Daniel Commerce Notes Term 3 2024 PDF

Economics What is Economics The principle of economics refers to making choices by weighing up the costs and benefits of the decision made. However, economics is mostly referred to as decisions regarding the circulation of money in a country or internationally. What type of economy is Australia? M...

Economics What is Economics The principle of economics refers to making choices by weighing up the costs and benefits of the decision made. However, economics is mostly referred to as decisions regarding the circulation of money in a country or internationally. What type of economy is Australia? Mixed systems- Most industries are private, while the rest, composed primarily of public services, are under the control of the government. What are businesses and why do they exist? Companies supplying goods and services usually make a profit. How are economics and businesses different? Economics is the study of money, Business is how money circulates. Economic Indicators Cash rate Unemployment rate Employment growth Inflation Economic growth Wages GDP (Gross Domestic Product) Exchange rate (value of $AU) Types of businesses Business sizes: Micro business: a business with less than 5 employees Small business: a business with 5 to 19 employees. Medium business: a business with 20 to 199 employees. Large business: a business with 200 or more employees Online - A business which runs some or all of its business using the internet. On Demand - A business which uses mobile technology to maximise consumer convenience by making it easier for them to obtain products and services. Global - A large company that has branches in many different countries. Offshore - Businesses which get many of their functions completed in different countries, typically developing to take advantage of the lower wages and less strict environmental regulations to save money. Government - Government owned and operated businesses that provide essential community service. Not for profit - A business that provides services to the community and does not earn a profit for its owners as all the money earned from donation goes to services the business provides. Business Cycle Expansion: This phase of the economic cycle occurs when aggregate demand is increasing. In other words, the population as a whole is demanding more goods and services and businesses are providing them. During this phase, The nation as a whole tends to prosper, confidence is high, businesses invest, and this stimulates further economic growth. Peak: As economic growth slows, this is what is known as the peak of the cycle. Employment levels remain stable and the economy is reliant on productivity growth to stimulate output. Business investment starts to stagnate as the growth of future demand starts to diminish. Businesses will still continue to invest, but on a nationwide scale, there is stagnation. What results is a limited economic movement. Contraction/Recession: Once aggregate demand starts to fall, we enter into the contraction phase. This is otherwise known as a recession, which we associate with declining employment, business investment, and consumer confidence. Jobs are lost and the overall demand for goods and services is harmed as a result. Trough: During this phase, the economy has suffered the worst of the decline. Economic growth remains stagnant, with aggregate demand failing to pick up. Business cycle growth/decline Growth 1. If the productivity of the economy on the whole increases, it means fewer resources are needed to produce the same level of output. This makes it cheaper to produce goods, meaning lower prices can be afforded. In turn, these savings are passed on into the wider economy. Whether this is through lower prices to the consumer or higher profits to businesses. 2. As countries start to reduce trade barriers, we see cheaper consumer goods coming in. As cheaper goods come into the country, consumers have more disposable income to spend on other goods. This means greater demand elsewhere in the economy, which can stimulate employment and push the economy into the expansion phase in the business cycle. Decline 1. Political uncertainty causes decline as it creates fear among the business community which prevents or delays investment. For instance, after the 2016 Brexit vote in the UK, business investment stagnated. When it became uncertain as to how and when the UK would leave the EU, business investment started to decline, particularly into 2018. 2. High-interest rates make it more difficult for businesses to invest. For instance, a small store that is just starting is going to find it hard to make repayments at an interest rate of 20 or 30 percent. It also sucks out money from the economy and re-directs it to the banks. As the interest rates are so high, businesses and consumers reduce their demand for credit. In turn, there is a contraction in the money supply which can lead to deflation. 5 sector economy Household Firms Government Financial (banks) Overseas (individuals) (businesses) Household The household Firms depend on How do the How do the How do the sector of the the household household and household and household and economy is made sector to provide government financial sector overseas sector up of consumers, labour so firms sector depend on depend on each depend on each who own can produce each other? other? other? resources like goods and labour, land and services. Government Household Household needs capital that they depends on depend on banks overseas to exchange for an The household consumers to pay for loans provide products income from sector taxes so they can we don't make firms. (individuals) use the countries Banks require nationally. depend on firms budget to household to take to provide them implement their out loans so they Overseas needs an income so economic make profit consumers to they can buy decisions through IR want their necessities and products to more. purchase or  encourage firms to purchase them Firms The firm sector How do the firm How do the firm How do the firm produces output sector and sector and sector and (goods and government financial sector overseas sector services), which sector depend on depend on each depend on each is sold to each other? other? other? consumers for a price. The government The firm sector The firm sector is sector receives takes loans from able to make tax in the form of the financial money by company tax and sector to expand providing spends this their businesses. products and money on public services globally goods and