Unit. Firms and Production. What is firm? What is production? = What is the difference between input & output? VISION PUBLISHING CO.

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1 Final Call: HKDSE Economics Unit What is firm? Firm 2 = Firms and Production the unit + that makes decisions + regarding the employment of factors of production + and the production of goods & services What is production? Production = the process of combination of inputs for the creation of goods or the provision of services What is the difference between input & output? Input vs Output Input Output Anything used for production Anything produced

2 10 Final Call: HKDSE Economics How to compare partnership with private limited company? Partnership vs Private limited company Partnership 2 20 partners Fast decision making Pay lower profits tax rate Easy to set up Owners have higher working incentive than employed professionals Private limited company 1 50 shareholders Owners bear limited liability Owners Capital Legal entity: owners are not responsible for legal charges against the company Continuity is not limited to the owners lives How to compare private limited company with public limited company? Private limited company 1 50 shareholders No need to disclose accounts to the public Private limited co. vs Public limited co. Public limited company 1 shareholders Ownership transferred freely Owners Capital Issue shares & bonds to the public Capital

3 64 Final Call: HKDSE Economics How to ascertain whether salary earned from working overseas should be included in HK s GDP & GNP? HK residents working overseas 1 year < 1 year How to ascertain whether salary earned by foreigners working in HK should be included in HK s GDP & GNP? Foreigners working In HK 1 year < 1 year

4 70 Final Call: HKDSE Economics What are the differences between employed, unemployed & under-employed? Persons Labour force Employed persons Unemployed persons aged 15 & have formal job or have work for pay/profit aged 15 & no job and no work for pay/profit & available for work & seeking work Under-employed persons working hours < 35 hrs/wk & available for additional work & seeking additional work Not under-employed persons working hours 35 hrs/wk or not available for additional work or not seeking additional work Not in labour force (not available for work): full-time students retired persons prisoners illegal immigrants housewives permanently handicapped Includes: discouraged workers persons with temporary illness persons taking up new job later persons starting business later persons returning to original job later

5 What causes AD? disposable income e.g. tax refund, govt. subsidy, rent, rates, interest income from ibond, Comprehensive Social Security Assistance (CSSA), Old Age Allowances ( fruit grant ), income tax desire to spend / desire to save e.g. poor product/services, expectation of salaries/ bonus, expectation of recession, expectation of interest rate hike, expectation of tax increase, more concerned about saving for retirement, expectation of no more quantitative easing/operation twist wealth e.g. bursting of assets bubble/stock market bubble/property market bubble money supply ease of borrowing & interest rate Private consumption expenditure Unit 7 National Income Determination and Price Level investors confidence/pessimistic about future business conditions e.g. bursting of assets bubble/stock market bubble/property market bubble, expectation of interest rate hike, expectation of no more quantitative easing/operation twist money supply ease of borrowing & interest rate / HIBOR profits tax rate, tax refund rent, rates business registration fee repeal of an investment tax credit salaries of civil servants remuneration package for Politically-Appointed Officials contraction of the government economic recession or depression of trading partners, disputes with trading partners, political upheaval of trading partners devaluation of Renminbi, depreciation of foreign currencies, appreciation of US$ or HK$, Asian currencies crisis, financial crisis in US / Europe, Euro crisis Individual Visit Scheme, Guangdong/HK cross-boundary private cars ( self-drive tour scheme ) promotion by Hong Kong Tourism Board delivery quota for doubly non-permanent resident pregnant women Investment expenditure Government expenditure Net export AD 75

6 What are the effects of AD & LRAS on price level & output? Short run: A B LRAS > AD Long run: B C Short run: A B Unit 7 National Income Determination and Price Level Rightward shift: LRAS & AD LRAS = AD LRAS < AD Long run: B Short run: A B Long run: B C 85

HKAL Economics Past Examination Papers Multiple-choice Questions Chapter 1: National Income Accounting

PASTpaper\AlmAcro\MCQ\CH1-National Income Accounting-SV.doc/P.1 of 7 HKAL Economics Past Examination Papers Multiple-choice Questions Chapter 1: National Income Accounting 1- The value of the vegetables