Unit 3A: Microeconomic Decision makers

Trade unions, s/s/b, specialisation, pay gap, etc

Trade Unions

An organisation that exists to protect workers in negotiations with the workers employer. Trade unions can:

* Collective bargaining (the bigger the union, the more power)
* Improve wages, working conditions, and hours
* Protecting employees (when capital takes place of worker, pension, layoffs when in economic downturn)
* Support them in strikes

Households

Where multiple people live together as a family. People who make decisions on spending, saving and borrowing.

Influence of income on s/b/s

the influence of income depends on how much income.

* Low income households (LIH) are less likely to spend and high income households (HIH) are more likely to spend.
* LIH’s can save very little because they need to spend income on necessities. HIH’s will probably save higher portions of their incomes.
* LIH’s won’t be able to borrow because banks consider them high risk of not being able to pay the money back. Banks will very likely loan to HIH’s and with less interest because they are confident that they will pay it back.

Decreasing Interest rates on s/b/s

* LIH’s won’t be affected by decreasing interest rates
* MIH’s+LIH’s will likely borrow more because of low interest rates
* MIH’s+LIH’s will think the interest is too low for their savings so they might withdraw them
* MIH’s +LIH’s will likely withdraw savings and increase borrowing and spending.

Confidence on s/b/s

* LIH’s will still need to spend a high portion of their income on necessities
* MIH’s and HIH’s will be likely to save if they have a decrease in confidence, if there is an increase in confidence, they will be likely to save.
* Confidence can come in an economic boom when the economy is doing well. When an economy does bad for 6 months, it is called a recession.

Income

For workers, income is the reward of labour. You cannot spend, save, or borrow without income.

Unearned income

Households or individuals can earn this from collecting rent, or shares (dividends)

Disposable income

Income after paying taxes

Interest

the reward for saving and the cost for borrowing. Interest rates are set by the central bank.

Wage factor examples

Salary, commission, bonus, working hours

Non-wage factors

fringe benefits (health insurance), job satisfaction, education level required

Derived demand

demand that exists because its dependant on the demand for goods and services. E.g. the demand for vanilla pods is partly derived for the demand of vanilla ice cream.

Professional athletes vs janitor.

* Pro athletes require more education and training, janitors do not
* There is less supply for pro athletes and high demand for them so their salaries are higher than janitors who have low demand and more supply. A

Reasons for differences in earnings

* Gender pay gap, discrimination
* pay differences between skilled and unskilled workers
* Specialisation
* Differences in public and private sector.

Public sector

State owned organisations, public sector workers include, nurses, teachers, doctors, transportation workers. aim is to better society.

Private sector

Private firms, profit driven

Primary sector

The main sectors of the economy, agriculture, mining, fishing, concerned with producing raw materials.

Secondary sector

The sector of the economy focused on producing and manufacturing the raw materials from the primary sector.

Tertiary sector

The sector of the economy that is concerned with services. For examples, doctors, business, lawyers, education.

Advantages of specialisation

* Training and workers are easier to manage
* Workers can get payed for being more skilled
* Workers can get more recognition

Disadvantages of specialisation

* Jobs can be boring and repetitive.
* Workers can be deskilled in other skills
* If the workers job can be taken over by capital, it will.

Increasing interest rates on s/s/b

* All households will be likely to save because rate is higher
* LIH’s will not change their spending patterns as they need to spend on necessities. MIH’s will be likely to spend less because existing interest payments are likely to increase. HIH’s won’t change.
* All households will be likely to borrow less except for HIH’s if the interest rate is a small portion of their income.