The financial through the services, such as sector makes overseas sector. roads, parks, money through schools and interest rates The overseas hospitals. when giving loans sector makes to the firm sector. money from the The firm sector firm sector receives through investment from importing and the government exporting sector in the form products and of government services. expenditure. Government Describe the How do the How do the government government government sector here sector and sector and The government financial sector overseas sector sector refers to depend on each depend on each local, state and other? other? federal governments and Financial The government has two institutions benefits from significant roles contribute international in the circular significantly to trade through flow of income: government export revenues, 1. Taxation revenue through which contribute (leakage): the corporate taxes, to national government and taxes on income and collects taxes interest, foreign exchange  from individuals dividends, and reserves. and businesses capital gains. when they earn an During financial Overseas income or profit. crises, businesses rely 2. Government governments on favourable expenditure often step in to trade (injection): this is provide agreements and when guarantees and policies set by the governments bailouts to government to spend money financial access domestic raised through institutions to markets. taxation on prevent systemic things such as collapse. infrastructure, welfare payments, education and health. Financial Describe the How do the financial sector financial sector here and overseas sector depend on The financial each other? sector is a section of the economy Financial made up of institutions often institutions that engage in provide financial international services to markets to commercial and diversify their retail customers. portfolios and reduce risk. Access to overseas markets allows them to spread their investments across different regions and sectors. The financial sector provides various instruments and  services for managing risks associated with international trade and investment, such as derivatives, insurance, and currency hedging. Overseas Describe the overseas sector here Transactions of the economy with the rest of the world Supply and Demand Law of Demand When the price goes down, quantity demanded goes up. Factors affecting Demand Price of the good itself => leads to a contraction or expansion in demand The price of other goods Expected future prices Changes in consumer tastes and preferences => leads to an increase or decrease in demand The level of income The size of the population and its age distribution Seasonal Increased demand means that at every given price, the quantity demanded is higher, so that the demand curve shifts to the right Decreased demand means that at every given price, the quantity demanded is lower, so that the demand curve shifts to the left Law of Supply When the price increases, the quantity supplied also increases, and vice versa. An increase in supply is always to the right A decrease in supply is always to the left Factors affecting Supply 5 Shifters of Supply Price of resources => increase in price of inputs or resources will decrease supply Number of producers => increase in number of resources will increase supply Technology => improvement in technology will increase supply Taxes & subsidies => Subsidy will increase supply, tax will decrease supply Expectations => If producers expect higher prices in the future, they may decrease supply in the present Supply and Demand Equilibrium When the supply and demand curves intersect, the market is in equilibrium. This is the point where the quantity demanded equals the quantity supplied. Example Price Quantity Demanded Quantity Supplied Market Equilibrium $5.00 10 gallons 50 gallons Surplus (40 gallons) $1.00 80 gallons 10 gallons Shortage (70 gallons) $3.00 20 gallons 20 gallons Equilibrium Surplus and Shortage Surplus: A situation where the quantity supplied is greater than the quantity demanded. Shortage: A situation where the quantity demanded is greater than the quantity supplied. Markets A market exists in any situation where buyers and sellers come together to exchange goods and services. A market can exist in a: Physical location Non physical location Across number of locations Retail markets Markets that allow consumers to buy most of the goods and services These include: Shopping areas in central business districts (CBD) Shopping malls in suburbs such as Westfield shopping centres Online shopping websites Labour markets It is where buyers and sellers of labour come together for the exchange of work for wage/ salary Buyers of labour: Employers/businesses wanting to hire. Sellers of labour: People looking for jobs. Unemployed seeking work. Employed looking for better opportunities. Examples: ‘Help wanted’ signs in shops Newspaper job ads Online job boards Financial markets The intermediaries between the savers and the borrowers in an economy. Savers: Households earning income and businesses making profits. Deposit money in banks or financial institutions. Borrowers: Individuals or businesses needing money. For buying a car, a house, going on a holiday, or expanding a business. Interest: The price of accessing money that belongs to someone else. Stock markets Stock market is a platform where shares in public companies are bought and sold. A share is a unit of ownership in a company. Purpose: Businesses raise money for investment by selling shares. Individuals or businesses invest their savings by buying shares, hoping their value will increase. Share Value: Value of shares can fluctuate based on demand. Successful company: high demand, price rise. Poor performing company: low demand, price drop. Factors influencing business decisions Technology Definition: the use of scientific knowledge for practical purposes or applications, whether in industry or in our everyday lives. ADD WORD FROM WORD BANK DESCRIPTIONS EFTPOS Allows for immediate payment transactions. Teleconferencing Allows multiple people to discuss and meet without being in the same location. Bar codes Helps in quickly identifying and tracking products. Hi-tech robotics Prominent in manufacturing, improves productivity. Globalisation Pros Cons Access to new markets Climate change - more carbon Enhanced global cooperation and dioxide released tolerance Domestic job loss Promotes economic growth - Increase in competition countries can specialise in activities with comparative advantages