Mandatory Theory Booklet - Economic And Business Environment 2024 PDF

**The Economic and Business Environment** **Year 10 Commerce 2024** - - - - - - - - - - - - 1. INTRODUCTION =============== Whether we know it or not, we are all involved in the economy. When we buy goods and services, put money in a bank account or get a casual job, we...

**The Economic and Business Environment** **Year 10 Commerce 2024** - - - - - - - - - - - - 1. INTRODUCTION =============== Whether we know it or not, we are all involved in the economy. When we buy goods and services, put money in a bank account or get a casual job, we are contributing to the economy. However, the economic and business environment is always changing. Not too long ago, most goods and services were bought from local shops in a face-to-face exchange. Now, thanks to advancements in technology such as the internet and smartphones, you can buy anything you want, 24 hours a day, and have it delivered to your door. Businesses can now access a global market, not only to sell their products but also to get them produced. Although this can create opportunities for businesses, it also presents challenges that individuals, businesses and governments need to think about. This topic looks at the way our economy and markets operate in a globalised world, including the interdependent nature of our economy and the role and function of businesses within the economy. 2. THE FIVE SECTOR CIRCULAR FLOW MODEL ====================================== The circular flow of income shows the connections between the five different sectors of an economy: **consumers, businesses, financial institutions, the government, and the overseas sector**. It also shows where money is being injected into the economy and where money is being leaked from the economy. These **injections** and **leakages** help economists calculate changes in the level of economic activity within an economy. ### 2.1 The consumer and business sector (FIRST AND second sector) Consumers and businesses are interdependent on each other. This means businesses would not survive without consumers buying their goods and services, and consumers rely on businesses to provide them with the goods and services they demand to satisfy their needs and wants, and also to provide them with an income. The household sector of an economy is made up of **consumers (household) and firms.** Firms use the resources of households to produce goods and services. This is known as **production**. Households will then use their income to buy various goods and services. This is known as **consumption**. Consumers and businesses are interdependent on each other. ### 2.2 the financial sector (third sector) The financial sector refers to financial institutions such as banks that act as intermediaries between the savers and borrowers in an economy. They receive the savings of individuals and businesses and then lend this money to others who need to borrow money. A choice of saving or investment is an important factor within the economy. **Saving** (S) refers to putting money away for later use and is a leakage from the circular flow of income, whereas **investment** (I) is when money is borrowed and used to expand and grow a business. This means investment is an injection into the circular flow of income. ### 2.3 the government sector (fourth sector) The government sector refers to local, state, and federal governments and has two significant roles in the circular flow of income: 1\. Taxation (leakage): the government collects taxes from individuals and businesses when they earn an income or profit. The main taxes include: income tax, company tax, GST. 2\. Government expenditure (injection): this is when governments spend money raised through taxation on things such as infrastructure, welfare payments, education, and health.  ### 2.4 the overseas sector (five sector) A more complete approach to understanding economies occurs when we also consider the overseas sector. This macroeconomic model details global (macro) influences upon a nation's economy and successfully explains the role of trade in helping an economy grow. Trade consists of exports and imports. Exports (X) refers to Australian businesses selling their goods or services to overseas individuals, businesses, or governments. These are an injection into the circular flow of income. Imports (M) refers to the buying of overseas goods or services by Australians. These are a leakage from the circular flow of income. The circular flow of income is used by economists to measure changes in the level of economic activity within an economy; that is, is the economy growing or shrinking? This is done by adding up the injections into the economy and comparing them to the leakages out of the economy. When **injections** are greater than **leakages**, economic growth occurs and the economy will **expand**. When **leakages** are greater than **injections**, an economy will experience economic **decline**. It is the government's role to try to manage and maintain a balance within their nation's economy by altering flows of money and influencing decisions within sectors. Read the articles below and Briefly summarise the main purpose of the article. Also, provide as many linkages as possible within the circular flow of income model. =================================================================================================================================================================== 3. interdependence between different sectors ============================================ All sectors in the circular flow of income are interdependent on one another -- this means that any changes in one sector can have direct impacts on another. For example, unstable employment (households/firms) may lead to low consumer confidence (households), meaning less spending (households/firms) and therefore businesses less willing to borrow from financial intermediaries (firms/finance). Using your own example from the circular flow of income model, [explain] the relationship between any 3 sectors based on the following information: Explain -- relate cause and effect; provide why and/or how - Low consumer confidence in society - Low demand for imports in Australia - Banks are charging a higher interest rate for business loans (to slow inflation) - Government Taxation Income has declined - Wages have been stagnant in 2024 \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ ### 3.1 the role of government The government has a significant role in the financial protection of consumers through the regulation of the financial sector. The Australian Securities and Investments Commission (ASIC) is an independent Commonwealth Government body responsible for the regulation of the financial sector. Its main roles are: monitoring the financial services industry monitoring the provision of financial services such as investment advice providing consumer protection in financial services, including shares, managed funds, superannuation, insurance, credit, and deposit-taking. 4. the business cycle ===================== The business cycle refers to the recurring pattern of economic growth and contraction that an economy experiences over time. It typically consists of four main phases: **Expansion**: During this phase, the economy is growing, characterized by increasing economic activity, rising employment, and higher production levels. Businesses are optimistic, and consumer spending tends to be strong. **Boom**: The boom marks the height of the economic expansion. It is the point at which the economy is operating at its highest level of output, employment, and income. However, it also signals a potential shift towards the next phase. **Contraction** (Recession): In the contraction phase, economic activity slows down. There is a decline in production, employment, and income. Consumer and business confidence may decrease, leading to reduced spending and investment. A recession is a significant and prolonged contraction. **Depression**: The depression is the lowest point of the business cycle. It represents the end of the contraction phase and signals the beginning of a potential recovery. A severe and prolonged trough can be referred to as a depression, although the term is less commonly used than \"recession.\" The fluctuations of the business cycle do not fall into a regular pattern. The periods of expansion can vary from several months to several years. A contraction need not result in a recession or a depression if a recovery begins before the economy falls too far. For example, if the Reserve Bank of Australia (RBA) lowers interest rates, this should raise people's confidence in the economy. This aims to encourage consumers and businesses to increase spending, which helps avoid a downward spiral to recession. Sometimes, a downturn may occur in only one kind of production: for example, coal. However, because of the interdependent nature of our economy, a change in any direction tends to spread. An increase in business activity can also spread. An increase in the demand for goods and services can force production and incomes to rise. ### 4.1 recession -- not enough spending Recessions are caused by lack of spending, not the inability of the economy to produce goods and services. Most goods and services are produced before they are sold. The amount produced depends on how much the business thinks consumers, other businesses and governments will buy, which in turn is influenced by the level of economic confidence. The key features of a recession include the following: Income and production are at their lowest level in the business cycle. Unemployment is at a high level. The inflation rate tends to stay low. Wages and salaries either fall or grow very slowly. Consumer demand and, consequently, business sales and profits reach their lowest levels. Bankruptcies are everyday occurrences, and the business outlook is bleak. Businesses have a lot of unused resources and no incentive to purchase new machinery. Interest rates remain low, while investment opportunities are few and the number of creditworthy borrowers is reduced. ### 4.2 booms -- too much spending The positive aspect of the business cycle is growth and prosperity in Australia. During this phase, production, spending, and employment all increase. Businesses expand, hire more employees, and incomes rise. As a result, overall spending continues to rise. Both consumer and business confidence are high. However, it\'s important to note that the economy cannot sustain limitless production of goods and services. There is a limit to this growth. When the limit is reached, additional spending contributes to rising prices, leading to inflation---a significant economic challenge that ultimately signals the end of sustained growth. The key features of a boom include the following: Income and production are at their highest levels. There is full employment of labour and all other resources. Wages and salaries are relatively high. Employees are now in a strong bargaining position as businesses compete for scarce labour resources. Businesses are operating at full capacity. Increases in consumer demand are met by increases in prices rather than by increases in production. Interest rates are high because loanable funds are in relatively short supply. The rate of inflation rises sharply. ### 4.3 the global financial crisis of 2008 In September 2008, the US financial system faced a significant loss of confidence when homeowners defaulted on their mortgage payments, leading to the bursting of the \'housing bubble.