Commerce exam

Commerce

The study of how people earn income, spend money, produce goods and services, and how governments and laws influence commercial behaviour.

Consumer

A person who buys goods and services.

Good

A tangible item that can be seen or touched.

Service

An intangible product or action provided by a person or organisation, such as legal advice or a haircut.

Needs

Goods essential for survival, such as food, water, shelter and clothing.

Wants

Luxury or non-essential goods and services that people would like to consume.

Resources

Inputs producers use to manufacture goods and services, including land, labour, capital and enterprise.

Land

Natural resources used in production, such as forests, coal and fertile soil.

Labour

The physical and mental effort people use while working.

Capital

Goods used to make other goods, such as machinery, tools or tractors.

Enterprise

The ability to combine land, labour and capital to earn a profit.

Scarcity

The limited availability of resources compared with unlimited wants and needs.

Consumer right: safe products

Consumers have the right to products that are safe, tested and include directions for proper use.

Consumer right: accurate information

Consumers have the right to accurate product information and descriptions, such as clear ingredient labels.

Consumer right: full disclosure

Consumers have the right to know the full terms of sale, including the full price and credit contract details.

Consumer right: guarantees and warranties

Consumers can expect guarantees and warranties to be honoured, including a refund or exchange for faulty products.

Competition and Consumer Act 2010

Australian law designed to protect consumers against undesirable business practices.

Misleading and deceptive advertising

Advertising that gives consumers false or inaccurate impressions about a good or service.

False claims

Untrue claims made about goods or services.

Unfair trade practices

Business actions that restrict competition or limit consumer rights.

Scam

An illegal business practice where the business has no intention of honouring its promised product or service.

Unconscionable act

A seller's practice that is unreasonable, unethical or often illegal.

Common scam types

Examples include false advertising, pyramid schemes, get-rich-quick schemes, referral selling, unordered goods and fake prizes/offers.

Contract

A legally enforceable agreement made between two or more parties.

Written contract

A contract recorded in writing, such as a signed document or online agreement.

Verbal contract

A contract agreed to through spoken words rather than writing.

Ways someone may enter a contract

Signing a document, paying for a product at a checkout, or clicking an 'I agree' button online.

Offer

A clear proposal made by one party, such as offering to sell something for a specific price.

Acceptance

Agreement to the specific offer that has been made.

Consideration

Something of value exchanged in a contract, usually money, goods or services.

Cybercrime

Illegal activity carried out using computers, devices or the internet.

Protecting yourself against scams

Be cautious with personal details, check information before paying, avoid suspicious links, keep evidence and report suspicious activity.

Economics

The social science that studies how individuals, businesses and governments allocate scarce resources to satisfy unlimited wants and needs.

Microeconomics

The study of decisions made by individual consumers, households and businesses.

Macroeconomics

The study of whole economies at regional, national or global levels.

Opportunity cost

The value or cost of the next best alternative given up when making a choice.

Exports

Goods and services sold by Australian producers to overseas countries.

Imports

Goods and services brought into Australia from overseas countries.

Budget

An estimate of future revenue and expenses over a period of time.

Monetary policy

Policy set by the Reserve Bank of Australia involving interest rates, such as the cash rate, to influence economic activity and inflation.

Depreciation

The loss in value of an asset over time.

Inflation

A general increase in the prices of goods and services over time.

Deflation

A decrease in the general price level of goods and services.

Real income

Income adjusted for inflation, showing the real purchasing power of money.

Business cycle

The rise and fall in economic output over time.

Taxation

Money the government charges individuals and businesses to fund government expenditure.

Foreign debt

Money a country owes to another country.

Economy

A system that organises production, distribution, trade and consumption of goods and services.

Interdependence

When people, businesses or sectors rely on each other for goods and services they cannot produce alone.

Interest rate

The cost of borrowing money, expressed as a percentage per year.

Savings

Income that people choose to accumulate or invest instead of spending.

