2.2 circular flow model

2.4 the business cycle

• phases of the business cycle

  • expansion- the economy grows, jobs increase and people spend more

  • peak- the economy reaches its highest point before slowing down

  • contraction- the economy shrinks, jobs are lost, and people spend less

  • recession- the economy reaches its lowest point before starting to recover

• causes of the business cycle

  • spending- too much spending can lead to inflation, while too little spending can cause a recession

  • confidence- peoples confidence in the economy affects their spending decisions

• examples of economic events

  • the great depression

• key features of recessions

  • high unemployment

  • low spending

  • falling prices (deflation)

• key features of booms

  • low unemployment

  • high spending

  • rising prices (inflation)

2.5 demand and supply

• Key Concept: The price of goods and services is determined by the interaction of supply and demand.

  Demand

  • Demand: The amount of a product people want to buy at a certain price.

  • Law of Demand: When prices go down, people buy more. When prices go up, people buy less.

  Supply

  • Supply: The amount of a product businesses are willing to sell at a certain price.

  • Law of Supply: When prices go up, businesses sell more. When prices go down, businesses sell less.

  The Price Mechanism

  • Equilibrium: The point where the demand and supply curves meet. This is where the price and quantity are balanced.

  • Price Mechanism: The way supply and demand work together to set prices.

  Factors Affecting Supply and Demand

  Demand:

  • Income

  • Tastes

  • Population

  • Substitute goods

  • Complementary goods

  • Expectations

  Supply:

  • Efficiency

  • Production costs

  • Weather

  • Number of suppliers

  Example: Imagine blueberries. If people want more blueberries (demand increases), the price will go up. If there are more blueberry farms (supply increases), the price will go down.

2.6 communicating information in tables and graphs

• supply table- shows how much a seller is willing to sell at different prices

• demand table- shows how much a buyer is willing to buy at different prices

• supply and demand graphs

  • x-axis: represent the quantity of a product

  • y-axis: represents the price of a product

  • supply curve: slopes upward, showing that sellers are willing to sell more at higher prices

  • demand curve: slopes downward, showing that buyers are willing to buy less at higher prices

  • equilibrium point: the point where the supply and demand curves intersect.

5.2 ways of assessing the performance of the Australian economy

• economists use various indicators to measure the performance of the economy.

Key Indicators

• Standard of living: Measures how well people are living.

  • GDP per capita: Total value of goods and services produced per person.

  • Limitations: Doesn't consider non-material factors like happiness or environmental impact.

• Economic growth: Measures the increase in production of goods and services.

  • GDP: Total value of goods and services produced.

  • Ideal rate: 3-4% per year.

• Income distribution: Measures how evenly income is distributed among people.

  • Inequality: The gap between the rich and poor.

  • Government role: Redistributes income through taxes and welfare.

• Environmental sustainability: Measures how well the economy can meet current needs without harming future generations.

  • Trade-offs: Economic growth can sometimes harm the environment.

Measuring Economic Performance

• Economists: Use various indicators to assess the economy's health.

• Purpose: To identify problems and make necessary changes.

• Importance: Economic performance affects everyone's lives.

5.6 unemployment

Unemployment is the situation where people who are willing and able to work cannot find jobs. The government aims to keep unemployment rates low.

How is unemployment measured?

• The Labour Force Survey is used to measure unemployment.

• It involves interviewing people aged 15 and over.

• The unemployment rate is the percentage of people who are unemployed out of the total labour force.

Causes of unemployment:

• Cyclical unemployment: Occurs during economic downturns when spending decreases.

• Structural unemployment: Results from changes in technology or production methods.

• Seasonal unemployment: Happens due to seasonal job losses.

• Frictional unemployment: Occurs when people are between jobs.

Impacts of unemployment:

• Deteriorating living standards: Unemployed people face financial hardship.

• Decreased national production: The economy produces less when people are unemployed.

• Changed government budget position: Unemployment affects government revenue and spending.

5.7 inflation rates and sustainability indexes

Simplified Summary of Inflation Rates and Sustainability Indexes

Inflation is the increase in the general price level of goods and services in an economy. It reduces the value of money.

Measuring inflation:

• The Consumer Price Index (CPI) is used to measure inflation.

• The CPI calculates the average change in prices of a basket of goods and services.

• The basket includes food, clothing, housing, and other categories.

Causes of inflation:

• Demand-side factors: Excessive demand for goods and services.

• Supply-side factors: Increased costs of production.

Impacts of inflation:

• Reduced competitiveness: Local producers may struggle to compete with cheaper imported goods.