\' Swiftly, the ensuing financial crisis extended globally. Major financial institutions went bankrupt or underwent acquisitions, prompting governments to enact rescue packages for their financial systems. The global financial crisis (GFC) triggered a severe worldwide economic recession, the most severe since the 1930s Great Depression. International stock markets collapsed, and global economic growth and trade sharply declined, resulting in a substantial increase in unemployment. Some countries faced such severe economic deterioration that the International Monetary Fund intervened with massive loans for bailout. Governments responded by implementing expansionary fiscal and monetary policies to boost consumer spending and business investment, aiming to serve as a buffer against the worsening global economic conditions. Explain how the economy is impacted by different phases of the business cycle. (Think -- what characteristics does each phase have, and how do they impact an economy) Explain -- relate cause and effect; provide why and/or how. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Inquiry Task -- with reference to evidence such as media articles, discuss the effectiveness of the government response to Australia's current economic situation. (Think -- raising of interest rates to slow inflation -- has this worked?) Discuss - Identify issues and provide points for [and/or] against TEEL Paragraph Structure - can talk about positives, negatives or both. MUST use evidence to support your statement. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ 5. demand and supply within a market ==================================== Through the interaction of demand and supply, markets attempt to solve the economic problem of scarcity and the efficient allocation of resources. ### 5.1 demand In economics, **demand** refers to the quantity of a good or service that consumers are willing and able to buy at a specific price and within a given period. Demand is influenced by several factors, including price, consumer preferences, income levels, and the prices of related goods. The law of demand states that, all else being equal, as the price of a good or service decreases, the quantity demanded increases, and vice versa. For example, let\'s consider the demand for smartphones. If the price of smartphones decreases, assuming other factors remain constant, more consumers may find them affordable, leading to an increase in the quantity demanded. On the other hand, if the price of smartphones increases, fewer consumers may be willing to purchase them, resulting in a decrease in the quantity demanded.  This demand curve shows that when the price of blueberries changes, the amount of blueberries people want to buy also changes. ### 5.2 supply In economics, supply refers to the quantity of a good or service that producers are willing and able to offer for sale in the market at different prices during a specific period. It is a fundamental concept in understanding how markets function. Supply Curve: - The relationship between price and quantity supplied is often graphically represented by a supply curve. It slopes upwards from left to right, indicating the positive correlation between price and quantity supplied. Let\'s consider the market for smartphones. If the price of smartphones increases, manufacturers may find it more profitable to produce and sell more smartphones. As a result, the quantity of smartphones supplied to the market increases. Conversely, if the price of smartphones decreases, manufacturers might find it less attractive to produce as many, leading to a decrease in the quantity supplied. The point at which the demand and supply curve intersect is called market equilibrium. This is the point at which buyers and sellers agree on a price and exchange the good or service for money. So, the **price mechanism** refers to the forces of demand and supply in determining the price and quantity of a good or service. We can see on the graph that the equilibrium price for blueberries is \$6 a punnet and the equilibrium quantity for blueberries is 600 punnets. **Changes in demand**: A change in any factor other than price will cause a shift in the entire demand curve and change the equilibrium price and quantity. The following table outlines the effects of these shifts on the demand curve.  **Changes in supply**: A change in any factor other than price will cause a shift in the entire supply curve. Increases in supply cause the supply curve to shift to the right and decreases in supply will cause the supply curve to shift to the left. The following table outlines the effects of these shifts in the supply curve. A diagram of a price and a price Description automatically generated with medium confidence  The data from these tables can now be entered into a graph, as shown. If we place the different prices along the vertical axis and the different quantities along the horizontal axis, we can plot the preferences of both buyers and sellers on the graph. The sellers' preferences are shown with the blue line, while the buyers' preferences are shown with the red line. The point at which the two lines intersect will be the price that the market will bear. The market for potatoes will settle at a point where 50 kg of potatoes will be sold each day at a price of \$5/kg. Sellers know that if they have 50 kg of potatoes in stock on any given day, they will be able to sell them all at this price. A graph with blue lines and green lines Description automatically generated 6. markets ========== A market is present when buyers and sellers convene to exchange goods and services, and it can manifest in physical locations, spread across various places, or exist without a physical setting. In the Australian economy, several markets are noteworthy, including retail markets, labour markets, financial markets, and stock markets. ### 6.1 retail markets These are the markets that allow us to buy most of our goods and services. They include: the shopping areas in the central business districts (CBDs) of our large capital cities the huge suburban shopping malls such as Westfield centres at Parramatta in western Sydney and Chatswood in northern Sydney local shopping centres with a supermarket