Economics U3 AOS 2

Material living standards + how is it commonly measured?

Material living standards are living standards measured by access to goods and services 

• Depends on the quantity of goods and services that are consumed – thus reflects the levels of income, production, unemployment rates 

• Commonly measured by looking at GDP per capita (GSP of a nation divided by its population) 

Criticisms of GDP per capita as a measure of living standards 

• It does not include all goods and services that are produced, only includes those that are sold (so not voluntary work) + it also doesn't include black market transactions 

• It only gives an average and doesn’t reflect on the actual distribution of the consumption of products in a nation 

• It treats all goods and services equally - increased burglar alarms and visits to a psychiatrists will increase GDP but may indicate that non-material living standards are decreasing 

• Does not effectively reflect non-MLS 

A) GDP (Gross domestic product)

B) Increases in GDP depend on

GDP (Gross domestic product) is the market value of all final goods and services produced within a country in a year 

Increases in GDP depend on: 

• Improved efficiency in the use of resources 

• Access to increased quantities of resources 

A) Real GDP

B) Purchasing power

Real GDP is GDP that has been adjusted to remove the impact of inflation 

Purchasing power is the ability to turn income and savings into goods and services 

Non-material living standards + Affluenza

Non-material living standards are living standards unrelated  to access to goods and services and includes factors such as happiness, leisure,  life expectancy, crime rates and good health 

• Depends on the quality of daily life 

 

• Affluenza is the addictive pursuit of more and more goods and services to the detriment of overall mental and physical wellbeing 

Outline how economic growth can reduce living standards (environment)

• Often the production of goods and services will result in negative externalities (e.g. pollution, global warming, loss of common resources such as forests) --> reduce non-MLS  

• A quality environment, such as clean air and water, leads to greater health and life expectancy, and so improves non-MLS 

• Reduces the quality of natural resources people rely on, such as clean air, water, and fertile land. Pollution and deforestation can lower food production, damage health (less workers) and increase the cost of living --> MLS 

Outline how good physical and mental health can improve living standards:

MLS 

• Good physical and mental health enables individuals to work efficiently, allowing them to maintain a stable income and financial security and thus be able to consume goods and services --> increasing MLS 

 

Non-MLS 

• Good physical health allows people to participate in activities which can support emotional stability and social interactions, increasing happiness and satisfaction 

Outline how bad physical and mental health can reduce living standards:

MLS 

• Whereas those with poor physical or mental health (e.g. having chronic illness, disability) will face higher healthcare expenses and may be unable to work consistently, which reduces their access to goods and services --> decreasing MLS 

 

Non-MLS 

• Poor physical health can limit mobility, reduce energy levels and individuals may also suffer from chronic pain 

• Individuals struggling with mental health may experience difficulties in managing daily tasks and forming social connections, which can lead to increased stress and anxiety 

Outline how high crime rates can reduce living standards:

Crime rates 

• Increased crime rates reduce MLS however is not shown up in GDP as GDP only looks at current production, so if a criminal burns down a house --> MLS would decrease but GDP is unaffected 

 

MLS 

• Firms may need to spend more on security systems, which increases production costs and leads to higher prices for consumers, thus reducing their purchasing power 

 

Non-MLS 

• Increased crime rates also reduce non-MLS as more people are more anxious and spend money on products to protect against crime but, in the absence of crime, could have spent money on products that made them happier 

• Makes it harder for people to enjoy public spaces due to fear of being a victim of crime

• Governments may need to spend more on policing and prisons, which may reduce spending for other areas such as healthcare and education, thus reducing society's welfare 

Outline how higher literacy rates can improve living standards:

The adult literacy rate measures the percentage of people ages 15 and above who can both read and write 

 

MLS 

• A more skilled workforce is more productive – increasing GDP and consumption levels 

• Literate people are more likely to gain higher employment as a person who can read can attend higher education such as university and get a degree, allowing them to be more highly paid so they can then afford more goods and services 

 

Non-MLS 

• The ability to read exposes a person to new ideas and possibilities which leads to an increase in non-material living standards 

• People can take pleasure in things such as novels and poetry

• By reading books, articles it can be used as entertainment and allow them to connect with others, increasing their happiness

In the five sector model, what is provided by households to firms

Resources are supplied from households to firms  

• Households own land and rent it out for shops and factories 

• Households start small businesses and own their assets 

• Households provide labour in return for wages 

• Households ultimately own all the shares in large and small companies and provide the initial funds for them to acquire wages resources 

