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Term 4 - Economics and Business - Coggle Diagram
Term 4 - Economics and Business
Work
Why we work. There are two reasons why we work:
Material reasons. Material reasons are any reasons to do work about money. For example the most common reason to do work is to get money to get something. This is a material reason to work.
Non-material reasons. Non-material reasons is any reason to work that does not include money. For example to gain experience in a specific area, for recognition and other things.
Types of work. There are four types of paid work and two types of unpaid work:
Full time. Full time workers have to work for over 35 set hours a week. Full time workers often get benefits such as sick pay and paid leave.
Part time. Part time workers have to work less than 35 set hours a week. Part time workers get the same benefits as a full time worker just at a lower rate.
Casual. Casual workers have no set hours of work. They are usually not entitled to leave but get a 20% loading.
Contract. Contract work refers to an arrangement in which an employee will work for an employer for a set amount of time on a particular task, which is specified by a contract. They can work part-time or full-time on the job, depending on the terms they have agreed to in the contract.
Voluntary. Voluntary workers are people that feel the need to help others so much that they will even work without pay. Volunteer work is common with many charities and foundations who generally aim to make the world a better place.
Internships. Internships are a form of work that involves a person working for a business or organisation to gain experience in a particular field. Most people that do internships are young people, trying to break into an industry and are looking for experience to learn more about their chosen career path.
Opportunity Cost
Opportunity cost is the real or economic cost of a decision. In other words, it is the value of the best alternative that you give up. For example, you had a choice of buying a phone or a PlayStation. You bought the phone for $1000. The opportunity cost would be the PlayStation (or the $1000).
Scarcity
Scarcity is the economic problem of having unlimited needs and wants, but limited resources available. Resources can include natural or made materials. People can also be considered resources. For example, employers need specialists and there may not be enough so they are a limited resource. Businesses or individuals are not always able to obtain all the resources they need, which means they must manage what they do have carefully. An important part of economics is examining the decisions that result from our need to manage scarce resources.
Earning an Income
Owning a property. In recent years, many people have used their savings to invest in properties such as houses or shops. By owning properties, the investor or landlord can lease the property to a tenant in exchange for money or rent. Purchasing a property in Australia requires a large amount of money which people generally have to borrow from a bank. For this reason, purchasing a property as an investment or home has become very difficult for many Australians today. While properties are an expensive investment, they allow the owner to increase their value through renovations. They also have several tax benefits that allow the owner to reduce the amount of tax they have to pay on their overall income.
Owning a business. Owning a business is a dream that many Australians have. However, owning a business is also a big responsibility. Most businesses require the owner to invest a great deal of time, effort and money, all of which could go to waste if the business doesn’t perform well enough. For successful business owners, the sky is the limit. With the right approach, some small businesses can grow into large businesses that can earn a plentiful income for their owner.
Investing in shares. Often large companies look for investors that will give them money in exchange for a share of the company. This allows the company to grow its operations while providing the investor with an income when the company makes a profit. If the company grows in value, so does the value of the shares owned by the investor. The benefit of shares is that they are fairly easy to buy and sell, and don’t require large sums of money like many other investments do. Buying shares can also be a very risky investment. If a company loses value or goes bankrupt, the shareholder is likely to lose any money they have invested in the company.
Producers and Consumers
Producers are the people who produce goods and services. These people include the brands Nike, Adidas, Puma and so on. All these brands produces goods so they are therefore called producers. There are 3 types of producers:
Agricultural producers. Agricultural produces are also known as primary producers. They are the oldest and most important type of producers. They produce products from the land such as fish, fruits vegetables and animals.
Industrial producers. Industrial producers are also known as secondary producers. They mainly produce manufactured goods such as clothing, phones, cars and anything else made in a factory.
Service producers. Service producers are also called tertiary producers. They do not produce goods, instead they produce services which may give you skills, knowledge or other intangible benefits. Teachers, the police and lawyers are all examples of service producers.
