REVIEW SHEET- FINAL EXAM:

ECONOMICS & BUSINESS

Date: Friday 2 June 2023

Time: 2 hours

BUSINESS THEORY & CONCEPTS

Introduction to Sharemarket – PTT

1. What does GICS STAND FOR.

Name the 11 industries in Global Industry Classification Standard
● Energy
● Materials
● Industrials
● Consumer discretionary
● Consumer Staples
● Health Care
● Financials
● Information Technology
● Communication services
● Utilities
● Real Estate
EMICCHFICUR
2. Distinguish between Consumer Discretionary and Consumer Staples?

You need to buy consumer staples to survive, whereas consumer discretionary are things
you want to buy for fun

3. Describe the characteristics of Blue-Chip Stock?

Industry leader, dependable business model, proven track record, history of delivering
strong returns over the long run, pays dividends to shareholders, regularly increases its
payout

4. What are dividends?

a form of distribution of a company's profits to its shareholders.

5. Name the three major stock exchanges indices in the United States?

DJIA (Dow Jones Industrial Average)

S&P 500 (The standard & poor’s 500)
Nasdaq Composite

6. Define the term diversification

process of allocating capital in a way that reduces the exposure to any one particular asset
or risk.
7. Distinguish between and bear and bull market?
A bull market is a sustained stretch of time when investment prices are rising in a financial
market. A bear market is a sustained stretch when investment prices are falling.
Business Structures -PPT

8. Explain the difference between Unlimited and Limited Liability in regard to

business structure?
the business owner(s) or partners are personally responsible for all debts and liabilities
incurred by the business in unlimited liability while in a limited liability, the business entity is
considered separate from its owner(s) or shareholders.
9. What are three advantages and three disadvantages of a partnership?
Advantages
● Shared Responsibility and Resources
● Flexible Structure
● Tax Benefits
Disadvantages
● Unlimited Liability
● Shared Decision-Making
● Limited Life Span
10. What is the best advantage of a company structure?
Limited Liability
(personal asset protection)
11. What are one disadvantage of company structure?
increased regulatory compliance and administrative burden.
(high set-up costs)

Mission and Vision Statements – PTT

12. Identify the four major steps in a Mission Statement (slide 4)

● Identify the organization’s USP
● Identify the key measures of the organizations
success.
● Combine the organization’s USP and key measures of
success into a tangible and measureable goal.
● Refine the words into a concise and precise
statement expressing the USP, success measures and
desired result.

Sayers answers:
1. Identify the company’s unique selling point
2. identify the key measures of the company’s success
 3. combine the key measures of success and unique selling point to create a tangible
and measurable goal
4. refine the words into a concise and precise statement
13. Define vision statement.
A philosophy, vision or set of principles, which steers the direction and behaviour of an
organization.

STEEPLE ANALYSIS

14. List the meaning of each letter in STEEPLE?

Social: Social factors refer to the target audience's opinions or attitudes that influence their
purchasing decisions
Technological: Technological factors are advancements or innovations that can affect a
business
Economic: Assessing the current state of the economy is beneficial to a business
Environmental: Environmental factors consider how a business's geographical location can
affect its operations
Political: Political factors refer to the government involvement in the industry and economy
Legal: Legal factors relate to the laws that apply in the province or territory where a
business operates
Ethical: Ethics is a general set of moral principles that people of a particular belief system
follow
15. In the exam you will have to complete a STEEPLE analysis with a case study.

Marketing Mix

16. Name the seven Ps of the market mix?

● Product
● Price
● Place
● Promotion
● People
● Process
● Physical Evidence

Pricing Strategies -PTT

17. In extended response, describe /explain the 6 pricing strategies that companies
could use.
Cost Plus Pricing: Is a method of pricing a product or service whereby all total direct costs
and some allocation of indirect costs are added together, along with some mark-up – either
a fixed or percentage amount – to determine the sales price to the customers.

