STANDARD OF LIVING

Standard of Living describes the economic well-being of a country’s citizens. It reflects the
amount and quality of goods and services consumed by the population. It shows the material
comforts enjoyed by citizens.

Indicators of a country’s standard of living

 level of consumption of goods and services

 average disposable income of the population
 level of national ownership of capital equipment
 access to modern technology
 level of investment in research and technology

Standard of living indicators are quantifiable or measurable factors.

Factors indicating Standard of Living

 GDP or National income per capita
 Average personal disposable income (the amount of money individuals have to
spend after deductions are taken out).
 Life expectancy
 Quality and quantity of available health care
 Diet of citizens
 Degree of leisure time or recreation enjoyed by citizens
 Income levels
 Employment rate
 Poverty rate
 Average number of hours of work
 Inflation rate
 Number of paid vacation days per year
 Proper infrastructure
 Economic growth
 Access to education
 Cost of products
 QUALITY OF LIFE

Quality of life refers to all factors that determine the ability of a population to enjoy its wealth.
It is a qualitative measure of the life of citizens.

A country may record a high GDP per capita figure, which indicates that on average citizens are
making a certain income. This may suggest a high standard of living. However, not all citizens
may have access to this money. The figure does not show how income is distributed in the
economy.

Quality of life indicators include:

 Level of crime and sense of security that people feel they have
 Freedom from bondage or oppression
 Life expectancy – The number of years a baby born in a country can be expected to live.
Factors like wars, diseases and famine reduce people’s ability to enjoy their wealth
 Infant mortality – the number of infant deaths (1 year and under) per 1000 live births
 Equal opportunities/Freedom from discrimination from various characteristics such as
gender and race
 Freedom of movement, worship and speech
 Diet and nutritional levels
 Freedom to exercise franchise or the right to vote
 The freedom to enjoy recreation
 The right to be educated
 Access to public utilities such as electricity and clean water
 ECONOMIC GROWTH AND DEVELOPMENT
Economic Growth refers to an all-round expansion of the economy. This is quantitative.
It can be measured by a country’s real GDP.
An increase in real GDP means that the value of the country’s total output is rising over the rate
of inflation.
Negative growth means the country is doing less well than in the previous year
Zero growth means that there has been no change when compared with previous years.

Benefits of economic growth

 Higher standards of living for the population
 Increased tax revenue for the government which can be spent on better health,
education and other social services
 Higher consumption levels which may lead to a better diet and longer life expectancy
 Higher levels of output leading to more jobs and lower unemployment rates
 Rising incomes and increased spending which will encourage foreign firms to invest in
the country

Disadvantages of economic growth

 Environmental damage caused by increased production, destruction of the countryside
for building factories and air and land pollution
 Increased consumption of scarce natural resources that can exhaust supplies
 Inflation may increase as increased spending may drive firms to raise prices
 Inequality of wealth may result as the rich may become richer during a period of
economic growth
ECONOMIC DEVELOPMENT
Development is a qualitative concept. It refers to the provision of facilities that enable growth
to take place – for example the provision of machinery/equipment and a workforce that is
properly skilled/educated/healthy
In order to have development, there must be growth. However, there may be growth but no
development.
An underdeveloped country tends to have the following features:
 Poor economic performance
 High rate of population growth
 Low standard of living
 Short life expectancy
 High unemployment
 Dependency upon agricultural employment
 Poor educational opportunities

Measures of Economic Development

 Human Development Index (HDI). This is a combined measure of a country’s GDP per
capita, life expectancy, literacy and school enrollment rates.
 Physical Quality of Life Index (PQLI) which includes literacy rates, infant mortality, life
expectancy.

