Economic and Global Concepts - Year 9 HaSS
Economic and Business Concepts — Year 9 HaSS
Economics: What it is
Economics is the study of how individuals, businesses, and governments choose to use limited resources to satisfy needs and wants.
Key Economic Concepts
Scarcity
Making choices
Specialisation and trade
Interdependence
Allocation and markets
Economic performance and living standards
Scarcity / Economic Problem
Scarcity: having unlimited needs and wants but limited resources available.
Factors of production (4 categories of resources):
Capital
Enterprise
Land
Labour
Implication: We cannot produce, buy, or own everything we want; we must make choices.
Making Choices
Because resources are limited, we prioritise what to produce or consume using available resources.
This requires prioritising between alternatives given constraints.
Opportunity Cost
Definition: The potential benefits that are foregone when choosing one alternative over another.
Pronunciation: [ä-par-'tü-na-të 'kost]
Importance: Helps compare costs and benefits of options.
Specialisation and Trade
Many countries rely on trade to satisfy population needs and wants.
Import: goods/services brought into a country from another.
Export: goods produced domestically sent to another country for sale/trade.
Specialisation: focusing on producing a particular good or service.
Benefits: increased efficiencies, higher output, economies of scale.
Interdependence
Producers, consumers, businesses, and government rely on each other to produce, specialise, and consume.
Allocation and Markets
Allocation: distribution of scarce resources among producers and then to consumers.
Goods and services are exchanged in a market.
Economic Performance and Living Standards
Economic performance measures how well an economy is doing.
Key measures:
GDP: ext{GDP} = ext{the total value of goods and services produced in a country over a year}
Inflation: general increase in prices of goods and services
Unemployment rate: percentage of people who are unemployed out of all people who are able to work
Living standards: material or non-material aspects of well-being
Refugee Rescue (Applied Activity)
Scarcity affects housing in refugee camps.
Group activity: manage temporary housing; decide who gets living space when not everyone can be accommodated.
Real-world ethical considerations: harsh reality, displacement, and distribution challenges.
Self-Interest in Social Organization
Self-interest can drive productive behaviour (working, saving) and lead to socially productive outcomes.
Reflect: personal money choices can be selfish yet benefit others through investment, saving, or consumption that supports others indirectly.
Circular Flow of Income Model (Overview)
Visualizes how money moves between sectors of an economy: households, businesses, government, financial sector, and international sector.
The 5-Sector Circular Flow Model (Year 9 Economics)
Objective: Identify the 5 sectors and describe the function of each.
Sectors: Households, Businesses (Firms), Financial Sector, Government, International Sector
Core idea: money moves through leakages and injections; equilibrium when total leakages equal total injections.
The 5-Sector Model: Key Concepts
Leakage examples: Savings (S), Taxation (T), Imports (M)
Injection examples: Investment (I), Government Spending (G), Exports (X)
Equilibrium condition: ext{Total Leakages} = ext{Total Injections}
The Product and Resources Markets
Product market: households spend money on goods/services (consumer expenditure).
Resources market: households supply resources (capital, enterprise, labour, land) to firms to earn income.
Household Sector
Households own resources (land, labour, capital, enterprise) and provide them to firms in return for income (wages, rent, interest, profit).
Households consume goods/services produced by firms, creating demand.
Households can save income or pay taxes, contributing to leakages.
Business Sector
Firms produce goods/services using resources from households.
Firms pay households income for resources provided.
Firms invest in capital (machines, buildings) to increase production (injection).
Revenue received when households, government, and foreign buyers purchase products.
Financial Sector
Includes banks, credit unions, and investment firms.
Acts as an intermediary between savers (households) and borrowers/investors (firms).
Facilitates the flow of funds in the economy.
Savings & Investment
Savings: income not spent by households; deposited in financial institutions; leakage from the circular flow.
Investment: business spending on capital goods (machinery, buildings, technology);
Financial institutions lend saved money to firms, enabling investment.
Investment is an injection into the circular flow (new money enters the economy).
Bank Money Creation (Example)
Bank deposits can multiply via fractional reserve banking.
Example: If $1000 is deposited and reserve requirement is 10%, the cycle can expand money supply up to $10,000.
Calculation: ext{Money Multiplier} = rac{1}{ ext{Reserve Requirement}} = rac{1}{0.10} = 10
Implication: Banks create money and enable investment for those who might not have had access.
Government Sector
Government collects revenue through taxation and redistributes via government spending.
Fiscal policy: influence economic activity by changing tax and spending levels.
Taxation and Government Spending
Taxation: money collected from households and firms (e.g., income tax, company tax, GST); leakage reduces income for spending.