Consumers are the people that buy the goods and services that producers make. Everybody you know are consumers even producers are consumers because they have to buy the stuff that they don't produce. There are seven types of consumers:
Environmentally friendly consumers. Environmentally friendly consumers are people that are better informed about the devastating effects that human consumption is having on the environment and its impact on our lives in the future. Because of this they will only buy environmentally friendly materials and production methods. They will not buy from businesses that harm the environment
Health concious consumers. Health conscious consumers are increasingly conscious about the effects of their consumption on their physical health. They make healthy lifestyle choices that see them being more physically active. As a result, fast food restaurants try to offer a healthy option to attract these types of consumers.
Socially responsible consumers. Socially responsible consumers are aware of the production methods, labour and environment used to make a product. Because of this they purchase the guilt-free option that does not exploit other people. Businesses today go to great lengths to get certification that supports the claim that they are treating the people involved in their production fairly so they attract socially responsible consumers.
Impulsive consumers. Impulsive consumers are known for making less calculated decisions on how to spend their money than most others. They are often attracted to the flashy advertising and visibility of a product on offer. To attract impulsive consumers, a business should ensure that its store and the products it offers can easily be seen by as many consumers as possible.
Loyal consumers. Loyal consumers are those that will continue to purchase goods and services from the same business over a long period of time. These customers are very valuable to a business as they account for a large number of sales. A business can encourage customers to stay loyal to the business by offering loyalty bonuses, maintaining high-quality products, and treating the customer well at all times.
Discount consumers. Discount consumers prefer to buy products that represent the best value for money. They often find sale items that have had their price reduced far more attractive that fully priced items. A business can attract such customers by having regular sales.
Need-based consumers. Needs-based consumers only purchase products that they really require. They avoid spending money on goods or services that they don’t feel are necessary at the given point in time. A business should ensure that it offers products that are needed by a wide range of consumers while making sure that consumers are aware that their products can fulfil certain needs.
Four factors of production
Land. Land is natural resources that businesses use such as water, land or animal such as fish.
Labour. Labour is the employees and their skills that are needed to produce and sell goods and services.
Capital. Capital is money, equipment, buildings or any other items that businesses need to produce goods or services.
Enterprise. Enterprise is a business’ ability to put land, labour and capital together to create goods and services.
Goods and services
Goods. A good is anything of value. For example a watch.
Service. A service is something that gives you skills, knowledge or anything that is intangible. For example a school is a service because they are giving you knowledge which is intangible.
Pricing strategies
There are five pricing strategies that businesses use:
Cost plus margin The selling price is equal to the total cost to produce the product plus an additional profit or margin that the business wishes to earn.
Economy pricing Large businesses like Aldi or Bunnings who buy their products in bulk can often get significantly cheaper stock than smaller businesses. They aim to make a small profit from each sale, but achieve a high number of sales due to the low price that they can offer customers.
Premium pricing The business tries to establish itself as a high-quality premium brand by setting a price higher than its competitors. This higher price can only convince people to buy it if the product is different to what is already on the market.
Penetration pricing A business may enter the market with a low price to encourage consumers to try the new product. Once the product builds up enough regular customers, the business may raise the price to a level that is more profitable.
Psychological pricing Charging prices that are not rounded to the nearest dollar amount is common practice for many businesses. When consumers are faced with a range of products and their prices, they are more likely to be attracted to the product that is $9.95 than they are to the product that is $10.00. Although the five cent difference seems insignificant, it is likely to attract more customers.
Needs and Wants
Needs. Needs are things that you need to survive. For example, a need is water, food, shelter and so on. You need these things to survive
Wants. Wants are things that you don't need but would like. For example, a want is an iPhone 13 Pro. You can live with out it but it would be nice if you had one.
Work Life Balance
Work life balance refers to the amount of time we spend at work compared to the amount of time we spend outside work (e.g. playing sport, watching movies or relaxing with friends and family).
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