Role of education in economic growth and development

 Education increases productivity: Improvements in the abilities and learning of the
labour force increases productivity and fosters higher output
 Education enhances creativity and innovation: By applying new ideas and capitalizing on
opportunities where one can implement knowledge on technologies, products and
processes economic growth or productive output can increase.
 Education promotes entrepreneurship by providing tools (knowledge of the
environment, markets, competitors; know-how in producing goods and services) to
develop ideas.
 Education fosters technological advancement which facilitates new and improved
processes that leads to increased productivity
 Education facilitates economic progress: Education can promote the transmission of
knowledge and facilitate the implementation of technology which can promote
economic growth
HUMAN RESOURCE DEVELOPMENT (HRD)

What is it?
HRD seeks to develop employees through training and development activities.
This learning can lead to human resource becoming the competitive advantage or strength of
the businesses.

HRD includes:

 on the job training (OJT)  greater access to facilities

 off the job training for learning
 coaching  governmental support
 mentoring  national skills development
 e-learning

Benefits of HRD
 Enhancing the quality of work as competent employees perform better
 Employees are more effective or efficient, thus increasing national output and economic
growth
 Low staff turnover or absenteeism as trained employees know what is required of them
and can work well.
 Worker participation is improved which can lead to a sense of pride and achievement

Role of education in economic growth and development

 Education increases productivity: Improvements in the abilities and learning of the
labour force increases productivity and fosters higher output
 Education enhances creativity and innovation: By applying new ideas and capitalizing on
opportunities where one can implement knowledge on technologies, products and
processes economic growth or productive output can increase.
 Education promotes entrepreneurship by providing tools (knowledge of the
environment, markets, competitors; know-how in producing goods and services) to
develop ideas.
 Education fosters technological advancement which facilitates new and improved
processes that leads to increased productivity
 Education facilitates economic progress: Education can promote the transmission of
knowledge and facilitate the implementation of technology which can promote
economic growth
 Education facilitates social progress: Education helps to foster an understanding of the
environment. It improves the quality of life of individuals and leads to increasing social
benefits to people and society
 INTERNATIONAL TRADE

This is the exchange of goods and services among different countries of the world.

Reasons why countries trade with each other

 one country may not be endowed with natural resources such as oil, natural gas,
asphalt, gold to produce the goods that they need

 a country may not be able to produce the goods they need in the quantities or of the
quality that they require

 a country may not have the climate to grow certain foods and depends on trade to
obtain it for example wheat in United States

 international trade allows for foreign direct investment where individuals from one
country invests money in foreign companies and other assets.

 Certain countries can specialize in certain production due to technological expertise and
then engage in trade

 Trade is made easy due to improvements in communication and transportation

 Trade fosters harmonious relationships among countries

Terms used in Trade

 Imports – Goods bought from other countries. They result in an outflow of funds
 Exports – Goods sold to other countries. They result in an inflow of funds.
 Visible Trade refers to the import and export of goods (food, machinery, vehicles)
 Invisible Trade refers to the import and export of services (tourism, transport, insurance,
banking)

Balance of Payments
This is a financial account that records the value of all payments made abroad by a country and
the payments received from abroad over a period of time

The balance of payments account is split into three parts:

 Current account (the value of visible and invisible trade)
 Capital account (the value of all flows of investment into and out of a country)
 Official financing (this shows how the account is balanced, for example, by borrowing
from overseas institutions)

Balance of Trade
When exports exceed imports, more money is entering the country than leaving - the balance is
said to be a surplus or a favourable balance

When imports exceed exports, more money is leaving the country than entering – the balance
is said to be a deficit/a loss which is an unfavourable balance.

Examples of balance of trade figures

$
Visible exports +50,000
Visible imports -45,000
Balance of Trade +5,000 (surplus)

Visible exports +48,000

Visible imports -49,000
Balance of Trade -1,000 (deficit)

Measures to correct a Balance of Payment deficit

A recurring balance of payments situation is disturbing for a country because it means there is a
sustained outflow of funds – a country is spending more than it earns.

A current account deficit can only be tolerated in the short term. A persistent current account
deficit must be dealt with as it cannot continue indefinitely.

