2024 CIE3M Final Exam Review List PDF

CIE3M Final Exam Review Unit 1 Factors affecting financial markets – explanations and examples - Factors that affect the stock market - Company news and performance - News releases or announcements - Employee layoffs - Changes in ma...

CIE3M Final Exam Review Unit 1 Factors affecting financial markets – explanations and examples - Factors that affect the stock market - Company news and performance - News releases or announcements - Employee layoffs - Changes in management - Accounting errors, scandals or controversies in the news - Industry performance - If the overall industry isn’t performing well, so will the companies under will be affected. - Investor sentiment/confidence - Bull Market: Strong stock market, prices are rising and investors’ confidence as well. - Bear market: Weak market, prices are falling, investor’s confidence is fading. - Economic factors - Interest Rates – Is borrowing expensive? What’s the monetary policy - Economic Outlook - What are the predictions - Inflation- Are things getting more expensive? Will this decrease sales? - Economic and Political shocks – Internal or external ie 9/11, pandemics - Changes in Economic Policy – Trade agreements or trade wars? Unit 2 Scarcity – Principles 1 and 2 - Principle 1: People have wants - People’s wants are endless and they do consider their needs and wants - Principle 2: Scarcity Affects Everyone - Consumer: a person who buys goods or services for personal use. - Producer: A person who makes a good or provides a service. Three Economic Questions 1) Question 1: What Will Be Produced? - Society has to decide what to produce and in what quantity. - Some countries let producers decide, and other countries decide for them. 2) Question 2: How will it be produced? - Producers decide how to produce by using resources efficiently. - Societies would often try different changes such as with unskilled workers, they may use labour-intensive methods (large groups of labourers), or with skilled workers, they may use capital-intensive methods (skilled machines ig). 3) Question 3: For Whom Will It Be Produced? - How each person’s share is determined? - How will goods and services be delivered to people? Factors of production - Entrepreneurship - The ideas and creativity required to open a business - Land - Natural resources on or under the ground such as water, forests, wildlife, and mineral deposits. - Labour - Human time, effort and talent are used to make goods or provide services. - Capital - Physics resources such as tools, machines, offices, etc. - Workers invest in the human capital of knowledge and skills. Economic Choices: Opportunity costs with examples - What you have to compromise, to gain something else. Graphing Production Possibilities Curve (Graph and various points on it) - Refer to worksheets Law of Increasing Opportunity Costs – Constant vs Increasing Opportunity Costs - The law states that as you increase the production of one good, the opportunity cost to produce the additional good increases. - Constant opportunity cost: When the opportunity cost stays the same regardless of the change in quantity. - Increasing opportunity cost: when the opportunity cost rises every time an additional unit is added. Shifting PPC Graphs - Refer to the worksheet Microeconomics - Studies behavior of individual players in an economy Macroeconomics - Studies behaviour of the economy as a whole with inflation, unemployment, etc. Positive economics - Facts about economy Normative economics - Judgements, opinions Unit 3 1) What is Demand? - People’s willingness to buy a good or service and having the ability to buy it. a) Demand Schedule - b) Total Revenue - Total earnings c) Changes in Quantity Demanded due to price - Explains the law of demand and supply. 2) SIX Factors that affect demand a) Normal vs inferior Goods (Part of Factor 1) - Normal good: demanded more when consumer’s income rises - Inferior good: demanded less when the consumer’s income rise b) Drawing Shifts in demand curve due to factors that affect demand - Refer to the worksheet c) Law of Diminishing Marginal Utility - When a new product is introduced to the market, it has high demand initially, however as time passes, it becomes less popular which means people find its utility less which decreases the marginal benefit. d) Income Effect  - Change in the amount of a product that a consumer will buy because the purchasing power of their income changes. e) Substitution Effect - When consumers react to a change in the price of a good or service by buying a substitute product. - Eg: If the price of paperback books climbs above $10, consumers might decide to buy fewer books and choose instead to buy $4 magazines. f) Change in Quantity Demanded vs Change in Demand - Change in quantity demanded affects a number of supplies and is solely focused on production. - Change in demand is caused by a change in the marketplace; which prompts people to buy different amounts at every price, also called a shift in demand. Focuses on other factors due to which demand might have shifted. g) Substitutes and Complementary goods - Substitutes: competitors - Complementary: products that are meant to be together (lol) 3) Elasticity of Demand a) What factors determine elasticity - Price level, type of product or service, income levels, etc. b) Calculating Elasticity (refer to example) - Example  c) Inelastic, elastic, unit elastic - Inelastic when the final number is negative. - Elastic when it is greater than 1 - Unit elastic when it equals 0 d) Characteristics of Inelastic and Elastic goods - Elastic goods are those that have a huge effect on revenue due to changes in prices. - Whereas an inelastic good is where the product doesn’t get affected if the price increases or decreases as it may be considered a necessity. 