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CIMA - BA1 - Fundamentals of Economics
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CIMA - BA1 - Fundamentals of Economics
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CIMA - BA1 - Fundamentals of EconomicsOrganisations Answer - - Social Arrangements
- Controlled Performance
- Collective Goals
Return on Capital Employed (ROCE) Answer - Profit Before Interest & Tax / Avg. Capital Employed
Earnings per Share (EPS) Answer - Profit After Tax / Number of Shares
Types of Stakeholder Answer - Internal - employees and management
Connected - customer and suppliers
External - government, community, pressure groups
Primary - have contractual relationships
Secondary - no formal relationship
Corporate Governance Answer - The systems by which companies and other organisations are directed and controlled
Objectives of Corporate Governance Answer - - to control the managers/directors by increasing the amount of reporting and disclosure
- to increase the level of confidence and transparency - to increase disclosure
- to ensure that the company is run in a legal and ethical manner
- to build in control at the top that will cascade down the organisation
Types of Economy Answer - These are solutions to the allocation of scarce resources:
- Command economy (decisions made by the government)
- Free/market economy (allocated by market forces via price mechanism, the 'invisible hand' of the market)
- Mixed
Individual and Market Demand Answer - Individual demand represents the amount that a consumer is willing and able to purchase at a given price (i.e. effective demand) Market demand shows the total amount of effective from all of the consumers in the mark (i.e. aggregate)
Factors affecting demand Answer - - The price of the good
- Prices of other goods (substitutes, complementary)
- Income
- Taste/Fashion
- Other (population size, credit terms)
Price Elasticity of Demand Answer - PED = % Change in Demand / % Change in Price
>1 - elastic, a price drop increases revenue
<1 - inelastic, a price increase will increase revenue
Factors affecting Elasticity of Demand Answer - Substitutes
Necessity / Habit
Time Frames
Loyalty / Brand Strength
Proportion of Income
Definition of the Market
Factors affecting Supply Answer - - Price
- Price of other goods
- Cost changes
- Success of harvests
Factors affecting Elasticity of Supply Answer - - Time frames
- Production factors (e.g. availability of trained labour)
- Inventory levels
- Competition
Market Failure Answer - Market failure is the inability of a market to allocate resources in a way that maximises utility
Public Goods Answer - Goods that may not be produced under a market system due
to:
- Non-excludability
- Non-rivalry
As a result, they are provided by the state
Externalities Answer - The cost or benefit that is imposed by one or several parties on a third party who did not agree to incur that cost or benefit
Can be negative (e.g. pollution) or positive (e.g. education)
Merit Good Answer - A commodity which is judged that an individual or society should have on the basis of some concept of need, rather than ability and willingness
to pay (e.g. education, healthcare)
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