and several specialty stores shopping strips located along major roads and near public transport the groups of shops gathered in the main streets of country towns and regional centres online shopping websites. ### 6.2 labour markets A labour market refers to the dynamic interaction between employers (demand) and employees (supply) in the exchange of labour services. In the labour market, individuals offer their skills, abilities, and time (labour) to employers in exchange for wages or salaries. Employers, on the other hand, seek to hire workers with the necessary qualifications and expertise to fulfill specific job roles within their organizations. Factors such as wage rates, employment opportunities, and the overall demand and supply of labour influence the functioning of the labour market. This dynamic relationship shapes employment trends, workforce participation, and overall economic conditions within a region or industry. A minimum wage must be paid to all employees over the age of 21 years. It is adjusted every year to account for rises in the cost of living. This is the minimum pay rate provided by the Fair Work Act 2009 and is reviewed each year. As of 1 July 2023, the National Minimum Wage is \$23.23 per hour or \$882.80 per week. ### 6.3 financial markets Financial markets serve as intermediaries connecting savers and borrowers within an economy. As households generate income and businesses accrue profits, individuals and companies may opt to save by depositing their money into banks or other financial institutions. However, some entities in the economy require funds for various purposes. Individuals might borrow for expenditures like buying a car, a house, or going on a holiday, while businesses may borrow to invest in growth and expansion. The cost of accessing money that belongs to others is called **interest**, much like the price attached to goods and services. When you deposit money in a bank, the bank pays you interest on your savings. Banks, in turn, lend the deposited money to consumers or businesses, typically charging borrowers a higher interest rate than they pay to depositors. This interest is a the means to which banks generate profits. ### 6.4 stock markets The stock market, like other markets, involves the buying and selling of shares in public companies. A share represents ownership in a company, and businesses can raise funds by selling shares. Individuals and businesses invest in these shares, hoping for their value to increase. In Australia, the stock market is known as the **Australian Securities Exchange (ASX),** listing over 2000 companies such as Woolworths, Wesfarmers, major banks (ANZ, CBA, NAB, and Westpac), and mining giants like BHP Billiton and Rio Tinto. The value of shares fluctuates based on demand. Positive company performance can lead to increased demand and higher share prices, while poor performance may result in more sellers than buyers, causing prices to decrease. 7. customary trading practices of aboriginal and torres strait islander peoples =============================================================================== In Aboriginal and Torres Strait Islander societies, trading involved the exchange of goods, ideas, and cultural practices. Instead of using money, they practiced swapping or bartering, exchanging one item for another. This trade was a means for improving their standard of living, allowing access to items not readily available in their regions and exposing them to new ideas. Trade routes connected communities, crisscrossing the continent, and even extending to Indonesia and Papua New Guinea. These routes, often following natural features, facilitated the exchange of goods, stories, and rituals across different language groups and communities. Trade wasn\'t just about material items but also included the exchange of rituals, chants, and ceremonies, contributing to the rich cultural diversity of First Nations Australians. ### 7.1 trading rare and valuable goods Before European settlement, Aboriginal and Torres Strait Islander peoples engaged in extensive trading, producing various items for exchange. These items included stones, shells (like pearl, baler, and trochus shells used for buttons, ornaments, and jewellery), ochres for paint and body decoration, tools such as stone axes, ceremonial items, and various foods like fish, crab, dugong or turtle meat, yams, bird eggs, and turtle eggs. Additionally, snake skins, mats, spears, and wood carvings were traded over small distances. One notable example is Wilgie Mia in Western Australia, the largest and deepest underground ochre mine in the country, which has operated for over 3000 years. Ochre, mined for ceremonies and trading, continues to be extracted and traded among Indigenous communities, especially by Wajarri Yamajti men for ceremonies, rock art, and other cultural practices.  The items that Aboriginal and Torres Strait Islander peoples produce or collect and then trade depends on where they are located. A group living in a coastal area, for example, is in a position to exchange the resources it finds there, such as fish and shells. A group living inland might exchange the resources that they find there, including herbs and stones, for items found in different types of country. Trade also included exchanging technology and ideas. ### 7.2 use of cultural knowledge in enterprising ways In recent times, Aboriginal and Torres Strait Islander peoples have applied their cultural knowledge in innovative and entrepreneurial ways. The last decade has seen the emergence of numerous Aboriginal businesses, particularly in areas like art and craft, cultural tourism, land management, finance, and mining. The commercialization of art, crafts, and cultural practices has provided a livelihood for many Indigenous individuals, contributing to a significant growth in the Aboriginal and Torres Strait Islander art and craft market over the past few decades. ### 7.3 tourism Tourism is a significant industry in Australia, generating billions of dollars annually with hundreds of thousands of international visitors seeking experiences that reflect pre-colonial life and a desire to learn about First Nations cultures. Throughout the country, numerous Aboriginal-owned and operated tourism enterprises cater to these interests. Tourism Australia offers a dedicated Aboriginal tourism website, providing detailed content, images, footage, and information about Aboriginal tourism experiences. Additionally, Aboriginal Tourism Australia (ATA), established in 1995 as a non-profit company, plays a crucial role in providing leadership and fostering the development of Aboriginal tourism. 