Government spending: public services (education, healthcare, infrastructure, welfare); injection into the economy by increasing income and demand.
International Sector
Involves trade and financial interactions with other countries.
Includes imports (leakage) and exports (injection).
Imports and Exports
Imports: goods/services bought from overseas; leakage as money leaves domestic economy.
Exports: goods/services sold to overseas buyers; injection as foreign income enters domestic economy.
International Trade (Overview)
International Trade: purchase and sale of goods/services between countries.
Increases global interdependence; globalisation is the growing interdependence.
Why Nations Trade and Trade Measures
Imports definition and role as leakage.
Exports definition and role as injection.
Specialisation is the main driver of international trade:
Countries focus on what they are most efficient at; trade surplus for others.
Comparative vs Absolute Advantage definitions (later in more detail):
Comparative Advantage: lower relative opportunity cost in production.
Absolute Advantage: produce with fewer resources than another nation.
Australia and Specialisation
Australia’s strengths: natural resources, high-quality universities, and travel/tourism services.
Comparisons: mineral fuels and ores/metals dominate export value (>50% of goods exports); services ~20% of total exports.
Comparative vs Absolute Advantage (Recap)
Comparative Advantage: lower opportunity cost in producing a good.
Absolute Advantage: can produce more of a good with same resources.
Positives and Negatives of Trade
Positives: economic growth, economies of scale, lower world prices, competition and innovation, better global relations.
Negatives: domestic industries may struggle, jobs may be lost, currency depreciation, uneven benefits, reliance on others.
Balance of Trade and Trade Flows
Balance of Trade: relationship between imports and exports.
Trade Surplus: exports > imports.
Trade Deficit: imports > exports.
Two-way Trade
International trade where countries both import and export similar goods.
Trade Barriers
Tariff: tax on imports.
Quota: limit on quantity of imports.
Embargo: prohibition on imports from a country.
Trade Wars
When one country restricts imports or imposes tariffs, partners may retaliate, reducing trade.
Protectionism
Protectionism: policy to restrict trade to protect domestic industries.
Nationalism vs World Free Trade vs gradual approach to liberalisation.
Trade Agreements and Blocs
Free trade agreements and trading blocs (groups of countries) aim to reduce barriers.
Trading bloc: countries in a region trade together more freely.
Interdependence and Globalisation
Interdependence: households, firms, governments, and countries rely on each other.
Why interdependence happens:
Specialisation
Trade
Globalisation: faster transport, global businesses, communication
Globalisation (Overview)
Definition: increasing interconnectedness of countries through trade, technology, travel, and cultural exchange.
Example: a phone designed in the USA may be made in China with parts from Japan, assembled in Australia, used globally.
What Drives Globalisation
Drivers: Technology, Transport, Trade, Global Agreements, Businesses, Migration & Travel
Features of Globalisation
Global supply chains, cultural exchange, economic interdependence, global communication, and global challenges
Examples of Globalisation
Fast fashion, food chains, social media, supply chains, pandemics
Impacts of Globalisation
Positive: cheaper goods, economic growth, knowledge/tech sharing, cultural understanding
Negative: wealth gaps, local businesses under pressure, environmental damage, loss of culture, crises vulnerability (e.g., pandemics)
Australia and the Global Economy (Overview)
Australia has a medium-sized economy; 14th in world by nominal GDP.
Trade accounts for ~47–49% of GDP; supports around 25% of jobs.
Australian Exports and Imports
Australia is both exporter and importer; composition of trade matters.
Export profile: heavily concentrated in primary commodities (mineral fuels, ores, metals).
Goods dominate export value (>50%), services ~20% of export value (education, tourism, finance, services, IT).
Imports: large share are intermediate goods used in domestic production; inputs include materials, fuels, chemicals, parts.
Australia’s largest trading partner shifted from the UK (historically) to Asia due to proximity, industrialisation, alignment of needs, education/tourism ties, and trade agreements.
Advantages of trade: access to larger markets, growth and jobs, lower prices/variety, efficient resource use, stronger international relations.
Disadvantages: vulnerability to global fluctuations, loss of local industries/jobs, environmental concerns, overdependence, unequal benefits.
Supply Chains (Overview)
Objective: Explain stages of supply chains and how goods move from production to consumption; describe global interdependence created by supply chains.
What is a Supply Chain?
Definition: network of people, activities, information, and resources involved in moving a product/service from raw materials to final consumer.
Steps: extract/grow raw materials; manufacture/assemble; package/label; transport; distribute to shops/customers.
