d

The Mobilitycare Quantity and Quality of the Factors of

Production

Choice

Similarly, consumers and governments only have a limited amount of money

but have many needs and want to satisfy.

Should the Government cut taxes

Proponents of tax cuts argue that cuts increase an individual or family's

disposable income, spur spending, and help grow the economy. Critics of tax
cuts claim that cuts only benefit the wealthy and reduce necessary
government services for the lower-income bracket.

Microeconomics & Macroeconomics

Microeconomics is the study behaviour of individuals and firms and the
performance of individual markets,

Macroeconomics is the study of the whole economy. This includes such things
as the number of people employed and the total output of an economy.

Marketing Systems
1. What us the main aim of a firm producing goods and services in a
market economy?
6+-
To make a profit sustainable enough to live comfortably and to continue
producing goods and services.

2. How do firms in this type of economy decide what to produce?

They analyse the market and the product which is in the highest command,
and then make the decision to produce it depending on their resources.

3. In a market system, how do firms decide how to produce goods and

services?

They decide based on the amount of resources they have, production cost and
profit to be made.

4. Once the goods and services have been produced, who are they for?

They are for (depending on the product) the public or a firm, either way, if it is
in demand, it will be purchased.

5. In deciding to produce shoes, Savita chose the cheapest method, which

meant she only needed 20 of her 30 workers. What will happen to the 10
workers that are not needed?

Either, she can expand her production and increase production speed and
amount, or she can fire the 10 extra workers.

The Price Mechanism

A MARKET brings together the producers and the consumers of a good or

service so that they can engage in exchange.

PRICE MECHANISM refers to the system where the forces of demand and
supply determine the prices of goods and services.

What's good about the market system?

● A wide variety of goods and services will be produced to satisfy different

consumer wants.
● Firms respond quickly to changes in consumer wants and spending
patterns
● The profit motive of firms encourages them to develop new products
and use the most efficient methods of production
Price ($) QD for Jane QD for Steven QD for Mata QD for the market

1 5 6 8

2 4 5 6

3 3 4 5

4 2 3 4

5 1 2 3

Demand

The quantity of a good that consumers are willing and able to buy at a
particular price, Ceteris Paribus*

Substitute Goods are goods of which the demand can change with factors
other than the price. Like Bread, Aerated Drinks, Transport etc. One prominent
example is Bread, the supply of bread like wheat could be scarce, now the
supply of bread is less and the demand goes up, however, if there is a surplus
in wheat, demand may go down.

A rise in Demand: The market demand curve shifts outwards

Possible causes are:

● An increase in disposable incomes after tax

● A rise in the price of substitutes
● A fall in the price of a complement
● Tastes and fashion favour the product
● An increase in advertising
● A rise in the population
● Other factors, eg. hot weather increases demand for cold drinks and sun
creams

A fall in demand
The market demand curve shifts inwards
Possible causes are:

● A fall in disposable incomes after tax

● A fall in the price of substitutes
● A rise in the price of complement
 ● Tastes and fashion favour the products
● A reduction in advertising
● A fall in the population
● Other factors eg. hot weather reduces the demand for winter coats

Income and demand

But will a rise in consumer income always lead to an increase in demand for a
product?

Yes, if the product is normal good

As income rises, consumers are willing and able to buy more

No, if the product is an inferior good

As income rises, consumers buy less as they witch their demand to other more
preferable products

Market Systems
Hunger Games Economics

Opportunity Cost
Specialization
Comparative Advantage

How the Market System Can Fail

Market Failure: When free markets fail to produce goods and services that are
worthwhile or when the decisions of producers or consumers result in wasteful
or harmful activities

Capitalsm Facts

● Firms will only produce goods and services if they are profitable
● Firs will only supply products to consumers whoa re able to pay for them
● Resources will only be employed if it is profitable to do so
 ● Harmful goods may be produced if it is profitable to do so
● Some producers and consumers may ignore the harmful effects of their
activities on others and the environment
● Some firms may restrict competition, mislead consumers and charge
them very high prices

Private Costs & Benefits

Private Sector Firms

Aim: To maximise their profits

Private Costs: Wages, rents, components, insurances premiums, telephone bills,
electricity
Private Benefits: Revenue from the sale of products to consumers

Consumers

Aim: To maximize their utility (or satisfaction)

Private Costs: Payments for the goods and services
Private Benefits: Satisfaction from consuming the products they buy

External Costs & Benefits

Costs: Arises when the economic activity of one group has a negative impact
on others and is not taken into account or pair for by those creating it

Benefit: Arises when the economic activity of one group have a positive impact
on others and is not taken into account or paid for by those who benefit

Social Cost

Formula: Total social cost = Private costs + External costs

Conflict My choice and reason Does my peer agree or
disagree, why?

