Business organisation

Traps in Business organisation

• Reverses the direction of the effect
  Trace the chain step by step (e.g. buying securities → banks gain cash → money supply rises) and check the sign at every link.
• Picks another type in the same classification
  Learn each classification as a table of types with one defining feature each (monopoly: one seller; monopsony: one buyer; command economy: central planning).
• Picks a closely related concept
  Learn related terms as contrasting pairs with one-line definitions, and identify which one the stem describes.
• Confuses forms of business organisation
  Sole trader: one owner, unlimited liability. Partnership: 2–20 partners, usually unlimited liability. Limited company: separate legal entity, limited liability. Co-operative: one member one vote, surplus shared by patronage.
• Uses the everyday meaning of a term
  Economic terms have precise definitions. Recall the textbook definition before matching.
• Gives only part of the answer
  List every component in the definition (GDP = C + I + G + (X − M)) and tick them off before answering.
• Applies the rule for the opposite case
  Before answering, name the case in the stem (inelastic? price floor ABOVE equilibrium? point INSIDE the PPC?) and recall the rule for that case only.
• Over-generalises a rule
  Economic laws hold 'other things being equal' and within limits. Be suspicious of options with always/never/all.
• Chooses a true but irrelevant statement
  Re-read the question's key term and test each option against it, not against whether it is true in general.
• Confuses tax systems
  Look at the AVERAGE rate: rises with income = progressive; falls = regressive; constant = proportional.