• Payment is made for those goods and services by households to the business sector 

 

In the five sector model, what is provided by firms to households

Business sector pays for these resources 

• In wages, commissions, royalties (eg. if you write a song or a book) 

• In rent for land 

• In dividends on shares 

• In profits (on businesses directly owned by households) 

The business sector provides goods and services to households 

The five-sector flow model:

Leakages + it’s components

Leakages: is money that exits from the flow of spending on goods and services --> it consists of savings, taxes and imports 

• Savings which are disposable income not used for consumption & are typically invested directly or through the financial sector 

• Taxes which households are required to pay to the government sector (state, federal and local) - include rates, stamp duty, GST, income tax 

• Imports, where spending goes towards purchasing products from overseas 

Injections + it’s components

Injections: is money that is added to the circular flow of income --> through investment, government spending or exports 

• Investment: where the financial sector (that includes banks and the stock market) lends to or invests in firms to increase productive capacity  

• Government spending which includes G1 (spending on products that are not capital in nature (not investments) such as employee salaries, stationary, rent) and G2 (government investment spending on capital goods such as new buildings, roads and ports) 

• Exports where Australian products are sold overseas and the funds received are an injection into the circular flow 

Define Business cycle + sketch it

The business cycle is the cyclical pattern of growth in the economy over time with periods of above average growth and periods of below average and negative growth

Expansion/recovery

Expansion/recovery: a period of increasing growth in real GDP which follows a trough 

During this stage: 

• The economy has plenty of capacity – so firms can easily increase production 

• Consumer and business confidence are beginning to rise  

• Unemployment begins to fall  

• Inflation is low but begins to rise 

• Assets are cheap, however start to increase 

Peak

Peak: occurs after a solid period of growth and just before a downturn 

During this stage: 

• Consumer and business confidence are high 

• Consumption, investment and asset prices are high  

• Unemployment and savings are low 

• Inflation is high 

Contraction/downturn

Contraction/downturn: a period of negative or falling growth in real GDP --> is often triggered by an unexpected event that negatively impacts on AD where consumer and business confidence drop resulting in a further decrease in AD 

During this stage: 

• Consumer confidence and business confidence decrease 

• Asset prices drop 

• Savings increase 

• Consumption decreases 

• Unemployment increases

Trough

Trough: occurs after a period of very slow or negative growth and just before a recovery 

During this stage: 

• Consumer and business confidence are low 

• Consumption, investment and asset prices are low  

• Unemployment (causes labour to be cheap + readily available) and savings are high 

• The economy has spare capacity causing inflation to be low

What is described as a recession?

Two or more consecutive quarters of negative GDP growth

Aggregate demand + formula

Private consumption expenditure (C) + what percentage of AD does it make up in Australia

Private consumption expenditure (C): the total spending by households on goods and services (but not including new housing which falls under I) 

• Makes up approx. 60% of AD in Australia 

Private investment expenditure (I) + what percentage of AD does it make up in Australia

Private investment expenditure (I): funds applied towards expanding productive capacity (e.g. new factories, plant, equipment, vehicles, housing, addition to inventories) 

• Makes up approx. 15-20% of AD 

• Volatile

Government spending (G)  (It’s components) + what percentage of AD does it make up in Australia

Government spending (G) 

Includes: 

• G1 – government spending on goods and services that are not capital in nature (not investments) (e.g. employee salaries, stationary, rent)  

• G2 - government investment spending on capital goods (e.g. new buildings, roads and ports (things that increase the productive capacity)  

  • G1 is approx. 17% of AD 

  • G2 is approx. 3% of AD 

Net exports/balance of trade (X-M) + what percentage of AD does it make up in Australia

• Exports (X) is spending by foreigners on Australian exports of goods and services 

• Imports (M) is spending by Australians on foreign goods and services 

  • X and M each represent around 20% of AD but their net impact on AD is around plus or minus 4% --> This is very volatile 

List the AD factors:

• Disposable income

• Interest rates

• Consumer and business confidence

• Exchange rates

• Economic growth overseas

Disposable income + how it affects AD

Disposable income: income available to households for spending after the receipt of welfare benefits and deduction of direct (income) taxes 

• Increase in disposable income will cause an increase in AD 

Interest rates + how it affects AD

Interest rates which are the percentage amount charged by lenders to borrowers for the use of money 

