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Economics and Business Year 10 Hass - Coggle Diagram
Economics and Business Year 10 Hass
Key concepts
Specialisation and Trade
Specialisation refers to the way an individual, business or entire country can focus on the production of a particular good or service in order to develop a more efficient and competitive production process
Specialisation in an industry allows a country to become more efficient over time as productions increase the country is able to take advantage of economies of scale
The mass production of goods is cheaper than producing goods or services in smaller quantities
Interdependence
Interdependence refers to the way we rely on others to satisfy our needs and wants
Making Choices
• In order to make good economic decision, we must consider our options
We must make the following economic decisions:
Business decisions (such as what to produce or where to sell a product)
Employment decisions ( such as what career path to follow)
Financial choices (such as how much money to save or spend)
Legal decisions (such as whether or not to take legal action over a faulty product)
Allocation and markets
Allocation refers to the way we distribute our scarce resources amount producers and consumers
The exchange of goods and services among buyers and sellers is referred to as a market
We often rely on price to determine how much we are able to produce and consume
When the cost of producing or obtaining a particular resource is high, not everyone will be able to obtain it
Scarcity
Is the economic problem of having unlimited needs and wants, but limited resources available.
Resources are divided into four categories:
Land- natural resources such as coal and water
Entrepreneurship- management of resources such as the skills or talent required to bring the resources together
Capital- manufactured resources such as equipment
Labour- human resources such as workers
Economic performance and Living standards
Economists measure how well an economy is doing (known as economic performance) using a wide variety of methods
Some key indicators of economic performance include:
Inflation- the general increase in prices of goods and services
Unemployment Rate- the percentage of people who are unemployed out of all people who are able to work
Gross Domestic Product (GDP)- total value of goods and services produced in a country
Economists also measure living standards
Material living standards refer to our access to physical goods and services
Non-material living standards are harder to measure and include things that may contribute to our happiness, such as freedom, low crime levels, access to facilities or free elections.
Gross Domestic Product (GDP) and inflation
Inflation
what is inflation?
Inflation occurs when there is an increase in the general level of prices paid for goods and services over a certain period of time
Rising prices means consumers must pay more for g&s if they want to continue to maintain their standard of living
Eg. $100 spent of g&s in 1980 were worth $408 in 2015
1980 average weekly wage $245, in 2015 it was $1674
reasons for inflation
Major factor causing rising prices is stronger demand in the economy for goods and services
Stronger demand can lead to shortages of g&s therefore increasing prices.
This may due to:
Businesses feeling confident about their future
Trading partners such as China preforming well increase export demands
Consumers feeling confident about their future income and employment
Low interest rates encourage consumers to borrow more
Who benefits/or not from inflation
Benefit
High income earners- people with jobs whose incomes increasing at the same rate or faster than inflation
Borrowers- rising prices means it may be better to borrow with a fixed interest rate and make a purchase now
Importers – the price of imported goods may be cheaper than the price of goods produced in Australia
Drawback
Low to middle class earners- people on incomes that do not increase as fast as inflation, such as part time workers, the unemployed and pensioners
Bank savers – money sitting in the bank may not buy as much as it previously did due to price rises
Exporters – as exported goods became more expensive, demand from overseas consumers will fall
How inflation is measured
• CPI measures the price change of a typical basket of goods and services purchased by Australian households every quarter
• ABS measures inflation using the Consumer Price Index (CPI)
Economic Growth
Importance of economic growth
Economic growth is important because:
o More goods and services are being produced
o More people are being employed and paid wages
o People can spend on a wider range of goods and services
o Improvement in living standards
Fall in economic growth
Recession- when economic growth falls for two or more quarters in a row. (6 or more months)
Depressions- classed as an extreme recession lasting two or more years
decrease in available credit
Increase in unemployment
economic growth falls
Decrease in living standards
What is GDP?
A measure of total value (in dollars) of all goods and services produced in Australia over a year
If GDP decreases- economy is shrinking
If GDP increases- economy is growing
ABS (Australia Bureau of Statistics) release the GDP figures every quarter (3 moths)
Economists hope to see an economic growth of 2% per year.