• Undermined economic growth: Inflation can reduce consumer spending and investment.

• Changed resource allocation: People may invest in non-productive assets like shares and property.

• Affected income distribution: Inflation can harm people on fixed incomes.

11.2 moving from home

Reasons to leave home:

• Further education

• Employment

• Independent lifestyle

• Disagreements with family

Challenges of moving out:

• Finding a safe and affordable place

• Budgeting for rent, bills, and insurance

• Applying for identification documents

• Dealing with homesickness

Important documents:

• Birth certificate: proves your identity (apply through Service NSW)

• Photo ID (NSW Photo Card): useful for various services (apply through Service NSW)

• Medicare card: provides access to healthcare (apply through Department of Human Services)

Support organizations:

• Government: provide welfare and support services (Centrelink, Department of Communities and Justice)

• Religious: offer various support programs (Anglicare, St Vincent de Paul Society)

• Community: provide housing, counselling, and hotlines (youth refuges, Kids Helpline)

Benefits of staying at home:

• Save money on rent and bills

• Increase savings for future purchases

11.3 arranging accommodation

Types of accommodation:

• Setting up your own apartment: Renting a place on your own.

• Moving into a share house: Sharing a house with other people.

• Setting up your own share house: Renting a place and finding roommates to share it.

• University college: Living on campus.

Finding the right place:

• Research: Look in newspapers, online, and real estate agents' windows.

• Inspection: Conduct a thorough inspection using a checklist.

Affordability:

• Create a budget: Estimate your income and expenses.

• Consider costs: Factor in rent, bills, utilities, and potential repairs.

11.4 arranging a lease

Arranging a lease involves:

• Finding a suitable property.

• Reviewing the tenancy agreement.

• Completing a condition report.

• Paying a reservation fee and bond.

• Signing the lease.

• Taking possession.

Key considerations:

• Understand your rights and responsibilities.

• Be aware of common rental problems.

• Communicate effectively with your landlord.

• Consider sharing accommodation to reduce costs.

• Seek advice from relevant organizations.

11.5 managing finances

• Costs:

  • Establishment costs: One-time costs like rental bond, furniture, appliances.

  • Ongoing costs: Recurring costs like rent, utilities, groceries, travel.

  Financial Strategies:

  • Monitor spending: Avoid impulse buying, track expenses.

  • Superannuation: Save for retirement through employer contributions.

  • Shared living: Use a kitty system, split bills fairly, create house rules.

  • Budgeting: Track income and expenses to manage finances effectively.

  Taxes:

  • Tax File Number (TFN): Unique identifier required for work and tax purposes.

  • Income Tax: Paid on income earned throughout the financial year.

  • Tax Return: Filed annually with the Australian Taxation Office (ATO).

  • Tax deductions: Reduce taxable income and tax amount owed.

11.7 major purchases

• Mobile Phones:

  • Fixed-term contract: Pay monthly for phone and service (usually lower call costs, benefits like streaming).

  • Pre-paid: Pay only for calls you make (no minimum charge, no contract).

  Tips for Buying a Mobile Phone:

  • Consider how you use your phone.

  • Compare fixed-term contracts vs. prepaid.

  • Shop around for deals from different providers.

  • Know your rights if you have a complaint (Telecommunications Industry Ombudsman).

  Buying a Car:

  • Costs: Initial (stamp duty, dealer fees) and recurring (insurance, registration, fuel).

  • Financing: Cash or loan (compare interest rates).

  • Options: New car, used car from dealer, used car privately.

  • Used Cars from Dealers: More expensive but offer guarantees (clear title, warranty).

11.8 options available for the purchase of major items

Payment Methods:

• Cash: Immediate purchase, no debt, potential discounts, requires savings.

• Credit:

  • Credit sales contract: Retailer provides credit, you pay monthly.

  • Loan contract: Borrow funds from a financial institution.

  • Credit card: Buy now, pay later (interest, fees).

  • Lay-by: Pay deposit, then regular payments (no interest, wait for item).

Purchase Options:

• New: Higher price, warranty.

• Second-hand: Lower price, potential defects.

• Joint ownership: Share costs with others (consider legal agreements).

Consumer Protection:

• Australian Consumer Law: Protects consumers from unfair practices.

• Second-hand goods: May have limitations on protections.

• Online purchases: May not be fully covered by Australian law if from overseas.

Alternatives:

• Sharing economy: Rent instead of buy (e.g., Airbnb, rideshare).

• Rent-to-buy: Rent an item with the option to buy later (can be expensive).