• An increase in interest rates will decrease AD because it will reduce household discretionary income (disposable income after payment of non-avoidable expenses such as for food, shelter and interest on loans) 

 --> and thus it will make households less willing to borrow for consumption  + it will make businesses less willing to borrow for investment 

Consumer confidence + how it affects AD (Talk about marginal propensity to consume)

Consumer confidence which is a measure (through regular surveys) of consumers' optimism about the future state of the economy 

• An increase in consumer confidence will increase AD because: 

  • Consumption will rise as consumers are more confident about the future and especially in their employment prospects (continued employment or wage increases) --> it increases the marginal propensity to consume  - a number between zero and one, which measures the change in consumption from $1 of additional income. [The higher the MPC the greater the consumption rather than saving] 

Business confidence + how it affects AD

Business confidence which is a measure (through regular surveys) of firms' optimism about the future state of the economy 

• An increase in business confidence will increase AD as investment will rise as firms are more confident about the future and hence will invest in new plant and equipment 

Exchange rates + how it affects AD

Exchange rates are a measure of the value of the AUD against other currencies 

• An increase in the value of AUD will decrease AD because: 

  • Australian exports will be more expensive for foreigners --> thus decreasing exports (X) 

 

• A decrease in the value of AUD will increase AD because: 

  • Australian exports will be more cheaper for foreigners --> thus increasing exports (X) 

How does economic growth overseas affect AD

Economic growth overseas 

• Increase in economic growth overseas (especially growth in Aus major trading partners like China, Japan, US, Korea) will increase AD as there is increased demand for exports 

Aggregate supply

Aggregate supply is the total value of all goods and services produced by a nation over a period of time 

• It is equal to GDP 

• The maximum possible AS is at the nation's PPF 

List the AS factors

• Quantity of resources/factors of production 

• Quality of resources/factors of production 

• Costs of production 

• Technological Change 

• Productivity growth

• Exchange rates

• Climatic conditions

• Government regulation

• International supply chains

How quantity of resources/factors of production affects AS

• Increase in resources will increase AS as firms have more resources available for production  

--> this can be caused by: 

• Discovery of new natural resources 

• Immigration - labour 

• More investment in capital resources 

How quality of resources/factors of production affects AS

• Higher quality of resources will increase AS 

 

e.g. 

• If agricultural land is over-farmed it can degrade the quality of the soil and reduce the ability to produce --> reducing AS 

• A better trained labour force will be more productive (higher outputs that can be obtained by given number of inputs) --> increases AS 

• Better plant and equipment can produce more --> increases AS 

How costs of production affects AS

• Increased production costs will reduce AS (e.g. increased wages, increased oil prices) 

• Decreased production costs will increase AS (e.g. decreased wages, decreased costs of technology) 

How technological change affects AS

Improved technology makes production more efficient --> increases AS 

A) Productivity

B) Labour productivity

C) How productivity affect AS

Productivity measures the output that can be obtained from a given number of inputs 

Labour productivity is a measure of how productive the workforce is - obtained by dividing total output by the number of hours worked 

 

• When productivity is increased, we produce more per unit of resources --> which increases AS 

How exchange rates affects AS

• When the value of AUD increases, inputs acquired from overseas become less expensive and so AS increases 

• When the value of AUD decreases, inputs acquired from overseas become more expensive and so AS decreases 

How climatic conditions affects AS

B) El Nino

C) La Nina

• Unfavourable climatic conditions (e.g. droughts, cyclones) --> damage resources and thus reduce AS 

• El Nino --> more droughts 

• La Nina --> more rainfall 

How government regulation affects AS (answer is examples)

Examples: 

• Policies requiring renewable energy can increase energy costs for firms --> reduce AS 

• Increases in minimum wage & award wages --> increase production costs and hence reduce AS 

• Lockdowns during pandemics, prevent firms from operating 

• Government spending can increase availability of trained workers + quality of resources --> increase AS 

How international supply chains regulation affects AS

AS can be impacted by disruptions of international supply chains (e.g. pandemics/lockdowns, wars (Russia-Ukraine, Iran), piracy (an act of robbery or criminal violence by ship or boat-borne attackers upon another ship) 

On AD & AS curves, what are on the X and Y axis?

