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.
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