Commerce Y10 Half Yearly Examination Study/Revision

economics

the production, distribution, and consumptions of goods and services. It also shows how individuals, businesses, governments and nations make choice about how to allocate resources

business

the organised efforts and activities of individuals to produce and sell goods and services for profit

circular flow of income

shows the connections between 5 different sectors of an economy

5 different sectors of an economy

consumer sector

business sector

financial sector

government sector

overseas factor

Why is the circuclar flow of income used?

It is used by economists to measure the changes in the level of economic activity as it shows where money is injected and leaked in the economy. It is measured by INJECTIONS - LEAKAGES

If injections are greater than leakages..?

Economic growth happens and the economy will expand

If leakages are greater than injections..?

an economy will experience econoic decline

households (consumer sector)

they hold economic resources such as land, labour, capital and enterprise who sell their resources to the firm in exchange for an income

firms (business sector)

uses the resources of households to produce goods and services

consumption

using income to buy various goods and services

financial sector

financial institutions such as banks that act as intermediaries between the saver and borrowers in an economy. They also receive savings of individuals and businesses and then lend this money to others who need to borrow money

government sector

refers to the local, state and federal governments

overseas factor

represents all international trade and financial transactions between a domestic country and the rest of the world

what are the injections of a circular flow of income

savings (S)

taxation (T)

imports (M)

what are the leakages of a circular flow of income

investments (I)

government expenditure (G)

exports (X)

key features of contractions

falling levels of production

decreasing consumer spending

rate of inflation may fall

wages rates generally fall

interest rates eventually fall

level of unemployment rises

key features of expansions

rising level of production

increased consumer spending

rate of inflation may rise

wages rates generally rise

interest rates eventually rise

level of unemployment falls

economy

the system for deciding how scarce resources are used so that goods and services can be produced and consumed

resources

land, people and raw materials that are considered scarce as we have unlimited wants but there is not enough goods and services to satisfy those wants

demand

the quantity of a particular good or service that consumers are willing and able to purchase at various price levels at a given point of time

what is demand influenced by?

disposable income
price of other goods and services such as substitutes or complements

consumer tastes

advertising

technology

fashion

law of demand

the higher the price of a good, the smaller the quantity is demanded and the lower the price of a good, the greater the quantity is demanded

what does the demand curve look like?

slopes downwards from left to right

supply

the quantity of a good or service which producers are willing and able to produce at a given price over a given period of time

law of supply

the higher the price of a good, the greater the supply is provided where the lower the price of a good, the smaller the supply is provided

given price (supply curve)

it shows the quantity that producers plan to sell at the price

given quantity (supply curve)

it shows the minimum price at which producers are willing to sell

contraction in supply

when the price of a good or service falls, the producers decrease their supply in the market to order to minimise costs for production

extension in supply

when the price of a good or service rises, the producers increase their supply, expecting to increase their profits

equilibrium price

the price at which quantity demanded equals quantity supplied

equilibrium quantity

the quantity bought and sold at the equilibrium price

if the demand curve shifts left

decrease in demand

if the demand curve shifts right

increase in demand

factors influencing a decrease in demand

the price of a substitute falls

the price of a complement rises

the price of a good is expected to fall in the future

income falls

expected future income falls

population decreases

factors influencing an increase in demand

the price of a substitute rises

the price of a complement falls

the price of a good is expected tio rise in the future

income rises

expected future income rises

population increases

factors influencing an increase in supply

the price of a factor of production used to produce the good falls

the price of a substitute in production rises

the price of a complement in production falls

the price of the good being supplied is expected to rise in the future

the number of the goods being supplied has an increase of suppliers

a technological change increases demand for the good

a natural event increases demand for the good

factors influencing a decrease in supply

the price of a factor of production used to produce the good rises

the price of a substitute in production falls

the price of a complement in production rises

the price of the good being supplied is expected to fall in the future

the number of the goods being supplied has a decrease of suppliers

a technological change decreases demand for the good

a natural event decreases demand for the good

market

a situtation where buyers and sellers come together to exchange goods and services

what are the 4 types of markets

retail market

labour market

financial market

stock market

retail market

place where we buy most of our goods and services including online shopping

labour market

combination of buyers and sellers of labour

financial market

intermediaries between the savers and the borrowers in an econnomy who make money from interest

stock market

where stock in public companies are bought and sold

land degradation

deterioratoin of natural environment casused by pollution and habitat destruction

conservation

to prevent over-use of natural resources so that future generations are not restricted from using them

corporate social responsibility

the business considering the interest of stakeholders, society and the environment when making economic and business decisions