Leakage

Money leaving the circular flow of income, such as savings, taxation or imports.

Injection

Extra spending added into the circular flow of income, such as government spending, investment or exports.

Investment

Using money with the hope of making more money or buying capital goods.

Government expenditure

Money spent by the government on goods and services.

Economic growth

The percentage increase in gross domestic product (GDP) from one year to the next.

Gross Domestic Product (GDP)

The total value of all goods and services produced in a country.

Level of economic activity

The number of purchases and sales occurring within an economy.

Sector

A division of the economy, such as the household, firms, financial, government or overseas sector.

Household sector

Individuals in the economy who provide labour, earn income, consume goods and services, save or borrow money, and pay taxes.

Firms sector

Businesses that produce goods and services, sell output, receive revenue, save or borrow money, and pay taxes.

Financial sector

Banks and financial institutions that receive savings and lend money to households and firms.

Government sector

National, state and local government bodies that collect taxes and spend money on public goods and services.

Overseas sector

The sector connected to Australia's trade with other countries through imports and exports.

Simple circular flow model

A model showing households providing resources to firms and firms providing goods, services and income back to households.

Five-sector circular flow model

A model adding the financial, government and overseas sectors to the household and firms sectors.

Three leakages

Savings, taxation and imports.

Three injections

Investment, government spending and exports.

Injections greater than leakages

Income rises because more money enters the circular flow than leaves it.

Leakages greater than injections

Income falls because more money leaves the circular flow than enters it.

Leakages equal injections

Income stays the same because money entering and leaving the circular flow is balanced.

Four phases of the business cycle

Expansion, peak, contraction and trough.

Economic expansion

The upswing of the business cycle towards a peak.

Economic contraction

The downswing of the business cycle towards a trough.

Peak

The highest point of the business cycle before activity begins to fall.

Trough

The lowest point of the business cycle before activity begins to recover.

Recovery

A phase where economic activity begins increasing after a trough.

Expansion features

Production rises, unemployment falls, wages rise and consumer spending increases.

Contraction features

Production falls, unemployment rises, wages fall and consumer spending decreases.

Why production rises in an expansion

Businesses see more sales and demand, so they produce more goods and services.

Why unemployment falls in an expansion

Businesses need more workers to meet higher demand.

Why wages rise in an expansion

Businesses compete to attract and keep workers.

Why consumer spending rises in an expansion

People earn higher wages and spend more money in the economy.

Why production falls in a contraction

Businesses see lower demand, so they produce fewer goods and services.

Why unemployment rises in a contraction

Businesses reduce their workforce because they do not need to produce as much.

Why wages fall in a contraction

Businesses need fewer workers and unemployment creates more competition for jobs.

Why consumer spending falls in a contraction

People earn lower wages or worry about job loss, so they save more and spend less.

Boom

A period of strong economic expansion with high income, high production, very low unemployment and possible rapid price rises.

Recession

A period where output falls for a period of time and unemployment rises.

Depression

A very severe recession with a large contraction in the economy and very high unemployment.

Features of a recession

Low income and production, high unemployment, low inflation, weak sales and profits, bankruptcies and low investment.

Features of a boom

High income and production, full employment, high wages, high demand, high interest rates and sharply rising inflation.

Consumer Price Index (CPI)

A measure of the change in prices of a typical basket of goods and services consumed by households.

Inflation rate

The percentage change in the price of the CPI basket over time.

High inflation

When prices rise quickly and money loses purchasing power.

Hyperinflation

Extremely rapid inflation where prices rise so fast that money loses value quickly.

Inflation during expansion

Demand can exceed productive capacity, pulling prices upward.

Inflation during contraction

Demand falls, businesses may cut prices, and inflation may decrease or become deflation.

Demand

The quantity of a good or service customers are willing and able to buy at a particular price.

Factors determining demand: POINT

Price of other goods, Outlook, Income, Number of potential customers and Tastes.