COMMERCE 10 EXAM

buyer (vocab)

consumers that require the goods and services, they make the demand for the services

contraction (vocab)

(phase of the business cycle)
a period of economic decline marked by falling real GDP

deflation (vocab)

the general decline of the price level of goods and services

depression (vocab)

a major downturn in the business cycle characterised by sharp and sustained declines in economic activity

demand (vocab)

the amounts of goods and services that buyers will purchase at a given price

law of demand

PRICE = INCREASE → quantity demanded falls less people want to buy at a high price

PRICE = DECREASE → quantity demanded rises - more people want to buy at the reasonable price
-- don't want to spend their money when expensive so they buy cheap

exports (vocab)

an injection into the circular flow of income

expansion (vocab)

real gross domestic product (GDP) grows for two or more consecutive quarters, moving from a trough to a peak

Economic downturn/downfall (vocab)

a significant decline in economic activity spread across the market, lasting more than a few months

how to track economic downturn/downfall?

- real GDP
- real income
- employment
- industrial production
- wholesale-retail sales

GDP/gross domestic product (vocab)

standard measure of the value added created through the production of goods and services in a country during a certain period

investment (flow of income) (vocab)

an injection into the circular flow of income

imports (flow of income) (vocab)

a leakage from the circular flow of income

inflation (vocab)

an increase in the level of prices of the goods and services that households buy

market (vocab)

exchange process between sellers and buyers

Market Equilibrium

point when the demand and supply curves meet

Price mechanism

refers to the forces of supply and demand in determining price and quantity of goods sold

EXAMPLE:
if demand increases, prices will rise, causing a movement along the supply curve

Ressesion

two consecutive quarters, 6 months of negative GDP growth

one quarter =

3 months

saving (flow of income)

a leakage from the circular flow of income

supply

The amount of goods and services that producers make available for sale at a given price

law of supply

price = ⬆️ = quantity supplied rises

price = ⬇️ = quantity supplied falls

demand = equal to supply = MARKET EQUILIBRIUM

why is the law of supply like that?

- higher price = induces producers to supply a higher quantity to the market.
- businesses seek to increase revenue, when they expect to receive a higher price for something, they will produce more of it.

- if prices fall, suppliers are disincentivized from producing as much.

seller

Producers of goods and services which make supply available

trough

stage of the economy's business cycle
= marks the end of a period of declining business activity and the transition to expansion

leakages

withdrawals from an economy's circular flow

DECREASE:
- level of income
- GDP

leakages examples

- savings
- taxes
- imports

leakages and injections

exceptions in the circular flow of income

injections

spending which is not generated by households

INCREASE:
- level of income
- GDP

injections examples

- investment
- government spending
- exports

are exports an injection or leakage

INJECTION

are imports an injection or leakage

LEAKAGE

what does the household sector do?

- holds economic resources such as land, labour, capital and enterprise
- sells their resources to firms in exchange for an income

who makes up the household sector?

individuals or groups of individuals as consumers
&
entrepreneurs producing market goods and non-financial and financial services

production firms sector

use resources of households to produce goods and services

consumption firms (and household) sector

households will then use their income to buy various goods and services (known as consumption)

(two-factor) circular flow model

money flows
households → businesses
= consumer expenditures in exchange for goods and services produced by the businesses

flows back
businesses → households
= for labor that individuals provide

household and firms sector on circular flow

household → firms
- economic resources
- consumption (C)

firms → households
- goods and services
- income (Y) = wages, rent, interest, profit

financial and gov sector's role on 3 sector economic model

FINANCIAL
- gets savings (S) from households
- invests (I) in firms

GOV
- gets tax (T) from households
- gov expenditure (G) to firms

financial sector

financial institutions (e.g banks) that act as intermediaries between the savers and borrowers in an economy

what does the financial sector do in the economy?

they receive the savings of individuals and businesses and then lend this money to others who need to borrow money

gov sector

refers to the local, state, and federal governments

gov's role in circular flow of income

Taxation (leakage) = the government collects taxes from individuals and businesses when they earn an income or profit

Government expenditure (injection) = when governments spend money raised through taxation on things such as infrastructure, welfare payments, education, and healthcare

income symbol

Y

consumption symbol

C

savings symbol

S

taxation symbol

T

investment symbol

I

Gov expenditure symbol

G

imports symbol

M

exports symbol

X

S + T + M = I + G + X

equilibrium

GDP remains the same, stable, unchanged

S + T + M > I + G + X

Disequilibrium

Disequilibrium

when quantity supplied is not equal to the quantity demanded

either be a surplus or shortage

business cycle

fluctuations in the level of economic activity in the economy

what happens during contractions? (examples with goods purchased)

less goods are purchased = business produces less goods = business needs less labour = increased unemployment.