Temporary measures to correct an adverse balance of payments problem

 Borrowing from the IMF

 Obtaining loans from abroad
 Using reserves of gold and currency
 Selling off assets

Strategies to combat a persistent balance of payment deficit

Devaluation – lowering the value of a currency in relation to other currencies. This makes
imported goods more expensive and imports cheaper for foreigners.

Deflation – If people’s income/spending power is reduced, it would lead to a reduction in

imports as they can buy fewer goods. Deflation can be achieved by increased taxes, increased
interest rates, restricted hire purchased and credit and wage controls.

Exchange control – means placing limits on the amount of foreign currency that can be bought.

Import controls restrict imports by the use of tariffs and quotas. (Tariff – a tax imposed on
imports to increase their cost and discourage consumption. Quota - a limit placed on the
amount of a commodity permitted to be imported)
 NATIONAL INCOME

National Income (NI)

This refers to the total income earned in a nation. It refers to the money value of all goods and
services produced in a country during a financial year.

Methods of calculating National Income

1. The Income Method

This involves taking into account all the incomes earned by individuals and firms within a
country including personal incomes, profits of firms etc.
One way to do this is to add total incomes earned from all the factors of production in
an economy

Factors of Production Income earned

Land Rent
Labour Wages/Salaries
Capital Interest
Enterprise Profit

2. The Output Method

This involves taking into account the total net output of every form of production in the
country in a year.

3. The Expenditure Method

This is the total value of all expenditure by consumers, firms and government as well as
foreign demand for exports less import expenditure.

Problems in Computing National Income Statistics

 Money terms
Items need to all be expressed in money terms to be added together. It is not possible
to add together barrels of oil, bottles of rum and tonnes of bananas.
 Double Counting
This occurs when the value of both raw materials and finished products are counted, for
example, if lumber is counted as output and furniture made from the lumber is also
counted. Firms should only record the value added to products by their activities.
 The informal economy
Part time jobs like bartending, babysitting and taxi driving are many times not disclosed
to Inland Revenue/tax authorities.
 The hidden economy or black market also falls under the informal economy.
The arguments against this is that if tax is evaded by some, a greater tax burden falls on
other citizens.

Uses of National Income Statistics

 To give an indication of the standard of living of a country. A comparison of economic
growth from one year to the next can be made
 To compare the standards of living of different countries
 To determine the rate at which national income is growing by looking at figures from
one year to the next
 To determine which sectors of the economy needs improving
 To assess the effectiveness of government policies

Factors affecting national income

 Natural resources: The availability of resources like oil and gas, fertile land and a good
climate affects what products can be produced in a country

 Industrial development: this refers to how technologically advanced a country is

 Quality of the labour force: the size of the work force as well as how healthy and skilled
they are

 Economic stability: The extent to which economic activity is spread over a wide range of
industries and not heavily dependent on one activity

 Political instability: political unrest can negatively affect investment into a country as
well as how well it achieves its economic objectives
Gross Domestic Product (GDP)
The total value of output produced within the borders of a country in one year using resources
within the country.

(The output of all resources located within the borders of a country. These resources could be
owned by residents who live outside a country)

Gross National Product (GNP)

The total output of all the resources owned by residents of a country (even if these are abroad)

For example, a citizen who opens a business in another country

Per capita income (PI)

Per capita means “per person” so per capita income means average income.
 MAJOR ECONOMIC PROBLEMS OF THE CARIBBEAN

The countries of the Caribbean are classified by the World Bank as middle-income developing
countries.
Some progress has been made in recent years relating to living standards and quality of life,
however, there are still many problems preventing further economic growth and development.

These problems include:

 Unemployment

Unemployment rates show the proportion of the labour force without jobs. It is a waste
of economic resources. A country’s GDP would be higher if the unemployed were
working and adding to national output.