8. reasons for government intervention in the market ==================================================== ### 8.1 prevention of environmental degredation Environmental degradation, resulting from factors like pollution and habitat destruction, is the decline in the natural environment. Addressing this issue is not only crucial for environmental well-being but also has economic implications, given that humans depend on the environment for air, food, water, and the production of goods and services. Governments play a role in mitigating environmental degradation by implementing regulations that limit activities causing harm, such as laws against littering, restricting certain chemicals in manufacturing, and regulating building developments in terms of location and practices. ### 8.2 conservation of natural resources The excessive use of natural resources is a problem for both the environment and the economy. Things like water, fish, farmland, and forests need to be protected so that future generations can use them. Governments have to balance using resources for immediate economic benefit with the long-term needs of both society and the economy. Sustainable management of the environment is necessary for lasting economic growth. 9. different types of businesses ================================ ### 9.1 online businesses An online business operates on the internet, using technology like e-commerce and smartphones. With the rise of online businesses, having a website is now expected by consumers. Many Australian businesses use the internet for various transactions. Online businesses offer opportunities for entrepreneurs of any age or experience level to create virtual businesses that can sell worldwide without the costs of a physical store. ### 9.2 on demand businesses Nowadays, we don\'t have to wait in lines for buses, call restaurants for delivery, or leave home for coffee. With just a tap on our phones, we can have groceries and meals delivered. On-demand businesses, using mobile apps, are especially exciting because they prioritize consumer convenience. ### 9.3 small and large businesses Businesses vary in size: - Micro business: Less than five employees. - Small business: 5 to 19 employees. - Medium business: 20 to 199 employees. - Large business: 200 or more employees. While many think of big companies like Woolworths, Commonwealth Bank, and Westfield, 98% of businesses in Australia are small to medium enterprises (SMEs) with less than 200 employees or less than \$10 million in turnover. SMEs, despite their size, play a crucial role in the economy, satisfying consumer needs and employing around 7 million people. Large businesses, on the other hand, have over 200 employees and typically operate nationally or globally. ### 9.4 global businesses A global business, also known as a transnational corporation (TNC), is a large company with branches in many countries. For them, national borders are not barriers; they\'re just lines on a map. Examples include Coca-Cola, LG, McDonald\'s, Uber, and BHP, showing that global businesses come in various forms and sizes. ### 9.5 offshore businesses In a globalised world, businesses often complete various functions in different countries to save costs, taking advantage of cheaper production in developing nations. However, some large companies, aiming for higher profits, have been criticized for using sweatshops, particularly in low-income countries, where workers face long hours, low pay, and unsafe conditions, especially in the clothing industry. Pressure is mounting on these businesses to ensure fair treatment of employees in lower-income nations and prevent exploitation. ### 9.6 government businesses Government businesses are owned and run by the government. They offer essential services like health, education, roads, and welfare. Examples in Australia include Australia Post, NBN Co, Sydney Water, and Sydney Trains. While there are fewer government businesses now, the ones that remain are typically quite large. ### 9.7 not for profit businesses A not-for-profit business serves the community and doesn\'t make a profit for its owners. Any money earned goes back into community services. These businesses often receive tax concessions. Examples include charities, sports clubs, community service organizations, and cultural societies.Top of Form 10. factors influencing business decisions ========================================== ### 10.1 technology Technological advances have transformed various aspects of business, including administration, communication, service delivery, and manufacturing processes. Businesses can enhance efficiency, productivity, and product/service quality by using appropriate technology. Hi-tech robotics in manufacturing improves productivity and reduces costs, while IT developments like bar codes and EFTPOS enhance communication and interaction between suppliers and customers. Technologies such as teleconferencing, email, cloud computing, and smartphones eliminate distance barriers, allowing for flexible work arrangements that benefit both employees and employers. ### 10.2 business cycle The business cycle greatly affects businesses. When economic issues arise, consumers spend less, impacting businesses negatively. This leads to falling profits, and to survive, businesses may need to cut costs, including laying off workers, causing the economy to further decline. On the other hand, during economic growth, consumer confidence increases, leading to higher spending, improved business profits, and a positive cycle. This is shown in the figure below. A diagram of a business cycle Description automatically generated ### 10.3 globalisation We live in a global world where news, entertainment, clothing brands, and products are from around the planet. This interconnectedness is called globalisation. It involves more trade and cultural exchange, breaking down barriers between countries. Globalisation has both positive and negative effects on businesses. 