Penetration Pricing Is a pricing method that businesses use to attract customers to a new
product or service When introducing a new product or service the business often sets a low
price initially to encourage consumers to try outthe new product Penetration pricing is a
short term strategy Once loyalty has been established prices will be increased so that
normal profit margins can be achieved

Loss Leader Pricing: The objective of the loss leader strategy is to price a product lower than
its production cost, in order to attract customers who can then be sold other, more
expensive products.

Premium pricing: the practice of setting a high price to give the impression that a product
must have unusually high quality

Dynamic pricing: businesses set flexible prices for products or services based on current
market demands

Competitive Pricing: Involves a business setting the price at the same

level as its competitors.

Elasticities – PTT

18. Review of these key concept regarding elasticity:

Values of PED Classification Explanation

PED > 1 Price elastic demand A change in price leads to a proportionately

greater change in the quantity demanded.

0 < PED < 1 Price inelastic demand A change in price leads to a proportionately
smaller change in the quantity demanded.

PED = 1 Unitary elastic demand A change in price leads to a proportionately

equal change in the quantity demanded.
19. Write the formula for calculating Price Elasticity of Demand
Price Elasticity of Demand = Percentage change in demand / Percentage change in price
20. Complete the following calculations.

A local council raises the price of car parking from £3 per day to £5 per day and finds
that usage of car parks contracts from 1,200 cars a day to 900 cars per
day. Calculate the price elasticity of demand for this price change.

Percentage change in demand=1200-900/1200=25%

Percentage change in price= 3-5/3=66%
0.25/0.66=0.38
PED=0.38 inelastic demand

MACROECONOMICS
Please review all previous exam review sheets for Economics.
Here is a selection of questions.

PPT Unemployment

1. What is frictional unemployment?

2a. List four types of structural unemployment.

b. State the generic category and then give some examples.

3. What is cyclical unemployment?

4 A person has job for the ski season, but their employment ends in
March. This person is unemployed due to s______________
unemployment

5.Draw the business trade-cycle diagram below. Label & the x y axis.
Calculations: Unemployment

6. The is the formula for calculating the unemployment rate.

You may be asked to recall this on the real exam.
Make sure you can define the labor force.

7. Calculation – Unemployment

The following data is for country XYZ:

● The total population is 50 million.

● 5 million people are unemployed.

● 1 million people cannot work because they have physical impairment or

mental disability.
 ● 100,000 have given up looking for work.

● 7 million are senior citizens (over 65) and don’t work.

● 10 million are below 15 and pursue study rather that work.

● All other citizens have some form of paid employment.

Calculate the unemployment rate.

8. How is underemployment different to unemployment?

Graph Analysis- Unemployment

9.

You will receive one or two graphs from the PPT related to unemployment in
Europe, Japan or India elsewhere. You do not have to remember specific
numbers, but your need to interpret some trends in the graph.

INFLATION

10. What is inflation?

11a. What is deflation?

11b. Deflation is a sign of very low e_________________ growth or a

recession.

11c. One country that has experienced deflation (for several periods in the last

few years) is _______________

12a. List three reasons to explain the increase in inflation in the United
States, in the last 2 years?
12b. Explain has each of the causes (you identify in 12a,) contribute to
inflation pressures. For example, how do supply change shortages in
China, contribute to higher prices in the United States? Provide
examples.

Graph Analysis-Inflation

13.

You will receive one or two graphs from the PPT in relation to inflation in US,
Japan, South Korea or India. You do not have to remember specific numbers,
but your need to interpret some trends in the graph.

14. Name the Central Bank for these countries

United States ____________________

United Kingdom _________________

Central Bank Responsibilities

15. The main responsibility of the Central Bank to increase i__________

r________ when inflation is a problem, (to cool the economy down) and

to ensure real wages match economic conditions. People reduce their

spending on good and services because higher interest rates lead to

increases in:

● mortgage (h_________) repayments,

● car loan repayments.

● c__________ card repayments.

 When there is a recession, the Central Bank lowers i _____________

r__________ to stimulate d______________ (to encourage increase

spending by consumers.).

In most developed countries the inflation t_______

b_______ is between 2 to ___% for inflation. When inflation is above this

band the central bank should increase rates.

However, many developing countries have a target band that is significantly

above this rate.