• On the y-axis is the general level of prices 

• On the x-axis is real GDP 

A) State the relationship between AD and the general price level

B) Outline why

AD has an inverse relationship with the general price level because of: 

• Wealth effect: when prices increase, the purchasing power of income decreases, which results in decreased consumption 

• Interest rate effect: when prices increase, consumers have less money left over for savings & hence investment --> which exerts upward pressure on interest rates (borrowers having less loans pushes up the price of loans) --> which causes firms to invest less (I) --> reduces AD 

• International competitiveness: when prices increase (more than prices in other countries) exports will be more expensive + imports will be cheaper --> reduces AD 

A) State the relationship between AS and the general price level

AS has a direct relationship with the general price level --> as when prices rise, firms increase production as they can earn more profit 

Draw the AS curve (Keynesian) graph and explain why it is the way it is:

In the Keynesian version of AS (shown above) 

• When the economy has spare capacity (e.g. high unemployment, idle equipment), the AS curve is relatively flat as producers can easily increase production in response to changes in price 

• As the economy gets closer to its productive capacity the slope starts to increase --> as bottlenecks (things that prevent growth) appear and workers bargain for higher wages --> so producers will need the incentive of higher general prices to increase production 

• Finally when the economy is close to full capacity (e.g. little unemployment and idle equipment) supply becomes more and more inelastic/slope steepens as economy faces capacity constrains  

Gross Domestic Product (GDP) + how often is it calculated

Gross Domestic Product (GDP): final market value of all goods and services produced in the economy over a given period of time 

• It is calculated by the Australian Bureau of Statistics (ABS) every quarter (e.g. 3 months ending 31^st March, 30^th June, 30^th September and 31^st December) 

What are the different ways of calculating GDP

(as these flows equal to GDP and each other): 

• Income approach (I) based on estimates of all incomes earned in the economy 

• Expenditure approach (E) based on estimates of total expenditure on goods and services 

• Production approach (P) based on estimates of total output produced in the nation 

The goal of strong and sustainable economic growth

The goal of strong and sustainable economic growth is to achieve the highest rate of growth in real GDP possible consistent with strong employment growth but without causing unacceptable inflationary, external or environmental pressures  (3-3.5% growth rate)

Economic growth + how to measure it (include annualize meaning and calculation)

Economic growth refers to an increase in the level of national production over time  

• It is commonly measured by looking at the rate of increase in real GDP 

 

Negative consequences of economic growth (Environmental)

• Such as pollution and other negative externalities (e.g. noise) in both the production and consumption of goods and services --> these can include carbon emissions that can worsen climate change/global warming 

• Degradation of land (e.g. if farm land is overused, it loses nutrients and can become unproductive) 

• Overutilisation of common access resources (e.g. loss of species (fish) through shrinking habitats) 

• Problems with waste disposal (e.g. plastics in the ocean) 

• Non-MLS: greater pollution and climate change which can reduce health outcomes + greater workplace stress 

Negative consequences of economic growth (External pressures)

• In response to an increase in AD, Australian producers may not be able to satisfy the extra demand (or may raise their prices) so cheaper imports rise relative to exports (M>X)  --> this increases the level of Australia's foreign debt and reduces the value of the Australian dollar 

  This is unsustainable as: 

  • The lower value of the AUD increases inflation which may cause the Reserve Bank to increase interest rates to slow growth 

  • Increased foreign debt means that more interest payments have to be made overseas in future (and so less spending in Australia) 

 

Negative consequences of economic growth (High inflation)

Increase in demand inflation which occurs when the aggregate demand for goods and services surpasses aggregate supply, causing prices to rise as higher economic growth results in an economy to operate to close to productive capacity 

Positive consequences of economic growth 

• Reduced unemployment rates  

• Increases in real GDP will result in increased taxes collected by governments as more sales of products means more GST collected + higher incomes means more income tax collected --> this allows governments to have higher revenue to spend on essential goods and services (e.g. hospitals, schools, police forces, infrastructure such as roads, ports and public transport) and welfare benefits and other transfer spending such as Jobseeker allowance (financial assistance to those actively seeking work, temporarily stood down, or unable to work due to temporary illness), aged pensions, NDIS 

 

Ultimately, economic growth tends to increase living standards as: 

• MLS: an increase in incomes and hence spending and consumption of goods and services 

• Non-MLS: life expectancy, happiness, self-esteem, etc 

The goal of full employment

The goal of full employment is to reach the highest level of employment consistent with the achievement of non-inflationary sustainable growth and an absence of cyclical unemployment 

• There is no specific percentage for the level of unemployment in order to achieve full employment, however it is said to be around 4 – 4.5% 

Cyclical unemployment + what affects it

Cyclical unemployment: occurs when the nation is not operating at its full capacity due to insufficient AD 

• This unemployment can hence be affected by all things that impact AD (e.g. CC, growth in trading partners, interest rates, exchange rates, etc) 

Why will there always be some UE?