production during expansion

- production increases
- producing more services

unemployment during expansion

- decreases
- fewer people are out of work as businesses need more workers

wages during expansion

- wages increase
- business is doing well
- they attract works by offering higher wages

consumer prices during expansion

households spend more as their wages are higher

prices during expansion

prices decrease as households spend more

production during contraction

production decreases = businesses produce less goods and services

unemployment during contraction

more people are out of work = businesses need less workers

wages during contraction

business are not doing as well = employ less staff = lower wages

consumer prices during contraction

households spend less = wages are lower & have less disposable income to spend

prices during contraction

prices increase as households spend less

What happens to price if demand is greater than supply?

causes a shortage and prices often get increased by the businesses

what happens on a graph if there is an increase in demand shifts?

the demand curve to the right

what does it mean if there is an increase in demand shifts?

results in an increase in price and quantity

what happens on a graph if there is an decrease in demand shifts?

shifts the demand curve to the left

what does it mean if there is an decrease in demand shifts?

results in a decrease in price and quantity

demand curve to the right

increasing demand

demand curve to the left

decreasing demand

why is there increase/decrease in demand?

- rise in customer income
- changes in consumer tastes and preferences
- increase in the size of the population
- substitute becomes more expensive
- complementary good becomes cheaper
- prices are expected to rise in the future

five-sector circular flow of income

Circular flow model of income is a simple five sector model of income in the economy, where the main flow is between households and business, with a series of leakages from the circular flow (savings, taxes and imports) and a series of injections into the circular flow (investment, government spending and exports). GDP in an economy, referred to as national income, is equal to C + I + G + (X-M)

what will happen if injections are greater than leakages in an economy

disequilibrium
- GDP will increase
- period of expansion due to less money leaving the circular flow via leakages

means that:
- production
- employment
- wages will increase
+ add to more consumption
- may cause increase interest rates and initiate inflation

Define Equilibrium in the context of the circular flow model of income

Equilibrium, in the context of the circular flow model of income refers to the state where leakages (savings, taxes and imports) equal injections (investment, government spending and exports) and the level of output in the economy (GDP) is stable and will not change.

common phases of the business cycle

TROUGH - lowest point of contraction
PEAK - highest point of expansion
CONTRACTION - reduction in GDP
EXPANSION - growth of GDP
RECESSION - two quarters of contraction

impact on price when supply is greater than demand

In this case, there is excess supply. Producers supply more of the good than the consumers demand, leading to excess supply at that price. Seeing this, producers drop their prices and supply less of the good (contract supply).

Outline the impact on price when demand is greater than supply

When demand is greater than supply prices increase as sellers know they can charge more as the product is sought after.

positives of moving out

- learn how to be independent
- manage finances
- privacy
- meeting new people
- no rules

negatives of moving out

- possible financial difficulties
- chores/responsibilities
- dealing with roommates
- maintenance

reasons for moving out

- family disputes
- employment
- choosing to live with partner

questions with living independently

- can you afford to leave home?

- How much will it cost and where will the money come from?

- can i cope on my own and not rely on anyone else?

- lonely?

- Have the skills to be able to move out of home? E.g. cooking, cleaning and managing a household budget

what age can I leave home?

- under guardianship until 18
- although don't have to live at home until that age

can leave home at 16 years of age
- if safe supportive place is avaliable

reasons young people are choosing to live at home for longer?

1. expenses - house prices and finances
2. people staying in education longer = don't have full time job = not financially stable = dependent on others
3. cultural backgrounds

key documentation

1. medicare card
2. birth certificate
3. photo ID

medicare card

- access to free medical treatment
- claim a rebate on private treatment
- apply for own at 15 years (Department of Human services)

birth certificate

- official registration of your birth by the NSW registry.
- key form of identity when applying for other documentation eg passport

photo ID

- people over 16 can apply from Service NSW
- alternative to a driver's licence.

gov organisations that support

- Department of Social Services
- Department of Communities and Justice
- Centrelink

religious organisations that support

- Salvation Army
- Anglicare
- St Vincent De Paul
- JewishCare NSW
- Muslim Care NSW

community organisations that support

- Youth refuge
- Community centre
- Lifeline
- Community housing
- Drop-in centres
- Kids Helpline

condition report

details the exact condition of the property when you move in

landlord

person who owns the premises being rented

tenant

person or persons who rent the property

residential tenancy agreement

an agreement between the landlord and the tenant that outlines all the terms that both parties must follow

reservation fee

usually one week's rent that will reserve the premises for you while your application for tenancy is being considered

lease

contract between two parties, usually regarding the renting of an asset such as a house, flat or motor vehicle.

renting a property process

1. find property
2. obtain Residential Tenancy Agreement
3. Complete condition report
4. pay a reservation fee
5. sign lease
6. pay rental bond
7. pay rent in advance
8. take possession and move in