Economic Factors PDF

External Factors ECONOMIC FACTORS Learning Outcomes Understanding changes in labour Understanding our limited resources market & skills shortages and how that affects our choices Awareness of economic scale, trade, Applying knowledge to real-word issues, and supply an...

External Factors ECONOMIC FACTORS Learning Outcomes Understanding changes in labour Understanding our limited resources market & skills shortages and how that affects our choices Awareness of economic scale, trade, Applying knowledge to real-word issues, and supply and demand organisation & role DEFINING ECONOMIC S We have already learned about how political factors affect the economy but there are other factors too. Economics is often associated with wealth and finance, but it is not all about money. Economics is a social science. In basic terms, it is the study of people and their choices. It considers how things are made (produced), how things are moved around (distributed), and how things are used (consumed). Once of the biggest economic factors relates to the labour market: to the working population, their skills & how much it costs to emply them. Changesin theLabour Market Labour is the supply of people who are available for work. This means the number of people who can & are able to work - ‘the working population’. It does not include those in the UK who cannot work for reasons such as ill health or elderly age. The supply of people in the UK has a big impact on organisations & on you as an employee: if people leave your organisation for a new job or retire, they need to be replaced. The labour market has 3 main factors: The Working Population Skills Shortages Increases & decreases in costs  The Working Population Made up of every person over the age of 15 who is willing & able to work. The population is important to fulfil labour requirements (to fill the jobs) , to pay taxes to the government. & contribute to the economy. The Office for National Statistics (ONS) measure the number of people in work. When the employment rate is high, it usually means that fewer people available for work & therefore employers need to pay more to retain or attract staff. When the employment rate is lower, organisations may finder it easier to recruit & replace staff & therefore wages can be lower. This depends on the organisation, what is does & where it is located as it can be more challenging to recruit in some parts of the UK more than others. This leads to supply & demand in the labour market, key factors being:  the number of people entering the workforce as they finish education  the number of people coming into the UK from other countries  the number of people taking retirement  the birthrate in the UK affects the number of young people who become available for work in a given year Supply an Demand d Supply is the amount of goods available, and demand is how much the public wants/needs it. The cost of a good is driven by demand. If demand is high, the price will increase. If demand is low, the price will decrease. Businesses aim to find the highest price they can charge for a product without negatively affecting the demand for it. A real-word example would be a store that discounts its winter clothing once the season is over. Demand is no longer high, so they lower the cost as an incentive to buyers.  Skills Shortages Skills shortages affect organisations where highly skilled workers are required. If there are not enough people with the required qualifications & skills then production will reduce. What happens to highly skilled employee salaries where there is a skills shortage? Potential employees can demand high salaries reflecting the demand for their skills. Skills shortages occur when there are not enough employers paying for training or if too few people want to do the work on offer. Skills shortages can be reduced by: 1.Investing in training such as apprenticeships 2.Recruiting fewer experienced employees, instead training up inexperienced people 3.Improving careers education to encourage more people to go into further & higher education. 4.Encouraging experienced skilled staff to transfer sectors or departments. Trade Trade occurs between individuals, businesses, and governments because we cannot efficiently produce everything we need by ourselves. Often this is because certain resources are more readily available in particular areas. Economies are made up of businesses and organisations that produce a good or service that they are best suited for and then trade for the goods and services they cannot efficiently produce. Trade is mutually beneficial as it leads to better productivity.  Supply Chain Economies of Scale A supply chain is all of the organisations & people directly or indirectly that make a Being able to pay a cheaper price for product or service & deliver it to the something because it is bought in bulk. customer. It covers everything from components beings produced to getting it to the final customer.  Costs Impact of Increase or Decrease If materials are scare then costs go up. It will cost an Increases Raw Materials organisation more to make its products or provide its services. & Product costs might go up or down due to many factors. Decreases in Price increases might impact on organisation if they are Products products used day-to-day or are a component of what the organisation sells. Costs The supply chain can affect all elements of the delivery of the product or service. This covers increased costs in the manufacturing of the product, for example, due to increases Supply Chain in electricity costs or skills shortages, through to reuctions in costs when companies merge or work together to get bigger economies of scale. All costs affect the way your organisation Services that are used by the organisation can include operates. Services anything from routine health & safety checks to training or specialist advice from consultants. Costs can determin whether a private organisation can make profits or whether public or third sector organisation can The impact of having enough people to recruits or having break-even or reinvest any surplus. Staff enough skilled workers impacts efficient operations, productivity impacting recruitment & training costs. First thoughts... Follow-up task Interview people in your organisation regarding the economic factors explored in Mind-map the economical factors in your this workshop. organisation relating to this workshop. Conduct further research and write up your findings & upload to Smart Assessor.  Any Questions