4) What is Supply? (Supply refers to the willingness and ability of producers to offer goods and services for sale) Law of supply: The law of supply states that when prices decrease, quantity supplied decreases, and when price increases, quantity supplied increases. a) Quantity Supplied due to price and shifts in the supply curve b) Drawing supply curve on graph paper - Supply curve: a graph that shows how much a good or service an individual producer can offer for sale at each price. 5) Six Factors that affect Supply a) Drawing shifts in the supply curve due to factors that affect the supply - Factors that cause a shift in the supply curve: - Input costs, labour productivity, technology, government actions, producer expectations, and the number of producers. i) Explain what direction the curve is shifting, changes in price, and quantity and provide an Explanation. - Price changes→changes the quantity supplied 6) Supply and Demand Curves a) Reading and Drawing shifts and changes in supply and demand curves using graph paper with actual numbers b) Disequilibrium, - Disequilibrium occurs when the quantity demanded and quantity supplied are not in balance. c) Graphing and calculating Surplus and shortages. - Surplus is a result of the quantity supplied being greater than the quantity demanded. - The shortage is the result of the quantity demanded being greater than the quantity supplied. d) Steps to Supply and Demand Analysis Unit 4 Different Market Structures: Perfect Competition, Monopoly, Monopolistic Competition, Oligopolies 1) What is Perfect Competition 7.1? a) 5 Characteristics of Perfect Competition and examples - Numerous buyers and sellers. - No one seller or buyer has control over the price. - Eg: the agricultural market for wheat, where there are many farmers producing and selling what, and there are numerous buyers such as bakeries and other food processing companies. - Standardized product. - Sellers offer a standardized product—a product that consumers consider identical in all essential features to other products in the same market. - Eg: The market for goods such as crude oil or natural gas. - Freedom to enter and exit markets. - Buyers and sellers are free to enter and exit the market. No government regulations or other restrictions prevent a business or customer from participating in the market. Nor is a business or customer required to participate in the market. - Eg: The market for mobile apps. - Independent buyers and sellers. - Buyers cannot join other buyers and sellers cannot join other sellers to influence prices. - Eg: the market used for cars. Each buyer and seller operates independently. - Well-informed buyers and sellers. - Both buyers and sellers are well-informed about market conditions. Buyers can  do comparison shopping, and sellers can learn what their competitors are charging. - Eg: the market for consumer electronics. b) Competition in the Real World - Example 1: Corn - In the US corn market, imperfect competition occurs due to government subsidies and group action, as farmers and buyers often agree on the market price, affecting supply and demand. - Example 2: Beef - The wholesale beef market exhibits perfect competition due to numerous producers and a similar cut of beef. Imperfect competition occurs due to collective efforts and [rodicers claims of superior product quality. c) Perfect vs imperfect competition - Imperfect Competition: market structures that lack one of the conditions needed for perfect competition are examples of imperfect competition. - Perfect competition: Perfect competition is the ideal model for a market economy, but real markets aren't perfect. Economists evaluate market competitiveness by identifying areas where they fall short. d) Standardized vs Brand Name Products - Standardized products are the ones that consumers see as identical regardless of producer. - Brand Name Products - Branded products; like Zara, h&m e) Key Concepts/Terms for example: Price Takers, Independent Buyers, and Sellers - A price taker is a business that accepts the market price determined by supply and demand. - Independent Buyers Sellers is where buyers and sellers do not band together to influence prices. 2) Impact of Monopoly 7.2 a) Pros and Cons and Characteristics of Monopoly and examples - Monopoly occurs when there is only one seller of a product that has no close substitutes. - Characteristics of monopoly: - Only one seller: a single business controls the supply of a product that has no close substitutes. - Control of prices: monopolies act as price makers because they sell products that have no close substitutes and they face no competition.  - Restricted and regulated markets: government regulations or other barriers to entry keep other firms out of the market. b) Different types of Monopoly and examples A natural monopoly is a market situation in which the costs of production are lowest when only one firm provides output. (Eg- MTR) A government monopoly is a monopoly that exists because the government either owns and runs the business or authorizes only one producer. (Eg - Postal Service) A technological monopoly is a monopoly that exists because the firm controls a manufacturing method, an invention, or a type of technology. (Eg - a company with a patent to produce something) A geographic monopoly is a monopoly that exists because there are no other producers or sellers within a certain region. c) Economies of scale, patents, Costs, Efficiency and government monopolies Economies of scale occur when the average cost of production falls as the