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• Consume


  To use something, i.e. if you consume a good, then you have used a good, whether that good was an apple (in which case you have eaten it) or a bike (in which case you have ridden it)
• Consumption


  When a person buys a good or pays for a service
• Consumer


  An entity that buys goods
• Goods


  A product that is produced by firms or businesses
• Economic Agent


  An entity (person or organisation) who acts within the economy. For example, you as a consumer are an economic agent and a corner shop or local business is also an economic agent
• Utilise


  To make use of something
• Utility


  The happiness or enjoyment an economic agent gains from consuming a good
• The Basic Economic Problem

  • The resources are finite but the wants of people are infinite
  • There are not enough resources available to 'satisfy' our wants
• Scarcity


  The excess of want over what the resources available can produce
• Choice


  Exists because of scarcity. If there is a finite quantity of resources, then only a limited amount can be produced. Therefore, there must be a decision as to what the resources should produce
• Trade-off


  The more you have of one option, the less you have of another
• Opportunity Cost


  The opportunity forgone. In other words, the unchosen option has been 'given up' in order to have the other, chosen option
• Business Objectives


  • Profit Maximisation
  • Sales Maximisation
  • Satisficing
• Profit Maximisation


  A firm may follow this objective in order to make the most money for the shareholders and owners of the business
• Sales Maximisation


  Firms are producing as many goods as they can before they make a loss
• Satisficing


  The idea of achieving the minimally acceptable result rather than the optimal solution
• Other Business Objectives


  • Survival
  • Market share
  • Cost-efficiency
  • Employee welfare
  • Customer satisfaction
  • Social objectives
  • Return on investment
• SMART Objectives

  • Specific
  • Measurable
  • Achievable
  • Realistic
  • Time-bound
• Businesses align with social objectives for many reasons, including the personal ethics of the business owner and in order to create a more positive reputation for the business's brand, which can lead to higher sales (and profits) in the long run
• Return on investment (ROI)


  This objective focuses on the success of a business from its investment decisions
• If the company loses money after buying out the rival firm, however, this would show a poor return on investment
• SMART business objectives


  • Specific
  • Measurable
  • Achievable
  • Realistic
  • Time-bound
• Sales Maximisation


  At the point of sales maximisation, firms are producing as many goods as they can before they make a loss
• Profit Maximisation


  The objective of profit maximisation aims to generate the most money possible for the shareholders and owners of a business
• Satisficing


  When a firm aims to generate revenue between a minimum and absolute maximum, we say that it is concentrating on satisficing
• Stakeholders are any individuals or organisations that have a direct influence on or interest in a business
• Stakeholders and their key interests

  • Shareholders: Survival, growth and profit maximisation
  • Owners: Survival, growth, positive reputation and acclaimed prestige
  • Management: Efficiency, low labour turnover, good industrial relations and status
  • Suppliers: High sales, steady growth, good liquidity and positive reputation
  • Government: Growth, high turnover, high profits, increased tax revenue and environmental awareness
  • Financial institutes (banks, etc.): Repayment of loans/interest, etc.
  • Customers: Low prices, quality product, green credentials and reliable service
  • Employees: Salary, job security, career progression, motivation
  • Local community: Safe place to live, low noise, disruption and pollution
• The power of stakeholders can be broken down into four categories: low power, low interest; low power, high interest; high power, low interest; high power, high interest
• Stakeholder needs and power can lead to conflicts of interest, such as between management and employees, government and owners, and suppliers and banks
• Corporate social responsibility (CSR) is now expected by most firms, whether dictated by the government or by the average consumer, and can help firms save money and create a positive brand reputation
• Opportunity Cost


  The next best alternative that is forgone when making a decision
• Profit Maximisation


  An objective of most firms: to generate as much profit as possible by choosing a certain quantity of output and price
• Satisficing


  The idea of achieving the minimally acceptable result rather than the optimal solution. In terms of business objectives this refers to the idea that some firms may generate the minimum level of profit that their shareholders accept – perhaps just above normal profits – instead of trying to maximise profits
• Marginal Revenue


  The additional revenue gained by a firm from selling one more unit of output
• Stakeholder


  A person or group that has interest in, and/or is affected by, the operations of a business
• Entrepreneurs play a crucial role in the economy by looking to combine resources (land, labour and capital) to innovate and start businesses, contributing to economic growth
• Creative Destruction


  The notion that the old is replaced by the new. New products and ideas (creation) can cause the demise of whatever existed before them (destruction)
• Entrepreneurs can gain an advantage over the rest of the market by exploiting creative destruction, such as introducing new products that replace older ones
• Ways an entrepreneur can expand and develop their business

  • Purchasing new locations
  • Investing in equipment
  • Expanding current premises
  • Hiring skilled staff
  • Buying out rival companies
  • Performing market research
  • Investigating new product ideas
  • Testing prototypes on the target market
  • Researching the market
  • Increasing brand awareness
• Added Value


  The difference between the price at which a business sells its product/service and the total cost of producing that product/service