4 indicators to determine health of an economy

standard of living

economic growth

income distribution

environmental sustainability

economic growth

occurs when an economy increases the volume of goods and services produced over a period of time

gross domestic product (GDP)

represents the total market value of final goods and services produced by a country over a period of time

aggregate demand (measuring GDP)

C + I + G + (X-M) = AD

C - Consumption

I - Investments
G - Government Expenditure

X - Exports

M - Imports

GDP per capita

breaks down a country’s economic output per person and is calculated by dividing the GDP of a country by its population

5 types of income

earned income

unearned income

government sourced income

income in kind

disposable income

earned income

money received on a regular basis from work

unearned income

money passively earned from land or capital such as property or shares

government sourced income

income derived from government via transfer payments

income in kind

income which can substitute for income

disposable income

the money flowing into a household from earned, unearned, government or other sources minus money paid in tax

wealth

assets that create income via returns or reselling

macroeconomics

the study of the behaviour and performance of an economy as a whole to understand the level of total expenditure, how it is influenced and the impacts of this on: output, income, employment and material living standards

what are the two key areas macroeconomics are influenced by

fiscal and monetary policy

fiscal policy

a government policy that involves altering the level of government spending and government revenue through the document of the budget which shows where the government plans on receiving money and where it intends to spend that money

budget outcome

the difference between receipts and expenditure

budget deficit

where government spending is higher than government revenue

budget surplus

where the government revenue is higher than government spending

balanced budget

where government revenue and spending are the same

monetary policy

a policy operated by the Reserve Bank of Australia (RBA) that seeks to manage the level of spending in the economy by controlling the money in the economy and the rate at which money flows around the economy

cash rate

the interest rate that banks/financial institution can borrow money from the Reserve banks

interest rate

the cost of borrowing money from banks or financial institutions

business plan

a formal document that outlines a business’s objectivse and the strategies to achieve them

7 types of business plans

informal planning

formal planning

strategic planning

tactical planning

operational planning

specific planning

directional planning

informal planning

Planning that is not written down and often not shared with employees of a business that is only known by the owner or is communicated to employees by word of mouth

formal planning

involves a series of documents which are generally given to employees, detailing the goals of the business and the strategies which will be used to achieve them

strategic planning

the process of long-range planning which establishes the objectives of the business that are made by senior management using broad strategies such as resource allocation, monitoring and control mechanisms, and evaluation procedures

tactical planning

focuses on how to achieve the most efficient use of resources in all functions of a business that are often made for the medium-term by middle management. This plan complements strategic plans in that they aim to implement the strategies broadly outlined in the strategic plan

operational planning

often made with a shorter framework and provide a further break-down of issues and provides specific detail for the tactical plan. This plan does not outline the objectives of the business but assume the existence of the goals and offer ways in which to achieve them.

specific planning

a plan that is clearly defined and easy to understood

directional planning

a plan that is less clearly defined but increases the flexibility of the plan

3 types of business structure

sole trader

company

partnership

sole trader (business structure)

a business structure that is the most simplest and gives you full control

company (business structure)

a business structure that is more complext and limits your liability because it is a seperate legal entity

partnership (business structure)

made up of 2 or more people who distribute income or losses

vision statement

a statement that aims to answer the questions of “what do we want to achieve in this industry?”

mission statement

a statement that aims to answer the question “how will we achieve our vision?”

3 types of goals

financial goal

social goal

personal goal

financial goals

a goal set to measure a businesses profit, return on investment, product sales, market share and growth

social goals

a goal that aims to operate for a social good or greator good

personal goal

a goal that managers and owners may have that influence the operation of their business

target market

a group of customers within a business’s available market at which a business aims its marketing efforts and resources

direct competition