Types of Unemployment
- Cyclical unemployment
This is caused by low levels of demand during a downswing in the business cycle

- Seasonal unemployment
Unemployment caused by seasonal factors eg. The tourism sector needs fewer
workers during the off-peak times, agriculture, carnival

- Casual unemployment
This is short-term periods of unemployment between temporary jobs

- Frictional unemployment
Unemployment caused by workers being unable or unwilling to move to new
areas or accept employment needing different skills

- Residual unemployment
Unemployment that exists due to workers’ poor mental or physical health

 Population density
This measures the number of people living per square kilometre.

Problems of high population density include:

- high land and property prices
- overcrowded living conditions
- little room for the expansion of industry
- people are unlikely to be able to grow enough food to be self-sufficient

 Migration
This occurs when people leave their own country to live and work in another country.

Types of migration
- Domestic vs. International
- Emigration vs. Immigration

Emigration
The movement of people out of a country to work or settle in another country

Advantages to the home country Disadvantages to home country

Income sent back from abroad can add to Brain drain or when skilled labourers
a country’s foreign currency inflows leave a country causing shortages in the
industry

It reduces population density and If savings are taken out when people
pressure on local resources emigrate then this is an outflow of
foreign currency

If workers return, they can bring back

new experiences and skills

It reduces the rate of unemployment

Immigration
The movement of people into the country to work or settle there

Advantages Disadvantages
Immigrants may have skills that local Immigrants may take jobs away from
workers do not have local workers

Immigrants may work for lower wages It adds pressure on local services and
which help reduce labour cost resources eg. health clinics

Immigrants may be prepared to do jobs It can lead to cultural groupings that do

that local workers are not keen to do not become integrated into society.
These divisions can create social tension.

It adds to social and cultural diversity

 Debt Burden
Debt exists in a country when the government spends more than it earns in revenue.
This debt increases whenever there is a budget deficit and falls whenever there is a
surplus.
Large debts are a burden to the economy because taxes may have to increase to repay
the debt and the interest.
Governments may borrow from local or foreign institutions.

 Sourcing capital
The Caribbean is made up of many developing countries and as a result suffers from low
levels of savings.
Savings are needed for investment in new factories, equipment and research and
development.
Unless capital can be obtained from other sources, the level of investment in the
country would be low.

Low levels of investment mean:

- Low productivity
- Rising unemployment
- Uncompetitive exports

 Economic dualism in the region

This is the existence of two very different economic sectors in one country – one with
high technology and one with low technology.
For example, a country with very rural communities depending on subsistence
agriculture, as well as a highly technical or industrialized manufacturing sector.

 Lack of natural resources

Industries are declining as natural resources are not renewable e.g. Oil
Also, the Caribbean is a relatively small land area compared with countries like Australia
and Russia.
Our total supply of raw materials is limited. Other industries have to be built up to
replace those dependent on diminishing resources.

 Lack of industrialization
Caribbean economies have not reached the level of industrialization of most developed
economies.
They are more heavily dependent on primary production.
 Problems associated with low levels of industrialization
- They are often labour intensive
- World prices of these products fluctuate e.g. Oil and bauxite, which leads to variations in
the value of the nation’s output
- Extracting primary products gives a country little opportunity to add value so incomes in
the industry are low

PAST PAPER QUESTION

Discuss any THREE economic problems faced by Caribbean countries. (6 marks)

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 POSSIBLE SOLUTIONS TO ECONOMIC PROBLEMS

 Access to Foreign Direct Investment (FDI)

All developing countries try to attract FDI from more developed counties.
FDI brings finance from another country that can boost the host country’s economy.
Developing countries have insufficient funds to invest due to their low level of savings.

