Economics Edexcel A Level Paper 1 Definitions Exam 2024 Questions & Answers 100% Correct!

Principal-agent Problem - ANSWERSPrincipal (Shareholders) has different objectives to Agent (Manager) but the Agent is inclined to act in order to achieve their own objectives. Public sector organisation - ANSWERSWhen the government has control over the Business Private sector organisation - ANSWERSFirms are led by private individuals and left to the free market to dictate Profit organisation - ANSWERSA profit organisation aims to maximise the financial benefits of its shareholders and organisations Not-for-profit organisation - ANSWERSA not-for-profit organisation has a goal which aims to maximise social welfare. They can make profits but they can only be reinvested back into the business/used for a good cause or operation of the organisation Vertical Integration - ANSWERSOccurs when a firm merges with or takes over another firm in the same industry, but a different stage of production. Forward vertical integration - ANSWERSWhen the firm joins together with another firm closer to the consumer e.g coffee producer buying a café where coffee is produced Backward Vertical Integration - ANSWERSWhen the firm joins together with another firm closer to the producer - this involved gaining control over suppliers e.g coffee producer buying a coffee farm Horizontal integration - ANSWERSMerger of two firms in the same industry in the same stage of production e.g two car manufacturers merging to create one company e.g Tmobile and Orange created EE Conglomerate Integration - ANSWERSTwo completely different firms with no connection joining together e.g Associated British Foods owns Primark - no association Organic Growth - ANSWERSWhen firms growth happens as a result of increasing output, widening customer base - internal growth. Investing into re-search and development