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Economic Factors Influencing Consumer Choice

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- Economic Factors Disposable income is the money left after taxes have been paid Discretionary income is anything left of disposable income after spending on necessities such as good, clothing and shelter. The ability to borrow is influenced by general interest rates

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LRATC

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Long-Run Average Total Cost

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Negative Externalities

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Unintended costs incurred outside of obvious input costs (labour, raw materials and electricity) such as social costs and effect on the enviroment.

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Specialisation - Labour Productivity

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Breaking down production into a number of sub-processes allowing for labour to specialise in one particular action and avoiding moving from one task to another, e.g Car manufacturing line or Fast food production.

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Public Companies

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A public company is one whose shares are not subject to any transfer restrictions beyond those established by the government.

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Deregulation

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The removal of government controls over an industry that is intended to make a business more responsive to market forces.

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Price Elasticity of Demand

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measures the responsiveness of quantity demanded to change in price. It is calculated as the percentage change in quantity dived by the percentage change in price.

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The Cash Rate

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The interest rate paid on overnight loans in the short term money market.

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RBA

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Australias central bank. Its main roles are conduct monetary policy and oversee the stability of the finical system.

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Interest Rates ? Demand

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Raising interest prices lowers aggregate demand and vice versa, this is used to combat inflation and this balance is maintained by the RBA.

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Corporatisation

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Occurs when the government changes the rules around how government-owned businesses are operated so that they behave more like private sector businesses, independent from the government.

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Privatisation

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Occurs when the government sells public trading enterprises to the private sector.

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GST ASX

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?

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Formula to Calculate Unemployment

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unemployed persons / labor force

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Formula to Calculate Labour-force Working Age Population

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Employed + Unemployed / Working Age Non-institutionalized Population

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The Labour Market

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Where individuals seeking employment interact with employers who want to obtain the most appropriate labour skills for their production process.

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Inflation/Unemployment Relationship

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Decreased unemployment equals higher inflation. (As unemployment falls, workers are empowered to push for higher wages. Firms try to pass these higher wage costs on to consumers, resulting in higher prices and an inflationary buildup in the economy.)

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Tight Fiscal Stance

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This involves increasing the rate of taxation and / or cutting government spending. It is sometimes known as deflationary fiscal policy

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Appreciation, Depreciation AUD

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The value of the AUD

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Opportunity Cost

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Represents the alternative use of resources. Often referred to as the 'real' cost, it represents the cost of satisfying one want over an alternative want.

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Counter Cyclical Economic Policy

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Economic policies designed to smooth fluctuations in the business cycle. Macroeconomic policies such as fiscal policy and monetary policy are usually used as counter-cyclical policies.

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APRA

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Australian Prudential Regulation Authority - The government body established to regulate all deposit taking institutions, life and general insurance organisations and superannuation funds.

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S + T + M = I + G + X

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Savings + Taxation + Imports = Investment + Government Expenditure + Exports. Injections and Leakages in the Five Sector Economy Model.

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Perfect Competition - Characteristics

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Theoretical market structure where there are many buyers and small sellers. They each sell one homogenous product and there are no barriers to entry into the industry. They are price takers as individually the have no power to influence price.

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Fiscal Policy

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A macroeconomic policy that can influence resource allocation, redistribute income and reduce the fluctuations of the business cycle. Its instruments include government spending and taxation swell as the budget outcome.

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Monetary Policy

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A macroeconomic policy that aims to influence the cost and supply of money in the economy in order to influence economic outcomes such as economic growth and inflation. The Reserve Bank of Australia administer monetary policy by influencing the level of interest rates.

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Injections

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Injections into the circular flow model of income are those flows of money that increase aggregate income and the general level of economic activity. The three injections are investment, government spending and exports.

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Leakages

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Leakages are the items that remove money from the circular flow of income, decreasing aggregate income and the general level of economic activity. The three leakages are savings taxation and imports.

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National Employment Standards

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The National Employment Standards (NES) are 10 minimum employment entitlements that have to be provided to all employees. The national minimum wage and the NES make up the minimum entitlements for employees in Australia.

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Internal Economies of Scale

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The cost saving advantages that result from a firm expanding its scale of operations. They occur when a firm's output level is below the technical optimum

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External Economies of Scale

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The advantages that accrue to a firm because of the growth of the industry in which the firm is operating, and are not the result of the firm changing its own scale of operations.

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External Diseconomies of Scale

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The disadvantages faced by a firm because of the growth of the industry in which the firm is operating, and are not the result of the firm changing its own scale of operations.

