Economics and Business

Economics and business Key Concepts

Specialiasation and trade- 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 & competitive production process

Interdependence- the way we rely on others to satisfy our needs/wants

Making choices- to make good economic decisions --> consider our options

Allocation and Markets- the way we dedstribute our scarce resources among producers & consumers

Scarcity- economic problem of unlimited needs & wants but limited resourecs available

Economic performance and living standards #

Resources divided into four catagories:

Labour- human resources eg. workers

Capital- manufactured resources eg. equipment

Land- natural resources such as coal and water

Entrepreneurship- management resources eg. skills/talent required to bring resources together

We must take the following economic decisions:

Employment decisions (what career path to follow) #

Legal decisions (whether or not to take legal action over a family product)

Business decisions (what to produce/where to sell a product)

Financial choices (how much money to save/spend)

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exchange of goods/services among buyers & sellers is reffered to as a market

We often rely on price in order to determine how much we are able to produce and consume

When cost of producing/obtaining a particular resources is high, not everyone will be able to obtain it.

Same key indicators of economic performance include:

Economist also measure living standards

Gross Domestic Product (GDP)- total value of goods & services

Inflation- the general increase in prices of goods and services

Unemployment rate- the percentage of people who are able to work

Material living standards refer to our access to physical goods and services

Non-material living standards are harder to measure & include things that may contribute to our happiness, such as freedom , low crime levels, access to facilities or free elections

Economic Growth

Inflation

Gross Domestic Product #

GDP- measure of tatal valye ($) of all goods/services produced in Aus over a year

Importance of economic growth

Fall in economic growth

if GDP ^- economy is growing

if GDP v- economy is shrinking

more ppl being employed & paid wages

ppl able to spend on a wager rager of goods & services

improvement in living standards #

more goods & services are produced

Recession- when economic growth v for 2 or more quarters in a row. (6 or more months)

Depressions- classed as extreme recession lasting 2 or more years

Economic growth falls

Decrease in available credit

Increase in unemployment #

Decrease in living standards

Inflation occurs when there is ^ in the general lvl of prices paid for goods & services over a certain period of time

Reason of inflation

Measuring inflation

Rising prices means consumers must pay more for g&s if they want to continue to maintain their standard of living

Eg. $100 spent on g&s in 1980 where worth $408 in 2015

1980 average weekly wage $245, in 2015 it was $1674

Major factor causing ^ prices = stronger demand in economy for G&S

stronger demand --> to shortages of G&S therfore ^ prices

This may be due to:

Business feeling confident about their future

Trading partners such as China performing well ^ export demands

consumers felling confident about their future income & employment

Low interests reates encourages consumers --> borrow more

Who benifits from inflation?

Inflation winners

Inflation losers

Borrowers

Importers

High income earners

Low to middle income earners

Bank savers

Exporters

ABS measures inflation using the consumer price index (CPI)

CPI measures price change of typical basket of g&s purchased by Australian households every quarter

Unemployment #

Effects of unemployment

Ways to reduce unemployment #

Causes of unemployment

Types of unemployment

Measuring unemployment

Youth unemployment

Definitions

Labour force refers to all eligible workers

Unemployment rate is percentage of ppl in the labour force who are unemployed

Unemployment refers to all those people who are able and willing but connot find a job

According to the ABS a person is considered employed if they are:

Employed for at least one hour per work

Aged 15 years and over

Unemployment rate: no^ of people unemployed/labour force x 100

Aus' unemployment rate: 4.6%

Imporntant indication of how well economy is performing

7.4% in 2020

5.3% in 2019

When production or GDP is weak & spending in the seconomy has decreased #

Increased competition overseas

Businesses take their operations offshore

Labour- saving technology

Economic

Political

social

Lower standards #

Increase in crime and drug abuse

Increased family tensions/ breakups

Increase in scuicides and other mental issues

Loss of self-esteem and confidence

Loss of output: the production of goods and services reduces

Loss of income: no jobs means no monery and higher relience on governe=ment assistance

Loss of government revenue: less people employed means less tax revenue for the governent

Increase government expenditure: large proprtion of labour force unemployed, means governmnt spending on welfare will increase

High levels of unemploymen t reflect poorly on that state and federal governments

Leads to loss of faith in the current government

More than 2x the general unemployment rate

Why is unemployment rate much higher in youth?

Youth unemployment rate - 10.5%

Technological changes in low skilled jobs

Government providing job training & apprenticeship opportunities

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

Government undertake new projects to generate jobs

Cutting down benifits to unemployed so that they make an effort to find a job

E.g. construction of Elizibeth Quay or the stadium at Burswood

Forrestfield airport lnk has created 2000

Cyclical unemployment

Seasonal unemployment

Frictional unemployment

Hard-core unemployment

Structural unemployment

Refers to loss of jobs resulting from mis-match of skills or machines replacing labour

Eg. cashiers & low skill jobs

refers to time spent waiting for a new job

The period between finishing 1 job and starting another

type of unemployment --> usually volluntary and one of the shortest duration

Common during a recession phase

During economic growth, consumers not buying as many goods and services

Firms/businesses respond by cutting down production and firing workers

Also known as demand-deficient unemployment

Eg. hari dressers

Related to occupations that are offered at particular times of the year

apple pickers

Includes thse regarded as being virtually unemployable

they may be chronically ill, have a diability unskilled, unqualified

Living standards

Material living standards

Non-Material living standards

The living standards of a population is measured in two ways:

OECD BEtter Life Index: Orginisation for Economic Co-operation and Development Better Life Index

aterial living stanrds and non-material living standards

Material living standards of a nation is measured by the quantity of goods and services availiable each year as measured by GDP. Eg. have access to Goods and services, GDP

Cannot be measured in dollar terms, and are intangible

Freedom of speech

Low levels of crime and discrimination

the environment

Literacy rate

Includes material and non-material living standards to assess overall well being

seeks to provide the true living standards of 40 different countries by measuring progress based on 11 criteria

Policies to improve living standards #

Economic policies

The government is constantly making economic policy decisions

Improving living standards is a key economic goal of many countries

Microeconomic policy- affects a particular company, industry, or market

Productivity policy

Training and workforce development policy

Migration policy

Macroeconomic policy - affects the whole nation

E.g. Budgetary policy- government income and expenditure

Governments opening up markets for free trade or removing regulations and rules for some areas of the economy

Productivity measures how efficiency resources are used to produce a given level of output

Can be increased by inproving labour resources so that workers are able to produce more goods and services per hour

Aims to provide the necessary labour resources to produce more goods and services to increase economic growth and the standard of living

Migrants provide skilled labour in areas of need 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

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