Studied by 1 personfactor markets
where factors of production are bought and sold
product markets
where produced good and services are bought and sold
demand
the quantity that consumers are ready
contraction of demand
price increase
expansion in demand
price decrease
individual demand
the demand of an individual consumer
market demand
the demand of all consumers
demand curve describe
y - price x- quantiy -m
supply
the quantity that producers are ready
supply expansion
price increases
supply contraction
price decreases
individual supply
the supply of an individual business
market supply
the supply of all producers
supply curve description
y- price x- quanity m
expansion and contraction impact on line
move up and down along line
law of demand
as price increases quantity demanded decreases
6 non price change on demand
changes in income
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
law of supply
as price increases the quanity supplied increases
impact of non price changes on supply
changes in number of suppliers
explain changes in number of suppliers
an increase in the number of suppliers increases supply as market supply increases (right shift)
explain changes in cost of factors of production
increasing cost of production will decrease supply
explain changes in technology
may increase productivity reducing costs of production thereby increasing supply
changes in expected future prices
expectations of future price rises decrease supply as suppliers hold the good and supply at a later date
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
when does price elasticity of demand matter
businesses setting prices
price elasticity of demand
how responsive quantity demanded is to change in price
TCO
revenue
increase TCO
price inelastic
No change TCO
unit elastic demand
decrease TCO
price elastic demand
price inelastic examples
petrol
price elastic examples
luxury goods
price elasticity of supply
how responsive quantity supplied is to a change in price
factors influencing price elasticity of demand
luxury or necessity
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)
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
factors affecting price elasticity of supply
length of time since price increase, ability to store inventory, excess capacity
explain length of time since price increase (supply)
the longer time since the price change the more price elastic
explain ability to store stock
books vs flowers
explain excess production capacity
if a business has excess production capacity they will be able to increase supply in response to a price increase
perfectly elastic demand graph
horizontal line (apple stall) - demand for a good is infinitely responsive to a change in price
perfectly price inelastic demand graph
vertical line (life saving dosage) demand for a good does not change in response to a change in price
perfectly price elastic supply
horizontal line - where supply of a good is infinitely responsive to a change in price
perfectly price inelastic supply
vertical line - where supply of a good does not change in a response to a change in price (mona lisa)
demand for labour
the quantity of labour that businesses are ready
labour graphs
y - price of labour x - quantity (hours)
supply of labour
the quantity of labour that individuals are ready
non price changes that impact on demand for labour
changes in output of firm
explain changes in output of firm
increasing production will result in increased demand for labour
explain cost of other inputs
decreasing costs of other inputs will results in decreased demand for labour eg. technology
non price changes impact on supply of labour
changes in working conditions
explain changes in working conditions
improved working conditions means more people are willing to work and therefore more labour
explain occupational mobility
as it is easier for people to transition between jobs then there will be an increased supply of labour
explain geographic mobility
ease of moving between locations in the same occupation
what 3 things is demand for labour dependent on
level of economic growth in economy
Aggregate Demand Formula (all of the demand for goods and services)
C+I+G+(X-M)
Aggregate Supply Formula (all of the supply of goods and services)
C+S+T
participation rate formula
labour force + seeking work/ population over 15
reasons for changes in participation rate
population ages
define workforce
working age population that are either working one hour per week or actively seeking work
aus workforce stats (Sep 2022)
13.6 m employed
structure of an economy
the proportion of total GDP in the economy contributed by each industry sector
industry share of australian output trends
significant decline in manufacturing
employment by industry trends
agriculture long term decline
unemployment rate
unemployed/employed+unemployed
types of unemployment
cyclical
explain cyclical unemployment
a period of decline in the business cycle
explain structural employment
unemployment as result of mismatch between skills workers have and skills businesses demand
Explain frictional unemployment
when workers are between jobs - switching
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)
explain underemployment
workers are employments but want to work more hours
explain hidden unemployment
unemployment that occurs because workers have become discouraged in the labour market hand have given up actively seeking work
explain long term unemployment
unemployed for more than 12 months
explain trends in the unemployment rate
cyclical
trends in the underemployment rate
over 1 million employed workers desire more hours of work although significantly declined since COVID peak
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
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
adv of casualisation for ind
flexibility in hours to balance family commitments and work life balance
disadv of casualisation for ind
less job security and income certainty
adv of casualisation for bus
reduction in employment costs - only engage workers when required
disadv of casualisation for bus
higher hourly rate paid
what do businesses do to reduce costs
outsourcing
explain outsourcing
contracting a non core activity formerly performed by the business to a third party organisation eg. qantas outsourcing food production
explain contractors
engage specialist workers (firms) on a defined length project base (no leave
explain subcontractors
Where a contractor firm in turn engages workers as contractors
prices reflect
the scarcity of goods and services
demand>supply
prices rise
demand<supply
prices fall
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.
price mechanism
The process by which the forces of supply and demand interact to determine the equilibrium price and quantity in a market
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
effect of excess demand
competition forces price up. Expansion of supply and contract of demand until equilibrium is found
equilibrium price
the price reached in a market by the operation of the price mechanism from which there is no force for change
equilibrium quantity
the quantity reached in a market by the operation of the price mechansion from which there is no force for change
price mechanism graph description
y-demand x-quanity
which tri is which
excess supply on top
allocative efficiency
the economy's ability to allocate resources to satisfy consumer wants
allocatively efficient
where producers supply the exact amount consumers want
private costs
costs of production pad by producers (wages
Note
Flashcard