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Internal Diseconomies of Scale

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The cost disadvantages (specifically, the increase in marginal cost per unit) faced by a firm as a result of the firm expanding its scale of operations beyond a certain point. Its output level is over the technical optimum.

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Australian Workplace Agreements

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A form of individual employment contracts between an employer and an individual employee that were phased out in 2013

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Monopoly - Characteristics

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An industry where there is only on seller producing a unique product. There are high barriers to entry so the monopolist has market power and can determine price or output (but not both)/

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Commonwealth Gov't Securities

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A government bond is a bond issued by a national government, generally with a promise to pay periodic interest payments and to repay the face value on the maturity date. Government bonds are usually denominated in the country's own currency.

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National Minimum Wage

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A national minimum wage sets the minimum hourly wage rate that is acceptable in law.

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Consumer Sovereignty

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The manner in which consumers, collectively through market demands, determine what is produced and the quantity of production.

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Enterprise Bargaining

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Negotiations between between employers and employees (or their representatives) about pay and work conditions at the level of the individual firm.

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Oligopoly - Characteristics

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A market structure consisting of a few large firms producing slightly differentiated products. There are significant barriers to entry and each engages in non-price competition.

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Modern Awards

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Modern awards apply to all employees covered by the national workplace relations system. Modern awards are industry or occupation-based, and apply to employers and employees who perform work covered by the award.

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Consumer Spending Patterns

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?

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Australian Financial System - Types of Markets

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- Pure competition - Monopolistic Comepetition - Oligopoly - Monopoly

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Factors Affecting Demand

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- Change in price - Shifts in the demand curve

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Role of the ASX

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'To conduct markets in which investors and enterprises come together with confidence to create prosperity through the sharing of risks and rewards.'

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Secondary Markets ASX

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Markets in which investors trade finical assets, such as shares or debentures, with other investors.

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Trends in Unemployment in Aust (recent)

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The current unemployment rate is 6.1%, which is down slightly

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Primary Markets ASX

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Primary markets are involved in the formation of new securities.

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Role of ASIC

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The Australian Securities and Investment Commission has the responsibility for corporate regulation, consumer protection and the oversight of finical serve products.

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How Fiscal Policy works - Economic Stabilisation

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To provide some counterbalance to the business cycle so as to stabilise the level of economic growth. During period of excessive growth where this is a a risk of high inflation, the government res to reduce economic activity by spending less, increasing vacation and raising interest rates. Inversely if the economy is in recession, the government tries to stimulate growth with increased government spending, tax cuts and low interest rates.

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Impact of Unemployment on Wages

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The wage curve is the negative relationship between the levels of unemployment and wages that arises when these variables are expressed in local terms. The wage curve summarises the fact that "A worker who is employed in an area of high unemployment earns less than an identical individual who works in a region with low joblessness."

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Total Outlay Method, Demand Elasticity

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Total Outlay Method is a way to calculate the price elasticity of demand by looking at the effect of changes in price on the revenue earned by the producer. If price an revenue move in the same direction, demand is inelastic if price and revenue move in the opposite direction, demand is elastic; and if revenue remains unchanged in response to a price change, demand is unit elastic

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Cyclical Unemployment

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A factor of overall unemployment that relates to the cyclical trends in growth and production that occur within the business cycle. When business cycles are at their peak, cyclical unemployment will be low because total economic output is being maximized.

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Structural Unemployment

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unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand.

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Frictional Unemployment

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the unemployment that exists in any economy due to people being in the process of moving from one job to another.

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Seasonal Unemployment

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occurs when people are unemployed at certain times of the year, because they work in industries where they are not needed all year round. Examples of industries where demand, production and employment are seasonal include tourism and leisure, farming, construction and retailing.

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Hidden Unemployment

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The unemployment or underemployment of workers that is not reflected in official unemployment statistics because of the way they are compiled. Only those who have no work but are actively looking for work are counted as unemployed.

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Hardcore

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A colloquial term referring to individuals who have never been employed full-time, or who have been unable to find employment for an extended period. The "hardcore unemployed" may be excluded from official unemployment statistics in some economies, as those who are not actively looking for work may not be counted.

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Long-term

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Long-term unemployment is defined as a duration of unemployment of 12 months or more.

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Underemployment

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Underemployment refers to an employment situation that is insufficient in some important way for the worker, relative to a standard.

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ABS Unemployment

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To be classified as unemployed a person needs to meet the following three criteria: - not working more than one hour in the reference week; - actively looking for work in previous four weeks; and - be available to start work in the reference week.

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