Stages in a Supply Chain
Primary stage: converting/extracting raw materials
Secondary stage: converting/processing raw materials into usable goods
Tertiary stage: services that are intangible
Global Nature of Supply Chains
Supply chains span many countries, creating interdependence: countries rely on each other for goods, services, materials, and labor.
Why Supply Chains Are Important
Keep products flowing worldwide; enable efficient production; enable specialisation; create jobs and support growth.
Challenges in Global Supply Chains
Disruptions, ethical concerns, environmental issues, over-reliance
COVID-19 and Supply Chains (Disruptions)
Governments restricted movement; factories closed; demand shifted from services to goods; global shipping container shortages caused delays.
Impacts of COVID-19 on Global Trade and Australia
Export restrictions on critical supplies; trade volatility; tariff/policy changes affecting cross-border management
For Australia: import delays; export access challenges; manufacturing interruptions
Sector-specific impacts: agriculture (labour shortages, market access), retail (stock shortages/overstock), healthcare (PPE demand)
Transnational Corporations (TNCs)
Key characteristics and global operation:
Global operations with headquarters in one country and production worldwide
Integrated production and supply chains
Large-scale employment and market power
Global branding; influence on trade and politics
R&D spread across countries; adaptation to local markets
Exercise: group card sort on pros and cons (social, economic, environmental impacts).
Pros and Cons of TNCs (Examples)
Pros:
1) Investment in new technology and equipment (+)
2) Jobs and incomes for local workers (+)
3) Taxes paid locally (+)Cons:
3) Jobs with low wages/long hours and safety concerns (-)
4) Destroy local competition due to size/power (-)
5) Tax contributions may be low/minimal (-)
6) Resource use and pollution concerns (-)
7) Large TNCs can influence governments (-)
Case Study: Toyota (Transnational Corporation)
Toyota Motor Corporation: Japanese multinational car manufacturer; established 1937 in Aichi, Japan
Production (2024): ~9.52 million vehicles (Toyota + Lexus); global sales ~10.8 million (2024)
FY2024 revenue: ~¥45.1 trillion (≈ US$410 billion); net income ~¥4.94 trillion (≈ US$45 billion)
Headquarters: Toyota HQ, Aichi, Japan
Notable: large-scale production lines and global reach
Key Globalisation Features (Recap)
Reach a global market; avoidance of trade barriers via global operations; lower transportation costs through scale; low-wage production in some regions; R&D and investment scale; global branding
Large TNCs influence international trade and politics; global supply chains spread risk but can amplify systemic shocks
Card Sort Takeaways (Exercise Summary)
Pros: technology transfer, jobs, tax revenues, economies of scale
Cons: labor issues, local monopoly effects, environmental impact, regulatory challenges, political influence
Important Formulas and Numerical References (From the Transcript)
Money Multiplier example: ext{Money Multiplier} = rac{1}{ ext{Reserve Requirement}} = rac{1}{0.10} = 10
Trade shares (examples):
Exports share of total export value: >50% of goods export value for Australia (primary commodities focus)
Services export share: ~20% of total export value
Trade as share of GDP for Australia: approximately 47–49%
Equilibrium in circular flow: ext{Total Leakages} = ext{Total Injections}
Connections to Foundational Principles
Scarcity drives choice; opportunity costs shape decisions.
Specialisation and trade emerge from comparative/absolute advantages and lead to increased overall welfare (concepts built on efficiency and resource allocation).
The circular flow model demonstrates how different sectors fund consumption and investment, showing how government policy and international trade influence national income.
Globalisation and supply chains illustrate economies of scale and interdependence, while also presenting distributional and environmental challenges.
Practical Implications
Trade policies and barriers affect prices, job availability, and consumer choices.
Global supply chains enable cheaper goods but increase exposure to shocks (pandemics, weather, geopolitical events).
Transnational corporations can drive technology and growth but may impact local industries and governance.
Understanding opportunity costs helps individuals and firms weigh alternatives in budgeting, investment, and policy decisions.
Ethical and Social Considerations
Allocation decisions (e.g., refugee housing exercise) highlight ethical questions about fairness, dignity, and resource constraints.
Trade-offs between economic growth and environmental sustainability require balancing innovation with stewardship.
Global interdependence invites responsibility for labour standards, environmental impact, and cultural preservation across borders.
Quick Recap: Key Terms to Remember
Scarcity, Opportunity Cost, Specialisation, Interdependence, Allocation, Markets, GDP, Inflation, Unemployment, Living Standards, Circular Flow, Leakages, Injections, Savings, Investment, Government Spending, Taxation, Imports, Exports, Balance of Trade, Trade Barriers, Tariff, Quota, Embargo, Globalisation, Transnational Corporations, Comparative Advantage, Absolute Advantage, Supply Chains