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)
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