Unit 3 - Microeconomic Decision Makers

Money

A medium of exchange of goods and services.

Functions of money

• medium of exchange

• good store of value

• means of deferred payment

• measure of values

Characteristics of money

Central bank

a public institution that manages the currency of a country or group of countries and controls the money supply → price stability

Commercial banks

a type of bank that provides services such as accepting deposits, making loans, and offers basic banking services to households and firms to make a profit

Disposable income

the income of a person after all income-related taxes and charges have been deducted

What determine show much we spend

• wealth

• disposable income

• interest rates

• consumer confidence

Why spending patterns differ

• income

• gender

• age

• wealth

• lifestyle

• culture

• taste

• family circumstances

saving

income not spent (or delaying consumption until some later date)

Why people save

• future spending

• in case our economic circumstances change

• increased opportunities to save

Borrowing

borrowing of money from a person/institution

What determines how much we borrow

• interest rates

• wealth

• consumer confidence

• availability of credit

Wage factors

• time rate

• piece rate (unit produced per employee)

• performance related salary

non - wage factors

Net advantages

 wage and non-wage factors that affect the attractiveness of a particular job

Reasons for wage differences

• highly skilled

• more productive

• dangerous jobs

• work unsociable hours

• more information on the best paying jobs

• move location and/or change their occupation for increase pay

Why people earn more in the same job

• regional differences in labour market conditions

• Length of service

• Collective pay agreement

• Compensating non - wage rewards

• Discrimination

Minimum wage

a legally-enforced pay floor in the labour market

Disadvantages of specialised jobs

• boring after a while

• learns limites skill and opportunity for promotion is slim

• job not applicable anywhere if they get replaced by machinery

Advantages of specialised jobs

• workers don’t need to know multiple skills

• acquire the skill for job faster

• receive status and recognition for a good job

Trade unions

organizations of workers that aim at promoting and protecting the interest of their members (workers)

Types of trade union

Forms of industrial actions

Factors that influence trade union power

Union strong bargaining strength

Unions weak bartering strength