ECO TEST 1

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factor markets

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Economics

245 Terms

1

factor markets

where factors of production are bought and sold

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2

product markets

where produced good and services are bought and sold

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3

demand

the quantity that consumers are ready

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4

contraction of demand

price increase

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5

expansion in demand

price decrease

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6

individual demand

the demand of an individual consumer

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7

market demand

the demand of all consumers

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8

demand curve describe

y - price x- quantiy -m

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9

supply

the quantity that producers are ready

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10

supply expansion

price increases

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11

supply contraction

price decreases

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12

individual supply

the supply of an individual business

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13

market supply

the supply of all producers

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14

supply curve description

y- price x- quanity m

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15

expansion and contraction impact on line

move up and down along line

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16

law of demand

as price increases quantity demanded decreases

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17

6 non price change on demand

changes in income

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18

why might changes in expected future prices impact demand

expectations of future price rise increases demand for the good today as consumers seek to purchase before price rise

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19

law of supply

as price increases the quanity supplied increases

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20

impact of non price changes on supply

changes in number of suppliers

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21

explain changes in number of suppliers

an increase in the number of suppliers increases supply as market supply increases (right shift)

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22

explain changes in cost of factors of production

increasing cost of production will decrease supply

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23

explain changes in technology

may increase productivity reducing costs of production thereby increasing supply

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24

changes in expected future prices

expectations of future price rises decrease supply as suppliers hold the good and supply at a later date

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25

changes in prices of other goods

producers may switch to producing the other good whose price has increased decreasing the supply of the first good

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26

when does price elasticity of demand matter

businesses setting prices

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27

price elasticity of demand

how responsive quantity demanded is to change in price

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28

TCO

revenue

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29

increase TCO

price inelastic

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30

No change TCO

unit elastic demand

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31

decrease TCO

price elastic demand

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32

price inelastic examples

petrol

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33

price elastic examples

luxury goods

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34

price elasticity of supply

how responsive quantity supplied is to a change in price

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35

factors influencing price elasticity of demand

luxury or necessity

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36

explain length of time since price increase

longer time since the price increase tends to be more price elastic demand (find alternatives after a while)

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37

explain proportion of income spent on good

if it is a bigger part of income than you are more likely to care about the price

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38

factors affecting price elasticity of supply

length of time since price increase, ability to store inventory, excess capacity

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39

explain length of time since price increase (supply)

the longer time since the price change the more price elastic

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40

explain ability to store stock

books vs flowers

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41

explain excess production capacity

if a business has excess production capacity they will be able to increase supply in response to a price increase

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42

perfectly elastic demand graph

horizontal line (apple stall) - demand for a good is infinitely responsive to a change in price

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43

perfectly price inelastic demand graph

vertical line (life saving dosage) demand for a good does not change in response to a change in price

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44

perfectly price elastic supply

horizontal line - where supply of a good is infinitely responsive to a change in price

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45

perfectly price inelastic supply

vertical line - where supply of a good does not change in a response to a change in price (mona lisa)

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46

demand for labour

the quantity of labour that businesses are ready

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47

labour graphs

y - price of labour x - quantity (hours)

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48

supply of labour

the quantity of labour that individuals are ready

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49

non price changes that impact on demand for labour

changes in output of firm

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50

explain changes in output of firm

increasing production will result in increased demand for labour

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51

explain cost of other inputs

decreasing costs of other inputs will results in decreased demand for labour eg. technology

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52

non price changes impact on supply of labour

changes in working conditions

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53

explain changes in working conditions

improved working conditions means more people are willing to work and therefore more labour

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54

explain occupational mobility

as it is easier for people to transition between jobs then there will be an increased supply of labour

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55

explain geographic mobility

ease of moving between locations in the same occupation

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56

what 3 things is demand for labour dependent on

level of economic growth in economy

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57

Aggregate Demand Formula (all of the demand for goods and services)

C+I+G+(X-M)

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58

Aggregate Supply Formula (all of the supply of goods and services)

C+S+T

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59

participation rate formula

labour force + seeking work/ population over 15

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60

reasons for changes in participation rate

population ages

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61

define workforce

working age population that are either working one hour per week or actively seeking work

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62

aus workforce stats (Sep 2022)

13.6 m employed

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63

structure of an economy

the proportion of total GDP in the economy contributed by each industry sector

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64

industry share of australian output trends

significant decline in manufacturing

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65

employment by industry trends

agriculture long term decline

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66

unemployment rate

unemployed/employed+unemployed

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67

types of unemployment

cyclical

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68

explain cyclical unemployment

a period of decline in the business cycle

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69

explain structural employment

unemployment as result of mismatch between skills workers have and skills businesses demand

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70

Explain frictional unemployment

when workers are between jobs - switching

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71

explain seasonal unemployment

occurs at certain times of year eg. industries where not needed all year around (fruitpickers) or where unemployment increases same time every year (uni graduation)

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72

explain underemployment

workers are employments but want to work more hours

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73

explain hidden unemployment

unemployment that occurs because workers have become discouraged in the labour market hand have given up actively seeking work

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74

explain long term unemployment

unemployed for more than 12 months

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75

explain trends in the unemployment rate

cyclical

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76

trends in the underemployment rate

over 1 million employed workers desire more hours of work although significantly declined since COVID peak

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77

trends in part and full time employment

significantly more jobs have been created as part time rather than full time jobs and part time jobs now represents more than 30% of jobs in the economy. This is called the casualisation of the Australian workforce -reduction of full time share of total employment and increase in part time and casual employment. Although in 2021 part time employment proportionally decreased as a share of total employment

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78

casual employment

where a worker is not guaranteed a number of hours a week and where the hourly wage rate is typically higher to compensate the worker

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79

adv of casualisation for ind

flexibility in hours to balance family commitments and work life balance

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80

disadv of casualisation for ind

less job security and income certainty

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81

adv of casualisation for bus

reduction in employment costs - only engage workers when required

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82

disadv of casualisation for bus

higher hourly rate paid

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83

what do businesses do to reduce costs

outsourcing

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84

explain outsourcing

contracting a non core activity formerly performed by the business to a third party organisation eg. qantas outsourcing food production

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85

explain contractors

engage specialist workers (firms) on a defined length project base (no leave

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86

explain subcontractors

Where a contractor firm in turn engages workers as contractors

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87

prices reflect

the scarcity of goods and services

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88

demand>supply

prices rise

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89

demand<supply

prices fall

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90

market equilibrium

a situation where at a certain price the quantity supplied and quantity demanded of a good or service are equal. The market clears and there is no tendency for price or quantity to change.

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91

price mechanism

The process by which the forces of supply and demand interact to determine the equilibrium price and quantity in a market

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92

effect of excess supply

sellers will lower prices to clear stock. As price falls there will be an expansion in demand until the market clears and equilibrium is found

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93

effect of excess demand

competition forces price up. Expansion of supply and contract of demand until equilibrium is found

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94

equilibrium price

the price reached in a market by the operation of the price mechanism from which there is no force for change

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95

equilibrium quantity

the quantity reached in a market by the operation of the price mechansion from which there is no force for change

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96

price mechanism graph description

y-demand x-quanity

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97

which tri is which

excess supply on top

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98

allocative efficiency

the economy's ability to allocate resources to satisfy consumer wants

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99

allocatively efficient

where producers supply the exact amount consumers want

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100

private costs

costs of production pad by producers (wages

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