finalised sem 1notes

8/18/2019 Finalised Sem 1Notes

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Economics

Chapter 1

1. Defne Economics, Opportunity Cost, Factors o Production and PPC

Economic is the study o how society choose to allocate scarce resources to production o

goods to satisy unlimited wantsOpportunity cost is the best alternatie sacrifced or a chosen alternatieProduction Possibility Curve is the cure showing ma!imum combinations o two outputs

that an economy can produce, gien aailable resources and technology

". #hat are the assumptions made when constructing PPC$

Fi!ed resources % &esources base can't ary during time periodFully employed resources

(echnology unchanged % (echnology means body o )nowledge applied to products remains

unchanged

*. #hat do the ollowing point shown in Fig1 mean$+ -nattainable points

E/cient possible points which showed ma!imum output possibilityC +ttainable but ine/cient points

0. #hat is ceteris paribus assumption$

Ceteris Paribus assumption means while certain ariables change, all other actors remain

unchanged

. #hat are direct, inerse and independent relationships$

Direct means two ariable changes in same direction. Eg. DemandInverse means opposite. Eg. 2upplyIndependent means related. Eg. Perectly Elastic

3. #hat is law o increasing opportunity costs$Opportunity cost increases as production o one output e!pands

4. #hat may cause when shiting PPF$Changes in resources

(echnological changes

5. Defne planned, mar)et and mi!ed economy.Planned means goernment accepts responsibility or all ma6or economic decisionsMarket means Priate indiiduals and big frms accepts responsibility or all ma6or economic

decisions with minimum goernment interention

Mixed means operating price mechanism within ramewor) o goernment control


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Economics

Chapter 2

7. #hat is total and marginal utility and diminishing marginal utility$ (otal utility is total satisaction gaining rom all those units o a good consumed within a period8arginal utility is additional satisaction gaining rom consuming an e!tra unit o a good within

a period.Diminishing marginal utility means since person become more satisfed, each e!tra unit

consumed will gie less additional utility than preious ones. 8arginal utility decrease as

consumption rises.

19. E!plain :aw o Demand and 2upply (he law o demand;supply means the inerse;direct relationship between the price and the

price actorsPrice actors cause changes in price determinants

cause whole demand;supply,


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Economics

production.For

whom

(he diision o output among society's

citi=ens

@ncome earned determines


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Economics

Chapter +,-,.

"0. Defne price elasticityoods diAer in degree to which pt is elastic;inelastic. 8id>pt is unitary thatma!imised reenue

"4. E!plain cross elasticity and income elasticity o demandCED&IED is the ratio o the percentage change in the


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Economics


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Economics

*0. E!plain specialisation. :ist adantages and disadantages.Focuses on producing limited scope o products to increase productiity+dantages Disadantages2ae time (oo repetitie&educe wor)load ?eed new s)ill ac


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Economics

Chapter >,10

0". E!plain homogeneous product9omo#enous product means all products are identical, buyers are indiAerent to which

product they buy

0*. 2)etch and e!plain supernormal proft o short run and long run o perect competition Fig3ence, e!plain short and long run e


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Economics

1. E!plain the eAect o adertisement+dertisement ma)es demand cure increase and become inelastic ?Increased loyalty@

Pros Cons2how characteristics o products 8islead;persuade consumers buying

unnecessary goods2timulates product deelopment Counter productie i sales isn't increasedFirms increase output and achiee

economies o scale

@ncreased loyalty means less competition

Chapter

". #hat are the regulations o monopolyPrice regulation % marginal cost pricing, subsidy or 1. Proft control % Fair or marginal

". &estore competition % against collusion, restrict monopoly

ormation*. ?ationalisation or create public enterprise or competition0. +llow priate frms

*. #hat is priatisation$ :ist adantages and disadantagesPriatisation means the transer o actiities rom public oernment owned or run to priate

sector

+dantages Disadantages1. 8ore e/ciency as proft motie 8ay reduce serices with less proft". &is) transerred rom ta! to owners Mob losses i owner cut cost and improe

e/ciency*. 8ore e/ciency as specialisation (hey concern proft rom e!pense o public

serice0. 2hort term reenue or goernment by

selling

0. E!plain why public utilities may be regarded as Nnatural monopolies' Fig 4+s :&+C declines through entire output, one frm can supply entire mar)et at lower cost than

two or more

. E!plain barriers o monopoly 7" Control o raw material and distributie outlets4 Economy o scale, Capital, :egal, oreront (echnological, Product DiAerentiation,

threatened conduct price war barrier, +ccess to cheaper inputs Due to mar)et position

3. 2)etch and e!plain supernormal proft o short run and long run o 8onopoly Fig 72upernormal proft in short and long run

4. E!plain price discrimination. #hen can monopoly oAer price discrimination$Price discrimination means diAerent charges to diAerent customers but not Fusti7ed by cost

dierences1. 2eller must be price ma)er". 8ust able to segment mar)et by distinguishing that consumers willing to pay at diAerent

prices*. @mpossible or costly to arbitrage Earn proft by reselling


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Economics

5. #hy monopoly earns 2?P in long run$Factors determining demand and cost cures shows proft, and no disturb high barriers or

entry (hey can alter its plant si=e to lower cost. @ long run loss, li


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Economics

Chapter 11

39. 2)etch and e!plain supernormal proft o short run and long run o oligopoly Fig 192upernormal proft in short and long run

