

<p>A bank loan must be repaid with interest, which increases overall costs.</p> Signup and view all the answers

<p>Managers evaluate whether the needed finance is for short-term or long-term requirements.</p> Signup and view all the answers

<p>To pay essential debts like wages and creditors consistently.</p> Signup and view all the answers

<p>Insolvency occurs when a business cannot meet its financial obligations as debts become due.</p> Signup and view all the answers

<p>Net cash flow is the difference between cash inflows and cash outflows for a given period.</p> Signup and view all the answers

<p>A cash flow forecast estimates future cash inflows and outflows, aiding in financial planning.</p> Signup and view all the answers

<p>Profit is calculated as revenue minus costs.</p> Signup and view all the answers

<p>A trading account shows how gross profit is calculated, impacting business financial health.</p> Signup and view all the answers

<p>Retained profit is the portion of net profit reinvested back into the company.</p> Signup and view all the answers

<p>Working capital includes cash, firms' debtors, and the value of inventories.</p> Signup and view all the answers

<p>By controlling spending, improving credit collection, and avoiding overtrading.</p> Signup and view all the answers

<p>Gearing is the proportion of total capital raised from long-term loans.</p> Signup and view all the answers

<p>It depicts the stages between cash expenses and cash received from sales.</p> Signup and view all the answers

<p>It shows the value of a business's assets and liabilities at a specific point in time.</p> Signup and view all the answers

<p>Current assets are assets owned by a business and used within a year; examples include cash and inventories.</p> Signup and view all the answers

<p>The current ratio is calculated as current assets divided by current liabilities; it indicates a company's liquidity.</p> Signup and view all the answers

<p>Return on Capital Employed (ROCE) measures a company's profitability; it is calculated as net profit divided by capital employed multiplied by 100.</p> Signup and view all the answers

<p>A high liquidity ratio may indicate that too much money is tied up in current assets, potentially leading to missed investment opportunities.</p> Signup and view all the answers

<p>It's crucial to ensure decisions align with long-term goals and market trends while also addressing immediate operational needs.</p> Signup and view all the answers

<p>Liabilities are debts owed by a business and can be categorized into current (short-term) and non-current (long-term) liabilities.</p> Signup and view all the answers

<p>The gross profit margin indicates the percentage of revenue that exceeds the cost of goods sold, signifying profitability.</p> Signup and view all the answers

<p>One strength is the ability to quickly assess a business's financial performance, while a limitation is that historical performance may not predict future outcomes.</p> Signup and view all the answers

<p>Shareholders' equity reflects the total money invested by owners and retained profits, indicating the business's net worth.</p> Signup and view all the answers

<p>Working capital is the difference between current assets and current liabilities, representing the liquidity available for daily operations.</p> Signup and view all the answers

<p>Market trends help assess whether a decision aligns with current consumer behavior and industry standards.</p> Signup and view all the answers

<p>The acid test ratio, calculated as (current assets - stock) / current liabilities, measures a firm's ability to pay short-term debts without relying on inventory sales.</p> Signup and view all the answers

<p>Capital employed indicates the total funds used in the business to generate profits and is crucial for assessing operational efficiency.</p> Signup and view all the answers

<p>During a boom, there is excessive spending, leading to rising prices and potentially a shortage of skilled workers.</p> Signup and view all the answers

<p>High inflation reduces business profit margins because the cost of goods sold increases and real incomes fall.</p> Signup and view all the answers

<p>Governments typically open up more jobs and provide unemployment benefits.</p> Signup and view all the answers

<p>Economic growth creates more jobs, increases standards of living, and leads to higher government tax revenues.</p> Signup and view all the answers

<p>The balance of payments records the difference between a country’s exports and imports, indicating economic health.</p> Signup and view all the answers

<p>The two main types are changing taxes and government spending.</p> Signup and view all the answers

<p>Indirect taxes typically increase the prices of goods, leading to a decrease in demand, especially for luxury items.</p> Signup and view all the answers

<p>Import tariffs reduce competition for domestic firms, but can also lead to higher costs for businesses needing imported materials.</p> Signup and view all the answers

<p>Privatization is aimed at increasing efficiency and competitiveness within industries.</p> Signup and view all the answers

<p>Higher interest rates generally lead to increased borrowing costs, which can reduce investment and consumer spending.</p> Signup and view all the answers

<p>Low unemployment can boost GDP as more individuals earn income, increasing overall spending power.</p> Signup and view all the answers

<p>During a slump, many businesses close, factors of production are underutilized, and unemployment is high.</p> Signup and view all the answers

<p>Increased profit taxes reduce retained earnings, which in turn lowers investment and the incentive to start new businesses.</p> Signup and view all the answers

<p>A trade deficit implies that imports exceed exports, suggesting the nation may be living beyond its means.</p> Signup and view all the answers

<p>Increased borrowing costs can lead businesses to delay or scale back investments, hindering their growth initiatives.</p> Signup and view all the answers

<p>Higher interest rates can reduce disposable income by increasing loan payments, leading to lower consumer spending.</p> Signup and view all the answers

<p>Businesses may choose to innovate or enhance production in the sectors where the government increases spending.</p> Signup and view all the answers

<p>Pressure groups can influence businesses by organizing consumer boycotts and generating bad publicity to change business decisions.</p> Signup and view all the answers

<p>External costs are costs incurred by society as a result of business activities, which are not borne by the business itself.</p> Signup and view all the answers

<p>Sustainable development aims to meet current needs without compromising the ability of future generations to meet theirs.</p> Signup and view all the answers

<p>Businesses can respond to ethical issues by making decisions based on a moral code, ensuring actions align with social responsibility.</p> Signup and view all the answers

<p>Higher interest rates can squeeze profit margins due to increased borrowing costs and potential decreases in sales.</p> Signup and view all the answers

<p>Globalization can threaten local businesses by introducing increased competition from foreign imports and multinational corporations.</p> Signup and view all the answers

<p>Cost-benefit analysis helps businesses assess the overall costs and benefits of a decision, considering both financial and non-financial factors.</p> Signup and view all the answers

<p>A successful consumer boycott can lead to reduced sales for the targeted business, prompting them to reconsider their practices.</p> Signup and view all the answers

<p>Increased government spending can result in more competition as firms may enter sectors where the government is investing.</p> Signup and view all the answers

<p>Businesses can lower prices on expensive products, reduce dependence on loans, or cut back on investments and expansion.</p> Signup and view all the answers

<p>Being socially responsible can enhance a company's image, but it may involve costs that impact profitability.</p> Signup and view all the answers

<p>Businesses may resist changes if the suggested alterations would significantly increase their costs or disrupt their operations.</p> Signup and view all the answers