16a. We measure inflation by movements & changes to the

Consumer Price Index

17a. Name the 8 major components used to calculate the CPI

(This is used by the United States, but other countries use a similar
system)
17b. What is the “basket of goods”?
What type of goods should be in the basket?
17c. What is meant by weight?

Calculation

18. The following information provides a simplified version of the

calculation of a consumer price index (CPI).

In Country A, the rate of inflation is measured by the

calculation of a CPI. The index is calculated using the
five products which are purchased by citizens of Country
A as representative of a “typical basket of goods”.

Table 1
 Produc Quantity of each product
t Average price per purchased
by the average household
unit in dollars ($) per week. (Weight)
2015 2016
A 5.60 6.30 25
B 3.45 3.50 18
C 1.20 1.05 40
D 8.40 9.20 5
E 2.55 2.35 12

Assume that 2015 is the base year for the purpose of calculating the
CPI.

Calculate the consumer price index (CPI) for Country A in

2016.

GDP - PPT

19. Define GDP, for the output method.

What are final good/ intermediate goods.

20. What is the GDP expenditure model formula?

In the exam, you will be given a case to solve on the expenditure model. (calculators
necessary)

21. Explain the difference between GNP vs GDP.

22. According to nominal GDP what are the three largest economies in the world.

23. According to PPP at GDP, what are the three largest economies in the world.

24. What is the definition of PPP? (16)

24. The definition of a recession is….

25 What is fiscal policy?

26. When do you implement expansionary fiscal policy?

27. When do you implement contractionary fiscal policy?

28. What is monetary policy?

29. What is expansionary monetary policy?

30. What is contractionary monetary policy?

MICROECONOMICS
Powerpoint: Introduction to Microeconomics: PPT

1. What is the law of demand?

2. Distinguish between normal good and inferior good?

(10, 11, 12)

3 Give four examples (non-price factors) that will shift the demand curve?
(19 to 26)

4. Distinguish between a shift of the demand curve and movement along the demand
Curve? (27)

5a. Refer to slide (29) for examples used in class. (demand)

b. There is a recession and cut in real income.

What will happen for the demand for foreign holidays?

c. What would happen to demand for milk, if there is a significant increase

in the population?

d. Want would happen if the demand for chocolate bars, if the price of chocolate bars
increased?

6. What is the law of supply?

7. List a range of factors that shift the supply curve?

8. Refer to slide (46) for examples used in class. (supply)

9a. A government decides to remove a subsidy for the car industry.

What should happen to supply of the car industry?

9b. What would happen to the supply of surf boards, if there is a big increase in demand
for boggy boards, which the company can also produce?

9c. What would be happen to the supply of Smart Phones, if there was a significant
 Improvement In technology for these phones?

9d. What would happy if supply of adventure tourism day trips, if there is a significant fall
the price of these day trips?

10. Complete the supply and demand graph below.

11. On your graph indicate where surplus and shortages would occur.

12. Draw graphs associated with price floors and price ceilings.

Powerpoint: Economies of Scale

13. What is the definition of Economies of Scale

14. Draw an Economies of Scale graph.

15a. What are constant economies of scale?

b. This is the best point of the graph. True or False. Why?

16a. Distinguish between fixed costs and variable costs?

b. Explain the connection between fixed costs failing and Economies of scale.

17. There many benefits of internal economies of scale. (slide 14)

In a paragraph response explain these benefits

Powerpoint: Taxation

18a. What are Direct Taxes? (s3)

b. Why are most direct taxes progressive? (s9)

19a. What are indirect taxes? (s5)

19b. Why are the most indirect taxes regressive? (s16)

20. Tax Deduction. A person buys a computer which is 90% for work use for $3000.
Their taxable income is $40,000. After the tax deduction, calculate new taxable
income?

21. Below is tax brackets for Country XYD.

A person earns $55,000.

a. Calculate their table payable

b. Calculate their average tax rate.

Income ($) %
0-5000 0
5001 to 10,000 10
10,001 to 30,000 20
30,001 to 50,000 30
50001 and above 40