As my exam gets closer on the fundamental basics of Business Economics, i am going to get some little notes and blogs ups. They are nothing more than my notes… made easier to read.
‘Risk’ will occur where there is an element of chance of injury or loss, such as with a fire. These risks can be quantified, and insured against. However, ‘Uncertainty’ are those outcomes that cannot be insured against nor quantified. These will include political unrest and changes, wars, natural disasters (although there could be a lot of discussion over this fact due to recent events and large insurance claims being made for damages), or simply whether an idea will work or not.
When economists look at the world around them, they always assume perfect information. This is concerned with business managers having all the relavant information and knowledge available to them, so that a 100% educated decision is made. Although, it is understood that in realty this may not be the case. We shall assume perfect information whilst taking about economics.
As a firm goes about its business there are factors that it influences outside of the company. These are called externalities. These may include social costs and benefits.
Social costs can be described as negative influences the company has on the surrounding community and environment. eg As a company increases its production quantity, it may increase its level of environmental pollution.
Social benefits may be seen as positive changes seen in the surrounding community and environment due to the actions of a firm. eg If a water company was to dam a river, it may create a beautiful lake for the local community and other businesses may well start Sailing Clubs.