31. E!plain concentration ratio and mutual independence, how they apply in oligopoly mar)et

structure$Concentration ratio means the percentage o total sales in the industry generated by itslargest frm@n Oligopoly, small numbers o frm dominate, means decision by single large frm aAects

oerall mar)etMutual Independence means the condition when action by one may cause reaction o

others

3". E!plain in)ed demand cureOligopoly demand assumed that rials would match a price decrease but ignore a price

increase

3*. E!plain the limitations o demand in oligopolyFail to fnd price stic)iness, not intended to proide complete e!planation o price and output

decision

30. E!plain collusion. @s it legal, why$Collusion means rial companies cooperate or mutual beneft. Collusion S)!') A

Monopoly #raph-sually no, it creates unair mar)et place by controlling supply or price, so it's done secretly

3. #hat are the obstacles to collusion$

Demand and cost diAerences ?umber o frms

Cheating 2ecret concession &ecession Decreased D cause increase +(C, asdiAer reenue

33. Defne price leadership and cost>plus pricingPrice leadership means leaing rials with little choice but to ollow and match prices to

mar)et share Competitors may lower prices to gain mar)et share as discounters.Cost3plus means determine price by adding a percentage mar)up to a productQs unit cost

34. E!plain the cartel, game theory, duopoly, price leadership and PayoA 8atri!Cartel means group o frms ormally agreeing to control the price and the output o product,reapin# monopoly pro7ts by raisin# prices and restrictin# output, but may cheat

?


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Economics

@normal agreement but legal and ormal statement but illegal

37. Discuss some o the methods an oligopolist could use to increase Rmar)et powerS.

mar)sProduct diAerentiation, non price competition, price wars to eliminate competition, ta)e oers

and mergers, creation o barriers to entry, collusionL other.

.0B De7ne all markets

1BMarket structure 2B%oB o(

sellers

B8ype o( product +BEntry

conditions

"BExample

sPer(ect competition 'ar#e 9omo#enous ;ery easy CropsMonopolistic

competition

'ar#e Dierentiated Easy 6outi$ues

Oli#opoly


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Economics

4. :ist the anti competitie trade practices 7Collusion, price agreement, mar)et sharing, collusie bidding and tendering, resale price

maintenance, e!clusie dealing, monopolisation, collectie boycott

43. E!plain role o microeconomic policy

&aise economic growth rate and increase Be!ibility, increase three e/ciencies by

&educe goernment interention, increase

competition

Pressure frms increase productiity and

productie e/ciencyPressure frms pass benefts to customers :ower price leads to improed allocation

@ncreased competition increase dynamice/ciency


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=ccountin#1B 8ransaction

+n eent that alters fnancial position o business and recurrent liability &emain in the business account or a period greater than one year.

7. 8he rationale may includeK

+ware li


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=ccountin#Capable o independent erifcation and ree rom bias

Consistency +ble to identiy similarities and diAerences between current and preious

reports

(imely Prepared in plenty o time or people re


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=ccountin#+ccounting Control accounting unctions

Protect assets and reliability o data

+uthorisation and separation o record)eeping duties rom duties o custodian o

assets

+dministratie usiness procedure

@ncrease operation e/ciency and compliance with policies

uidelines Clearly establish lines o responsibility

@nternal auditing2eparate record)eeping and custodianship


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=ccountin#1>B 6ank reconciliation

E!plain the diAerence between the ban) balances shown in an organi=ationQs ban) statement

1B Summary o( document Lo4

1. &e


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Mana#ement8anagement +rt and science to accomplish indiidual and organisational goals through eAorts o indiidual and

groups using PO:C

Planning > Defne goals or uture organisations perormance and deciding on the tas)s and resources need to

be achieed

+ goal > is desired state that the business or organisation attempts to realise

2mart > +cronym, ies structure and weight to your goals, should be easy to understand

+chieable, ae a clear point o success

Speci7c is when you state or write e!actly what you want to accomplish

Measurable means must be able to demonstrate and ealuate that goal is achieed

=chievable oals should be challenging but achieable, must ft in with )ey responsibilities

)elevant means the goals must ft in with )ey responsibilities

8ime36ound 2pecifc time rame in which the goal is to be achieed

:eels >Strate#ic, 8actical, Operational > "> y or more, 1>" y, daily to si! monthly,

-ses ramewor) o ision or mission, @mplement 2trategic Plan, Operational planning

-nderta)en by senior, middle, ront line management

+ction Plan > :ists specifc steps how, people who, resources what and time periods when to

accomplish goals

8ission > 2tatement o the purpose o a company, organisation or person, reason or e!isting, guide

action, oerall goal and path

E/ciency s Perorm or unction in best possible manner with the least waste o time and eAort

EAectieness +de Co>ordinations o the arious humans and physical actiities o an organisation

(eam (eam meets and learns opportunities and challenges, agrees goals and begins

tac)le tas)s

Deelopment Stormin# > (olerance o each team member and emphasi=e diAerencesL otherwise the team

will ail

ruce (uc)man %ormin# % (eam members ta)e responsibility and hae ambition to wor) or success o teamQs

goals

Per(ormin# > (hey are motiated and )nowledgeable, competent, autonomous and able to

handle the

decision>ma)ing process without superision.

