ECO TEST 1

factor 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

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