What is opportunity cost?

next best alternative foregone

What are the reasons why the supply of a product may be price-inelastic?

• It may take time to produce the product. this means that it will take time to adjust supply in response to a change in price / example of a product that it takes time to produce
• It may not be possible to store the product. this means that it cannot be taken out of storage when price rises / products cannot be put into storage when price falls
• It may be costly to adjust supply e.g. it might be necessary to build new factories and this may discourage firms from adjusting supply
• The supply of a natural resource may become limited e.g. gold maybe close to depletion

What are the causes of market failure?

• Failure to take into account all costs and benefits/ external costs and benefits/ under-consumed/ underproduced/ over-consumption/ over-production
• information failure
• public goods are not produced in a market system
• abuse of market power
• lack of mobility of resource

What are the function of money?

• Store of value
• Unit of account
• Medium of exchange
• Standard for deferred payment

What are the functions of the central bank?

• Lender of last resort
• Printing notes and minting coins
• Setting interest rates
• Supervising monetary policy
• Banker for commercial banks and government
• Manage international financial system

Define ‘stock exchange’

An organisation/ market for the sale and purchase of shares

What are the functions of trade unions?

• Negotiating wages and other non-wage benefits
• Defending employee rights and jobs
• Improving pay and other benefits
• Improving working conditions
• Increase worker participation in business decisions
• Develop skills of union members

What are the economies of scale?

• Financial economies
• Technical economies
• Risk-bearing economies
• Marketing economies

What are the internal diseconomies of scale that a large firm may experience?

• Difficulties controlling/ managing the firm/ managerial diseconomies as there are more layers of management in a large firm so ti may take longer to make decisions
• communication problems as there are more layers of communication and communication may be indirect. messages may be misinterpreted and it takes time to reach recipients
• labour diseconomies: workers may feel less appreciated/ have low morale so may become demotivated which could reduce labour productivity/ efficiency
• poor industrial relations: there may be industrial action such as strikes

What are the advantages that firms may gain from a horizontal merger?

• Take advantages of economies of scale, reduce average costs
• Increased market share as a direct competitor is eliminated
• exchange ideas and gain technology so that to increase innovation and produce with better quality

What are the advantages of a sole proprietor?

• Profit incentive/all profits go to the sole proprietor, do not have to share with partners
• and/or shareholders
• Flexible as no one else to consult/quick to make decisions
• Provides personal services/has personal contact with consumers (1) can pick up changes in
• demand/target products
• Low start up costs/easy to set up, eases entry into the market/limited legal requirements
• Own boss, no-one to take orders from

What is multinational company?

a company that has its headquarters/is based in a country but produces in a number of countries

What are the characteristics of perfect competition?

• many buyers and sellers, making each firm a price taker
• free entry and exit, absence of barriers to entry and exit/ results in only normal profits being earned in the long run
• homogeneous product, demand for one firm’s product will be perfectly elastic
• perfect knowledge, firms and buyers aware of profits

Define ‘monopoly’

A market with one seller/ single supplier

A price maker/ a firm with market power/ dominant firm/ has barriers to entry

What are the aims of government?

• ull employment
• price stability
• economic growth
• redistribution of income
• stability of balance of payment

What are the types of direct taxes?

• income tax
• corporation tax
• capital gains tax
• inheritance tax

What are the types of indirect taxes?

• sale tax/ value added tax
• excise duties
• customs duties/ tariff
• licences

How supply-side policy measures could increase productivity?

• improved education/training, may raise workers’ skills, increase output per worker hour
• privatisation may increase competitive pressure on firms to keep costs low, encourage more investment, and increase output per factor hour
• reforming trade unions may reduce restrictive practices, this may allow firms to use their workers more efficiently increase output per worker hour
• cutting corporation tax may increase profit, increase investment and increase output per factor hour
• giving subsidies to encourage firms to invest in advanced technology, engage in research and development and/or train workers

What are the types of unemployment?

• Cyclical
• Structural
• Frictional
• Seasonal/ Casual

What are the causes of inflation

• demand-pull
• cost-push
• monetary

What are the indicators of living standards?

• GDP per capita
• HDI takes into account income, education and life expectancy

What is absolute poverty?

• A lack of access to basic necessities e.g. food/clothing/housing
• Living on less than e.g. US$1.25 a day

What are the characteristics of a rapidly developing economy?

• high increase in real GDP per head will increase living standards by investment
• significant improvements in healthcare will increase life expectancy cause by increased spending on hospitals
• significant improvements in education will raise workers skills
• high proportion of workers employed in the tertiary sector . as countries develops, workers tent to move from primary and secondary sectors to the tertiary sector
• low rates of population growth. as countries develop, the birth rate tends to fall faster than the death rate
• high spending on luxury products
• encouragement of MNCs to set up as it may reduce unemployment
• more use of advanced technology due to more research and development and invest

What are the benefits of specialisation?

• A country can specialise in what it is best at producing/increase efficiency/increase productivity so leading to higher output/higher income
• A country can gain a good reputation in producing the product/produce a high quality product, this may increase demand for the product

What is ‘balance of payments’

• Record of economic transactions with other countries, which includes current account, capital account and financial account

What are the reasons why an economy may have a high foreign exchange rate?

• a high demand for the currency. this may arise from e.g. good quality/lower price of exports/speculation that the currency will rise in the future
• a low supply of the currency due to, for instance, a low demand for imports/a low level of investment abroad
• government setting a high exchange rate by buying the currency/raising the exchange rate

以上就是基础知识部分的常考题目，在近三年的卷子当中也被重复考察，希望大家认真复习，牢牢拿住基础部分分数！

最后强调，主观题目的试卷最重要的是分析，对于6分和8分的题目一定要进行有逻辑的或者分类的分析。

祝大家明天下午考试成功！