As there will always be: 

• Structural unemployment which arises due to changes in the production process, that typically causes a mismatch between the skills of workers and what firms want --> these changes include: 

  • changing tastes of consumers that lead to changing products 

  • technological advancements 

  • outsourcing of jobs to other countries where labour is cheaper 

  • changes in tariff levels 

 

• Frictional unemployment which is unemployment caused by people being temporarily between jobs 

Natural rate of unemployment / NAIRU (Non-Accelerating Inflation Rate of Unemployment) + what unemployment rate it is said to be + what types of unemployment does it consist of

Natural rate of unemployment / NAIRU (Non-Accelerating Inflation Rate of Unemployment): lowest level of unemployment that can be reached without causing inflation to become too high and where cyclical unemployment is absent 

• It is around 4-4.5% unemployment rate 

• It consists of structural, frictional, seasonal and hardcore unemployment 

A) Employed

B) Unemployed

C) Labour force

D) Unemployment rate + how to calculate

E) Participation rate + how to calculate

A) Hidden unemployment

B) Underemployment/disguised unemployment

C) Calculating underutilisation rate

A) Hidden unemployment occurs when people become discouraged from not finding a job and give up seeking employment and hence leave the LF

• Such people will not be included in the unemployment rate as they are not actively seeking employment

B) Underemployment/disguised unemployment: which occurs when someone who is employed however are not working as many hours as they desire 

Long-term unemployment + why is it bad

Long-term unemployment: occurs when people have been unemployed for a year or more 

• This is a bad sign as when this figure increases, it is harder for them to find a job 

• The government can lower long-term unemployment by offering incentives to businesses to hire long-term unemployed 

Too high unemployment negative consequences: 

• Not all labour resources are being fully utilised and hence GDP is lower than it could be 

• Less tax revenue + government will have to spend more on unemployment benefits 

• Greater income inequality as there are more people relying on low welfare payments 

• Lower MLS --> as there are less incomes and hence less consumption 

• Lower non-MLS --> people may experience low self-esteem, financial stress, lack of purpose, more crime 

Benefits of unemployment

• Reduced inflation 

• Reduced labour costs – as workers are reluctant to leave their jobs or ask for higher wages and may accept low wages + less likely to go on strike --> which can increase AS and thus AD and GDP 

 

The goal of low inflation

The goal of low inflation is a 2 to 3% per annum increase in the general level of prices on average over time as measured by the consumer price index --> this goal is based on the CPI 

What circumstances will the RBA accept:

A) Inflation above the range for a short period of time

B) Inflation below the range

• The RBA is willing to accept inflation above the range for a short period of time if the economy still seems to have spare capacity 

• The RBA also may accept inflation below the range if economic growth is satisfactory and there is minimal risk of deflation 

General level of prices

The general level of prices is a measure of the prices of a representative basket of goods and services sold in the economy 

Why is inflation not targeted as 0%?

• As some wages tend not to go down, which is bad because if wages go down this encourages firms to hire more workers which reduces unemployment --> inflation means that even if wages stay steady real wages decrease allowing firms to employ more workers as labour is relatively cheaper 

• Some increase in prices is due to increased quality of products which is not fully captured in CPI 

• By targeting 0% there is a risk of going negative, causing deflation which is bad as it causes the delay of purchases 

A) Inflation

B) Disinflation

C) Deflation

• Inflation is an increase in the general level of prices in the economy (measured by CPI) 

• Disinflation is a reduction in the rate of inflation however the prices are still rising but not as much (e.g. inflation drops from 4% to 2%) 

• Deflation is a decrease in the general level of prices in the economy (measured by CPI) (e.g. -3%) 

How CPI is calculated:

Criticisms of the way inflation is measured:

• The selected items which are measured are items for a typical metropolitan household in Australia 

 --> where inflation might measure changes in prices well for households in: 

• Rural Australia 

• Not typical in their spending (e.g. rural households, pensioners, vegetarians) 

Calculate inflation using the CPI level: (include quarterly and annually)

A) Headline rate of inflation

B) Underlying/core rate of inflation

C) How to calculate underlying/core rate of inflation

The rate of inflation measured by using the CPI is known as the headline rate of inflation – which is does not include any adjustment but can sometimes fluctuate due to temporary events