Advantages of FDI Disadvantages of FDI

It increases GDP by adding to national Profits are often sent abroad to the home
output country
If some output is exported, it increases Many high-level jobs may be taken by
the foreign exchange earnings for the employees of the home country
host
Jobs will be created by investment into Capital equipment may need to be
factories therefore reducing imported leading to an outflow of foreign
unemployment funds
The host country receives new The business may compete with local
technology, capital, management skill businesses and put their future at risk

 Development of human resources

A well-trained workforce is very important to a country.
If a workforce is lazy, has low skills and is not able to adapt to new ideas and technology
– economic growth would be low.

Governments of Caribbean countries are making efforts to improve the quality of

human resources by:
- Improving school infrastructure and equipment
- Raising educational standards
- Increasing student places in tertiary institutes
- Developing university courses geared towards the needs of modern industries
- Providing opportunities for lifelong learning eg. MUST Programme – Multi Sector
Skills Training, CCC, YTEPP

 Development of manufacturing, distribution and export sector

Manufacturing industries use raw materials, add value to them and sell finished
products.
There are significant advantages to developing the manufacturing sector of an economy
such as:
- Creates employment
- Increases tax revenue
- Increases GDP
- Increases exports and reduces balance of payments deficits
 Government policies to increase manufacturing:
- Grants to encourage businesses to set up
- Investing in infrastructure
- Training to upgrade skills of managers
- Low taxes on profits to encourage firms to reinvest

PAST PAPER QUESTION

Discuss any THREE solutions to a stated economic problems faced by Caribbean countries.
(6 marks)

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 BUSINESS TECHNOLOGY

ROLE OF INFORMATION COMMUNICATION TECHNOLOGY (ICT) IN BUSINESS

Business Technology refers to the application of science, data, engineering and information
for business purposes such as the achievement of organizational goals.
ICT is considered to be all uses of digital technology that exist to help individuals, businesses
and organizations use information.
ICT is concerned with the storage, retrieval, manipulation, transmission or receipt of digital
data. Importantly, it is also concerned with the way these different uses can work with each
other.

WAYS IN WHICH TECHNOLOGY HAS INFLUENCED BANKING AND COMMERCE

 Through the introduction of Automatic Teller Machines (ATMs) and Automated Banking
Machines (ABMs) which facilitate the deposit and withdrawal of funds, as well as other
services without having to go into a bank to access teller services. The location of ATM
machines in hotels, petrol stations, malls and supermarkets adds to the convenience of
customers who can transact business without having to wait in line at a bank

 The practice of on-line banking which enables customers to access their accounts from
home and other locations using personal computers. This facility enables customers to
check their balances from the comfort of their homes and permits easy and convenient
payment of utility and other bills. Customers with more than one account can also use
this facility to transfer funds from one account to another.

 Through electronic commerce (e-commerce). Using the internet, individuals and

businesses are now able to make business transactions via the World-wide web, without
having to visit a physical brick and mortar store. E-commerce has given rise to many on-
line stores which permit customers to browse for products and pay for them
electronically.
TYPES OF ICT USED IN BUSINESS

Traditional

(i) Productivity tools, for example: Word, Excel, Access (for databases), PowerPoint
(presentations), graphics (Adobe Photoshop)

(ii) Specialist applications like Accounting (QuickBooks), Computer Aided Design (CAD),
Management Information Systems (MIS)

Digital communication technologies:

(i) Internet
- Buying and selling goods
- Collecting marketing data
- Promoting the business and its products

(ii) mobile
The buying and selling of goods using mobile technology (eg. Apple Pay which
involves paying for goods and services with a smartphone)
Good mobile connections are important as well as safe payment systems to prevent
online fraud

ICT can lead to:

 improved communication in business operations through the use of mobile phones,
emails, internet and intranet e.g. mobile money applications, e-commerce,
management information systems;
 improvements in record keeping and management e.g. using Quick Book, MS Projects
 online market research and information gathering on competitors;
 more efficient deliver using GPS systems
 using the internet to advertise products
 use of robotics and computer aided design software to enhance production; Computer
aided manufacturing to increase production efficiency
 improved stock control management through the application of electronic point of sale,
electronic data interchange and electronic funds transfer
E-COMMERCE AND E-BUSINESS

In both cases, the e stands for "electronic networks" and describes the application of electronic
network technology - including Internet and electronic data.