=dFournin# > @noles completing the tas) and brea)ing up the team

2teps in Identify problem problem defnition, goal defnition, inormation gathering.

&ationing Generate solutions encloses two to three fnal solutions and preliminary

implementation

8odel Generate alternatives ealuatie criteria are measurements to determine success and

ailure

Evaluate alternatives comprises fnal solution and secondary implementation to the site

Choose best alternative fnal implementation and preliminary monitoring o the outcome

and results

Implement decision secondary and fnal monitoring o the outcomes and results o the site

Evaluate decision modiy decisions and actions ta)en

Fault decisions =nchorin# and adFustin# bias #hen rely too heaily on one single inormation or number

=vailability bias #hen inormation is easy to access and more readily aailable or

recently published heailyEscalation o( commitment Continually ollowing a course o action een is clear not ideal

solution

Overcon7dence People oerestimate ability to predict uture


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Mana#ementSatis7cin# Choosing frst aailable alternatie rather than see)ing best possible

solution

Problems in teams Social loang (endency o indiiduals putting less eAort

ae 6ob description, assign tas) or each with deadlines

Dominant team members ae dominant personality limit others

+llocate specifc time limit to be heard and encourage participation

Team conict Disagreement, di/cult to oercome i e!ist beore orming

Deelop rules o conduct and priate mediation

Group think Desire or harmony cause poor decision

-sing brainstorming to rational decision ma)ing model and

generate


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Mana#ement:eading> @nBuencing staA to do what an organisations, business or teams want done

@t is the process o directing and co>ordinating both day%to>day tas)s and those specifc tas)s

re +bility to inBuence or motiate people to achiee some end or goal

(raits > Desire to lead, onesty and @ntegrity, 2el>Confdence, Emotional 2tability, Cognitie +bility,

nowledge o the usiness

:eader s > 'eaders inspire people, build relationships, innoate and ta)e ris)s, proide a ision , ocus on

people

8anager Mana#ers enact the plan, proide and allocate resources, r educe ris)s , rely on Controls ,

ocus on things

2tyles =utocratic > ma)e the decision alone without necessarily inoling employees in decision>ma)ing

process

Pros and Cons Democratic > employees participate in the decision>ma)ing, but leader has the fnal say

Each three 'aisse:>(aire > leae employees alone to ma)e decisionL minimum guidance and inolement in

the decision

2ituational > no single RbestS leadership, is one who can adopt diAerent leadership styles depend

on situation

Factors > #or)ers, the decision, the leader, the enironment

8otiation > Forces either within or e!ternal to a person that arouse enthusiasm and persistence to pursue

action

8aslow uman beings are motiated by unsatisfed needs

(heory basis> :ower needs must be satisfed beore higher needs are met

(here are general types o needs physiological, saety, loe and esteem

(hese general needs must be satisfed beore a person can act unselfshly

#e are moing towards growth, and sel>actualisation

Physiolo#ical needs > 8ost needs hae to do with surial physically and psychologically

Sa(ety needs > People need to eel ree rom threat o physical and emotional harm

Social needs > @nclude loe, aAection and belonging needs, relate to interaction with

others

Esteem needs > @nternal needs e.g. sel>respect and achieement

E!ternal needs e.g. social status and recognition

Sel(3actualisation > ealthy indiiduals prime motiation

WT > Describe two diAerent wor)orce motiations and e!plain wor)ers' behaiours between e!tremes

8aslow's conersion :ower order needs (heory WL higher order needs (heory T

W +utocratic> +ssumes employees are naturally unmotiated and disli)e wor)ing, desire only monetary rewards

8ust be controlled, orced and threatened to delier whatQs needed, closely superise

Mobs must be clearly structured, many layers o management and superision to control wor)ers

T democratic +ssume sel>motiated and creatie, en6oy and see) responsibility, motiated by sel>ulflment,

or laisse=>aire inoled in decision ma)ing, appreciating is regular and important, creatie and innoatie are

accepted

Controlling > 8onitoring all management processes

VEnsures the realisation o organisation or team ob6ecties

2cientifc + Deelop science or each indiidual wor) tas), techni Diide wor) e 2pecialisation and diision o labours improe productiity, clearly defned authority, wor)ers clear

e!pectations


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Mana#ementCons > &educe labour productiity, centrali=ed decision ma)es no input rom employees, limited scope o

innoation

ehaioral DH: 8ore concern with employee well being, encourage management approaches considering

employees motiated

8anagement % Focus approach on indiidual, group motiation and leadership, indiidual labour is crucial meeting

goals

Pros reater 6ob satisaction, labour productiity, less conBicts, employees interest align with goals

Cons Popular decision oerride best decision, ine/cient waste aluable time and resources,

ine!perienced ine/ciency

finalised sem 1notes

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