So the ABS and RBA also calculate the underlying/core rate of inflation – which provides as a better indicator of the longer-lasting changes in the general level of prices 

It can be calculated by: 

• Trimmed mean – removing from CPI the top 15% products with the biggest price change and the bottom 15% of products with the smallest price change and just looks at the middle 70% 

• Weighted median – which looks at the middle price change 

• CPI excluding volatile items – CPI that excludes fruits, vegetables, automotive fuel) 

By focusing on underlying inflation – the RBA will not change policy due to one-off events 

A) Demand inflation

B) Factors that affect it

• Demand inflation: when AD outstrips aggregate supply, causing prices to rise as a result to maximise profit --> particularly occurs as the economy reaches productive capacity 

 

These factors include: 

• Higher disposable income – due to lower tax rates, interest rates etc 

• Higher consumer confidence 

• Greater government spending 

• Strong growth overseas which increase Australia's exports 

• Lower exchange rates – in which the Australian dollar weakens which increases Australian exports + decreases imports 

A) Cost inflation

B) Factors that affect it

• Cost inflation: occurs when rising costs of production (such as wages, interest rates or imported inputs) cause prices to rise so firms can protect their profits

 

These factors include: 

• Higher production costs – due to increased business tax, wages etc 

• Lower productivity 

• Poorer climate conditions 

• Lower exchange rates – due to weakened AUD, imports are more expensive so firms are likely not to be able to afford overseas productive inputs 

• Increased input costs 

Consequences of high inflation 

Erosion of purchasing power 

• Inflation erodes the real value of money and so the purchasing power of incomes and savings  

--> this especially impacts: 

• People on fixed incomes (e.g. retirees living off savings) 

• People on minimum wage 

• People paying income tax who get pushed up into the next income bracket and pay higher taxes (this is called bracket creep) although their real income may have not increased 

--> Thus reduces material living standards 

 

Development of wage-price spiral 

• Where there is an expectation that inflation will increase so workers will demand higher wages, which increases production costs leading to firms to increase selling prices – inflation which causes workers to demand even higher wages which further pushes up inflation 

 

Distortion of spending and investment decisions 

• It makes businesses uncertain whether changes in relative prices reflect real changes in demand or if it's just inflation --> this can lead to bad decisions such as overproducing or underproducing goods 

• Encourages investors to invest in assets whose price increases protect against inflation which may not always be the most productive assets (e.g. gold, bitcoin) --> leads to slower economic growth 

• Wastes resources with the constant need to communicate new prices (e.g. takes time, money and effort (printing menus, updating systems, relabelling etc) 

• High inflation discourages saving and future investment as consumers will wish to use their purchasing power before it is eroded, this means there will be a smaller pool available for investment which will slow future economic growth 

 

Low returns on investment 

• When inflation rises above the interest rate, lenders/savers receive lower returns and hence lose purchasing power --> this has the effect of redistributing wealth from lenders to borrowers as borrowers are repaying loans using money that is now worth less than expected 

--> this may discourage investment, resulting in GDP to grow less and reduces material living standards 

 

Lowers international competitiveness 

• If Australia's inflation is higher than global competitors, then our exports will be relatively more expensive and we will lose market share and exports will decline --> reduces GDP and thus MLS 

Consequences of low inflation 

Consumers will delay consumption on the basis that if they wait prices will decrease  --> this causes a decrease in AD and thus lowers GDP and increases unemployment 

Inventories

Inventories are the stock of unsold goods and raw materials that businesses keep on hand for future sale or production.

Casualisation

Casualisation refers to the increasing number of casual and part-time jobs in the workforce as a proportion of the total number of jobs

How can access to goods and services affect living standards (access and not access)

MLS 

• Greater access to goods and services such as healthcare, education, and products increases material living standards as individuals are able to satisfy more of their needs and wants. 

• On the other hand, limited access to goods and services reduces material living standards as individuals cannot obtain and consume essential goods and services required for a satisfactory standard of living. 

 

Non-MLS 

• access to certain goods may boost an individual's general welfare and quality of life. (e.g. For instance, access to healthcare improves life expectancy and access to education can increase life satisfaction and opportunities.) 

• Overconsumption of products may reduce ones leisure time, increase stress, worsen health and also can result in negative externalities which ultimately reduce the overall satisfaction and wellbeing of individuals. (e.g. consuming cigarettes, using loud lawnmowers)