producer grows larger. A patent gives an inventor the exclusive property rights to that invention or process for a certain number of years. d) Profit maximization by Monopolies Although a monopoly firm is the only supplier in its market, the firm cannot charge any price it wishes. A monopolist still faces a downward-sloping demand curve. In other words, the monopoly will sell more at lower prices than at higher prices. The monopolist controls price by controlling supply. A monopoly produces less of a product than would be supplied in a competitive market, thereby artificially raising the equilibrium price. e) Key Concepts and Terms for example: Price makers, cartel, barriers to entry substitutes - A cartel is a group that acts together to set prices and limit output. - A price maker is a firm that does not have to consider competitors when setting the prices of its products. - A barrier to entry makes it difficult for new businesses to enter a market. 3) Other Market Structures 7.3 a) Characteristics of Monopolistic Competition 1. Many sellers and many buyers a. The number of sellers is usually smaller than in a perfectly competitive market but sufficient to allow meaningful competition. b. Sellers act independently in choosing what kind of product to produce, how much to produce, and what price to charge.  2. Similar but differentiated products a. A technique used by larger firms to ascertain consumer preferences: focus groups. A focus group is a moderated discussion with small groups of consumers. 3. Limited control of prices a. Many close substitutes exist 4. Freedom of entry and exit b) Characteristics of Oligopoly 1. There are few sellers but many buyers 2. In industrial markets, sellers offer standardized products, but in consumer markets, they offer differentiated products 3. The few sellers have more power to control prices than in monopolistic competition 4. To enter or exit the market is difficult c) Differences between market structures: monopoly, oligopoly, monopolistic competition and perfect competition. Unit 5 1) Benefits and Issues of International Trade 17.1 a) Specialization and Economic Interdependence Specialization occurs when a narrow range of products are made. Economic Interdependence is a situation in which producers in one nation depend on others to provide goods and services they do not produce. b) How trade (imports/exports) affect Prices, quantity and employment. Exports —goods & services produced in one country, sold in others Imports—products produced in one country, purchased by another Costs & benefits Varies by nation  Higher prices at home offset by more jobs & income created by production that was expanded to meet the demand c) Trade Balance (Or Imbalance) when exports = imports --> balanced when exports > imports --> trade surplus (imbalanced) when exports < imports --> trade deficit (imbalanced) 2) Absolute and Comparative Advantage (Part of 17.1 on Pg. 512-515 Refer to Worksheet ) a) Opportunity costs and PPC b) Law of Comparative Advantage The law of comparative advantage states that countries gain when they produce items they are most efficient at producing and are at the lowest opportunity cost. c) Absolute/Comparative Advantage Absolute advantage is the ability of one trading nation to make a product more efficiently than another trading nation. Comparative advantage is a trading nation's ability to produce something at a lower opportunity cost than that of another trading nation. d) Advantages of Free Trade 3) Trade Barriers 17.2 a) What are trade barriers? A trade barrier is any law that limits free trade between nations. b) Examples of Trade Barriers – tariffs, quotas etc. 5 types of trade barriers: 1. Quota: A trade barrier that limits the quantity or value of goods that can be imported or exported, usually imposed by a government. 2. Tariff: A tax or duty imposed on imported or exported goods, making them more expensive and less competitive in the domestic market. 3. Voluntary export restraint (VER):A trade barrier where the exporting country voluntarily agrees to limit the quantity or value of its exports to another country, often in response to the threat of more severe trade restrictions. 4. Embargoes: A complete ban or prohibition on trade, usually imposed by a government, against a specific country or a specific type of goods. 5. Informal Trade Barriers: Non-tariff barriers to trade that are not explicitly imposed by governments but still hinder trade, such as complex regulations, bureaucratic procedures, or  discriminatory practices that make it difficult for foreign businesses to enter or operate in a market. c) Terms: Infant Industries, dumping, etc. Infant industries: Refer to new or emerging industries that are in their early stages of development and require protection from foreign competition to become competitive in the long run. Dumping: Foreign market pricing is the practice of selling goods at lower prices than their domestic or production costs, often to gain a competitive advantage or eliminate local producers. d) Arguments for and against Protectionism 1. Protecting domestic jobs: Protectionism aims to shield domestic industries from foreign competition, preserving jobs and employment opportunities within the country. 2. Protecting infant industries: Protectionism can provide a temporary shield for emerging industries, allowing them to develop and grow domestically before facing international competition. 3. Protecting national security: Protectionist measures can be justified on grounds of national security, particularly in sensitive industries like defense or critical infrastructure, to ensure self-reliance and protect against potential vulnerabilities.