11. entrepreneurship ==================== When we see something, we need in an advertisement, someone came up with the idea for that product. Not all inventors turn their ideas into businesses; some sell their ideas to existing businesses. Starting and running a business, along with the effort to grow it, requires entrepreneurial qualities and a willingness to take risks. ### 11.2 entrepreneur characterstics An entrepreneur is someone who takes risks and has the qualities needed to turn an idea into a successful business. They are innovative and motivated by exploring new markets, even without a guarantee of success. If their ideas become successful businesses, the profits can be substantial. Entrepreneurs have great ideas, seek opportunities, enjoy the challenge of creating a successful business, make money from solving problems, and often start their own businesses. ### 11.2 innovation Innovation is a term that might have different meanings, but in general, it involves enhancing or making a significant contribution to an already existing product or service. On the other hand, invention is the creation of something entirely new. Despite the differences, both innovation and invention lead to the development of something unique. 12. ethical decision making and corporate social responsibility =============================================================== In recent times, there\'s a growing influence on businesses known as Corporate Social Responsibility (CSR). This involves businesses considering the interests of stakeholders, society, and the environment when making economic decisions. CSR goes beyond legal requirements, emphasising ethical decision-making for the benefit of society and the environment. It values both profits and social responsibility. CSR is not just a moral choice but also a smart business move. Customers pay attention to businesses\' social responsibility practices and may stop buying from those acting irresponsibly. Conversely, socially responsible businesses are rewarded with increased customer support. While being socially responsible might incur short-term costs, it proves beneficial for the company in the long run. 13. summary of topic ==================== Tick once you can do the following: understand that the five-sector circular flow model consists of consumers, businesses, the financial sector, government, and the overseas sector -- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ identify that savings, taxation and imports are leakages from an economy, and investment, government expenditure and exports are injections into an economy understand that when injections are greater than leakages an economy will grow, and when leakages are greater than injections an economy will experience economic decline identify that the financial sector acts as an intermediary between savers and borrowers in an economy understand all economies experience periods of expansion and contraction, referred to as the business cycle; recessions are caused by a lack of spending and result in increased unemployment, lower business production and profits and low wage growth; booms are when the economy is growing and result in low unemployment, increased business production and profits and high wage growth (and can also lead to high levels of inflation) identify that demand refers to the amount of a product consumers are willing to buy at a particular price (as the price of a good rises, the demand for that good falls) and that supply refers to the amount of a product producers are willing to sell at a particular price (as the price of a product increases, the amount producers are willing to sell increases) understand that the price mechanism is where demand and supply intersect and shows the point where buyers and sellers agree on a price, and that changes in the demand and supply of a product will result in a change in equilibrium price and quantity determine that a market is any situation where buyers and sellers come together to exchange goods and services for money, and that examples of markets include retail markets, labour markets, financial markets, and stock markets understand Aboriginal and Torres Strait Islander peoples traded using bartering, with common goods traded including stones, shells, ochres, tools, food, technology, and ideas identify how the government intervenes in markets using laws and regulations such as the Environment Protection and Biodiversity Conservation Act 1999 to reduce environmental degradation and to conserve natural resources understand technology has increased efficiency and lowered the production costs for businesses, while globalisation has allowed businesses to sell their products worldwide and get their products produced in other economies, but has increased competition understand that corporate social responsibility refers to a business making decisions based not only on maximising profits, but also on social and environmental responsibility identify that entrepreneurs and innovators take risks and turn ideas into businesses, and that their ideas improve our living standards and increase economic activity. 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