E-commerce covers outward-facing processes that touch customers, suppliers and external
partners, including sales, marketing, order taking, delivery, customer service, purchasing of raw
materials and supplies for production and procurement of indirect operating-expense items,
such as office supplies. It involves new business models and the potential to gain new revenue
or lose some existing revenue to new competitors. Electronic Data Interchange (EDI) – the
exchange of information to improve and change business processes.

E-business includes e-commerce but also covers internal processes such as:
- Production: linking machinery to computers to control operations eg. In a bottling factory, an
electronic device can check that the required quantity of liquid is filled into a bottle

- Inventory management: software is used to track inventory levels, orders, sales and deliveries.
It can also reorder new stock when it falls below a certain pre-determined level.

- Product development: designs for new products can be created electronically using a
computer or electronic drawing pad which are then converted into prototypes

- Risk management: the mathematical calculation of risk taken, for example the likelihood of
incurring a loss/stock not being sold.

- Finance: The electronic handling of purchases and sales ledgers, invoicing, payments, creation
of financial statements.

- Knowledge management: the understanding of information and how it can beused to make
decisions eg. Sales reports, financial calculations, what competitors are doing and market
research reports.

- Human resources: there are programmes that support HR such as databases of employee
records, payment software and online training courses.

E-business strategy is more complex, more focused on internal processes, and aimed at cost
savings and improvements in efficiency, productivity and cost savings.
WAYS IN WHICH ICT CAN BE USED TO IMPROVE EFFICIENCY OF BUSINESS OPERATIONS

It is important for businesses to keep up with the changing pace of the technological
environment. Business efficiency can be improved by ICT in the following ways e.g.:
 speed and time
 storage: large quantities of data can be stored on servers or clour servers
 more efficient business operations e.g. document templates; digital filing system;
 instant communication through the use of emails, video conferencing;
 access to information via websites; request information at any time; share information;
 use software programmes to collect and interpret data;
 customer relationship management software records customer information e.g. buying
history, follow up on complaints
 automation

BENEFITS OF TECHNOLOGY TO BUSINESS

 reach more potential customers, develop a business relationship with potential

customers

 streamline operations, reduce costs, improve efficiency, maximise profit, minimise

waste, devote talent to core business instead of overhead

 provide better service to customers

 support better relationships with key partners

 allow customers to better guide the business

Consequences of unethical use of ICT:

 Privacy: Privacy or the 'right of a person not to reveal information about himself or
herself' is of prime concern when using ICT applications. In the business environment
privacy can be compromised when systems are attacked (unauthorized access/hacking).
This has become an issue with the increase use of mobile banking, e-banking and e-
commerce e.g. identity theft
Data Protection Acts are designed to protect personal data

 Security: Information stored in databases is not 100% safe as information can be leaked
to outsiders. Company information can also be hacked from outside (when someone
who is not authorized gains access or control of computers/networks)

 Businesses can seek to upgrade security via password security and personal
identification numbers.

 Intellectual Property rights are considered infringed when intellectual work e.g. writings,
theories, studies, songs, music etc. protected by law is used without permission from
the owner. This involves piracy of material protected by intellectual property rights that
is, the unauthorized use, copying, distribution or downloading of software, games,
information. The person or business can lose income and control over material.

 When employees access social media during the course of working hours, unless for
business use, this can prove to be a distraction from doing one's job.

 Using social media to engage in cyber bullying or intimidating other persons or

manipulating media to damage the image of competitor's product.

 Impact on humans: fraudsters use the internet to con money of out people by posing as
genuine sellers. Unethical businesses can invade people’s privacy with unwanted
advertising. The internet is also used to spend money on things people do not need or
cannot afford like gambling websites or places that sell on credit terms which are
difficult to repay.