Economics and Business

Key Concepts

Specialisation and Trade

Interdependence

Making Choices

Allocation and Markets

Scarcity

Economic Performance and Living Standards

Economic problem of having unlimited needs and wants but limited resources

Resources divided into four categories

Labour – human resources such as workers

Capital – manufactured resources such as equipment

Entrepreneurship – management resources such as the skills or talents to bring the resources together

Land – Natural resources such as coal and water

In order to make good economic decisions we must consider our options

Must make the following decisions

Business decisions (such as what to produce or where to sell a product)

Financial choices (such as how much money to save or spend)

Employment decisions (such as what career path to follow)

Legal decision (such as whether or not to take legal action over a faulty product)

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.

Interdependence refers to the way we rely on others to satisfy our wants and needs.

Allocation refers to the way we distribute our scarce resources among producers and consumers

Economists measure how well an economy is doing (known as economic performance using a wide variety of methods.

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Gross Domestic Product (GDP)

What is it?

A measure of total value of all goods and services produced in Australia over a year

Importance of economic growth

More goods and services are being produced

More people are being employed and paid wages

People are able to spend on a wider range of goods and services

Improvement in living standards

Fail in economic growth

Depressions

Recession

When economic growth falls for two or more quarters in a row.

Classed as an extreme recession lasting two or more years

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.

Reasons for inflation

Major factor causing rising prices is stronger demand in the economy for goods and services.

Who benefits from inflation

Winners

Losers

High-income earners – people with jobs whose incomes increase at the same rate or faster than inflation.

Low to middle-income earners – people on incomes that do not increase as fast as inflation, such as part-time workers, the unemployed and pensioners

Measuring inflation

Consumer Price Index (CPI) measures the price change of a typical basket of goods and services purchased by Australian households every quarter.

Unemployment

Definitions

Labour force

Unemployment rate

Unemployment

all those people who are able and willing to work but cannot find a job

to all the eligible workers. Everyone who has a job plus those who are looking for us

the percentage of people in the labour force who are unemployed

Measuring unemployment

Equation is (Number unemployed / Labour force) x 100

Causes of unemployment

When production or GDP is weak and spending in the economy has decreased

Businesses take their operations offshore

Increase competition overseas

Labour-saving technology

Effects

Economic

Political

Social

Increased relationship tension

Homelessnes

Lower slef-esteem

Loss of output

Loss of income

Not enough jobs/people working

Leads to a loss of faith in the government

High levels of unemployment reflects poorly on the state and federal government

Youth unemployment

10.5% unemployment rate

Why is it so common in youth?

Ways to reduce unemployment

Government undertakes new projects to generate jobs

Cutting down benefits to the unemployed so that they make an effort to find a job.

Raising the compulsory age of school attendance so that students can improve on their qualifications

Government providing job training and apprenticeship opportunities

Unemployment Types

Cyclical unepmloyment

Seasonal unemployment

Frictional unemployment

Hard-Core unemployment

Structural unemployment

Refers to the loss of jobs resulting from mismatch of skills or machines replacing labour.

Refers to the time spent in-between jobs

Worker who business shut down either for a short period of time or permanently

Occupations that are offered at particular times of the year

Included those regarded as being virtually unemployable

Unemployment effects

economic

political

social

Low self esteem

loss of income

loss of faith in government

Lower living standard

Increase in crime and drug abuse

loss of government revenue

increase government expenditure

Living standards

Material

Non-Material

Access to goods and services

Cannot be measured in money and intangible

OECD Living standards

Organisation for Economic Co-operation and Development Better Life Index

Includes material and non-material living standards to assess overall wellbeing.

Factors that influence major consumer and financial decisions

Policies to improve living standards

Comparison of two countries

Germany

South africa

Education

Health

Income

Environment

Jobs

Income

Education

Health

Environment

Jobs

43% aged 15-64 have a job

average household disposable income is 11 594USD per year

Fewer years of education for citizens aged 5 - 36

Life expectancy is 54 years

67 percent of people say they are satisfied with their water quality

75% aged 15-64 have a job

average household disposable income is 34 394USD per year

average of 508 on reading, literacy maths, and science test

life expectancy is 81 years

91 percent of citizens say they are satisfied with their water quality

Faactors that influence a consumers decision to buy

Economic policies

Government policies

Microeconomic

Macroeconmic

Productivity

Training and workforce development policy

Migration

Policies that affect the whole nation

Policies that affect a particular company, industry or market

How efficiently resources are used

Aims to provide the necessary labour resources to produce more goods and services

Migrants provide skilled labour in areas needed in the economy

immigrants boost economic growth and therefore living standards

Marketing

Age and gender of consumers

Availability of credit

Convenience

Price

Ethical and environmental considerations

not all customers interested in paying the lowest for an item as it the pirce can reflect on it's quality

Agreement where money is lent to a borrower and must be repaid a later date

Marketing methods that can convey the value of a good/service

Different age groups and genders have different needs

items that save consumers time

Standards that provide guidance on what is considered right and wrong

Many consumers wish to purchase products that have been produced in a clean and ethical manner