Unemployment
Unemployment Definitions
According to the ABS a person is considered employed if they are:
Employed for at least one hour per week
Aged 15 years or over
Labour force refers to all the eligible workers. Everyone who has a job plus those who are looking for one
Unemployment refers to all those people who are able and willing to work but can not find a job
Unemployment rate is the percentage of people in the labour force who are unemployed
Measuring Unemployment
Unemployment Rates
Number of unemployed divided by labour force times by one hundred
Will never be 0 as people are always changing jobs, machines replacing labour. Anything 5-6% is generally acceptable
Australia's Unemployment Rates
7.4% in 2020
5.3% in 2019
This is an indicator of how well the economy is preforming
Causes of Unemployment
When production or GDP is weak and spending in the economy has decreased
Increased competition overseas
Business take their operations offshore
Labour-saving technologies
Effects of Unemployment
Economic effects of unemployment
Loss of output; the production of goods and services reduces
Loss of income; no jobs means no money and higher reliance on government assistance
Loss of government revenue; less people employed means less tax revenue for the government
Increase government expenditure; large proportion of labour force unemployed, means government spending on welfare will increase
Political effects of unemployment
Corruption
High levels of unemployment reflect poorly on that state and federal governments
Leads to a loss of faith in the current system of government
Social effects of Unemployment
increase in crime or drug use
Homelessness
Living standards decrease
loss of self-esteem
INcreased family tentions/ breakups
Increase in suicides and other mental health issues
Youth Unemployment
Youth unemployment rate- 10.5%
More than double the general unemployment rate
Technological changes in low skill jobs
Eg, self-service has taken over checkouts
Ways to reduce unemployment
Government undertake new projects to generate jobs
Forrestfield airport link has created 2000 jobs
Eg. Construction of Elizabeth Quay or the stadium at Burswood
Government providing job training and apprenticeship opportunities
Raising the compulsory age of school attendance so that students can improve on their qualifications
Cutting down benefits to the unemployed so that they make an effort to find a job
Types
Cyclical unemployment
Also known as demand-deficient unemployment
It is common during a recession phase
During when economic growth, consumers are not buying as many goods and services.
Firms/business respond by cutting down production and firing workers.
Eg. During a global pandemic Trades, airports, small businesses
Seasonal unemployment
This is related to occupations that are offered at particular times of the year
Eg. Adventure world, fruit pickers, casual workers/Christmas
Frictional unemployment
Refers to the time spent waiting for a new job
It is the period between finishing on job and starting another
This type of unemployment is usually voluntary and of the shortest duration.
structural unemployment
eg.Brick laying, self-serve checkouts, bank withdrawals/ATMs
Refers to the loss of jobs resulting from mismatch of skills or machines replacing labour.
Hard-core Unemployment
Includes those regarded as being virtually unemployable
They may be chronically ill, have a disability, unskilled, unqualified, inexperienced and disinterested
Living Standards
Non-material
Non-material living standards can not be measured in dollar terms, and are intangible
For example
o Freedom of speech
o Low levels of crime and discrimination
o The environment
o Literacy rate
The living standards of a population is measured in two ways: material living standards and non-material living standards
Material
Material living standards refers to our access to physical goods and services
Material living standards of a nation is measured by the quantity of goods and services available each year as measured by GDP.
The OECD Better Life Index
• Organisation for economic Co-operation and development better life index
• Includes material and non-material living standards to assess overall wellbeing
• Seeks to provide the true
• living standard of 40 different countries by measuring process based on criteria 11.
Policies to improve living standards
Improving living standards is a key economic goal of many companies
The government is constantly making economic policy decisions
Economic policies:
Microeconomic policy
Governments opening up markets for free trade or removing regulations and rules for some areas of the economy
affects a particular company, industry or market
Productivity policy
Can be increased by improving labour resources so that workers are able to produced, more goods and services per hour
Productivity measures how efficiently resources are used to produce a given level of output
Training and workforce development policy
I just needed two points so the mind map didn't look weird
Aims to provide the necessary labour resources to produce more goods and services to increase economic growth and the standard of living
Migration policy
Migrants provide skilled labour in areas needed in the economy
Immigration boosts economic growth and therefore living standards
Immigrants consume goods and services, this leads to greater spending and therefore higher employment rate and growth
Macroeconomic policy
Budgetary policy- government income and expenditure
Affects the whole nation
Comparison Between Australia and South Africa
Factors that influence major consumer and financial decisions
Marketing
A company’s methods can influence a consumers decision to buy
Convey the value of a good or service
Age and gender of Consumers
As we age we have different needs
Marketers may specifically target men or women to buy their product
Availability of Credit
Credit is an agreement where money is lent to a borrower and must be repaid at a later date (usually with interest)
Availability refers to how easy it is to borrow
Credit cards are an example
Spending too much on a credit card can lead to debt that is difficult to repay. One of the most common reasons for bankruptcy.
Convenience
Items that save a consumer time and often easier to use
Eg. Ready made meals
Price
Not all consumers are interested in paying the lowest price for an item
Price is sometimes associated with the quality of the product
If prices are too low, consumers become suspicious of its quality
Ethical and Environmental Consideration
Ethics are standards that provide guidance on what is considered right and wrong.
Many consumers wish to purchase products that have been produced in a way that is consistent with their beliefs
Issues to take into consideration:
Animal Rights
Human rights
The Environment