Should we cut down forests No, there will already by flat They don't think they should
to grow more crops to feed land in less developed do it because of
people in less developed countries, if not, then we can deforestation is bad.
countries? cut down some trees, but
only a little bit and use that
space and maximise
efficiency for growing crops

Should we build more Instead of using the money No, flooding natural land is
reservoirs to provide to destroy the natural land, a waste of resources
drinking water by flooding we can instead collect water
out the remaining areas of from the rain and the sea
natural land? and spend the money on
making a water filtration
hub

Should we devote more No, our weapon defence is No, our weapon defence is
resources to buying already good, and we are a already good, and we are a
weapons to defend our neutral country, we have neutral country, we have
country or spend more on allies, and Singapore allies, and Singapore
developing new forms of already produces a lot of already produces a lot of
energy that do not harm the carbon emissions. carbon emissions.
environment?

Should the government They should increase taxes, Decrease taxes because
increase taxes to provide because if they were to some people can't afford to
and maintain national parks charge national park entry pay higher taxes
or lower taxes and charge fees, not that many people
for national parks would continue to go, its
legal tax-evasion

Should develop countries Yes, because they can't yes

pay undeveloped-countries afford to maintain their
to protect their natural natural land, and it is
environments, including important that they do
tropical rainforests

1. Consumers aim to maximise their satisfaction from consuming while

minimizing their costs when buying goods.
2. Producers aim to maximise their revenue from sales while minimising
their costs of production.
3. In other words, both consumers and producers are concerned about
maximising their private benefits while minimising their private costs
4. However, production often has external costs (pollution) And external
benefits (beekeeping) that are not accounted for.
5. Litter, vaccination
6. Fail
7. Subsidies
8. Taxes
9. Nationalise
10. Private
 Households

When firms grow, they hope to achieve economies of scale

Economics of scale are cost saving from increasing the scale of production in a firm or
industry, the firm average costs decrease with the increased amount of output.

Internal Economies of Scale

Increasing the size of a firm provides an opportunity to change the way it is organized, run
and financed to reduce the average or unit cost of production.

External Economies of Scale

These are cost savings enjoyed by firms in large industries compared to firms in smalled
industries

Money

Money changes the standard of living. Money is the medium of exchange. Helps consumers
meet their needs and wants. Helps firms buy their buy their factors of production. Helps
goveremntns to create public and demerit goods.

Barter system - trading with items of value

Forms of money over the years - gold, silver, copper, shells, fish, precious stones, cattle,
sheep, tobacco, cheese, textils, paperbills ect.

Functions of Money -
Money acts as a medium of exchange
Money acts as a erasure of value
Money acts as a store of value
Money acts as a standard if deferred (delayed) payments.

Characteristics of Good Money:

Durability - lasts for a long period of time to maintain its value

Divisibility - To be a valued medium of [Link] be divisible (a 100$ note can be

changed to $50, $10, $20 notes easilty)
Scarcity -limited supply to maintain value

Acceptability - It must be valued and widely recognised as a legal way to pay for goods and
services

Portabiliy - Must be easy to carry and conceal

Uniformity - To be a measure of value, all $100 dollar notes must be valued the same

Centeral Banks are responsible for:

● Managing the creation and distribution of currency

● Regulating commercial banks to ensure that the products thy provide contribute to a
healthy economy
● Setting the interest rate in an economy.
● Commercial banks in which they save a required reserved of their cash.
● Acting as a bank to the commercial banks in the economy.
● Acting as a lender of last resort to commercial banks.
● Managing the receipt of government tax revenues and taking care of payments to all
government employees
● Managing the exchange rate of a nations currency
● Working with other central banks in the global financial system to monitor corrupt
money flows

Funtions of Comercial Banks:

- Accpeting deposits (Firms and households require a place to stre their money)
- Current Accounts (This is a type fo deposit account created to facilitate a large
number of transactions)
- Making loans (Firms and households make asses purchases that require large
amounts of money)
- Creating credit (Key feature that shows the difference between commercial banks
and a central bank)

Household: Where people live together as a family or in a family situation

Spending, Saving, Borrowing

The ability to spend, save and borrow money starts with the ability to gain income
This is heavily influenced by the amount of income a household has.
When income changes, their spending, saving and borrowing pattern also changes

Interest

The reward for saving and borrowing.

The interest rate in an economy is set by the central bank, they discuss on a monthly or
quarterly basis if interest rates should change. Any changes in interest rates leads to
consequences that impact spending, saving and borrowing.
 Impacts:

Spending Saving Borrowing

Decreasing Rates Little Impact on Low-Income Little impact of Low-Income This will have no impact on
Households household low-income households as
money lenders will retain their
Medium & High-Income Medium and high-income high rates
households are likely to increase households are likely to decide
consumption of expenditure as that the interest rates is too low Medium and high-income
they possibly save less and to encourage saving. Households may decide to
borrow more. borrow more money from
commercial banks, since it is
cheaper to repay. However, if the
confidence in the economy
remains low, even with
low-interest rates,
medium-income households may
decide not to borrow since they
are fearful for the future

Increasing Rates Low-Income Households are All Households are likely to save Low-income households may find
likely to change their expenditure more because the reward for that money lenders increase their
patterns as most of their income saving has increased. rates even higher.
goes to necessities.
Both medium and high-income
Medium-income Households are households are likely to decrease
more likely to decrease spending their level of borrowing as they
on expenditure, a smaller are paying more to support their
proportion of their income will be existing borrowing.
spent on luxuries

High High-income households

are likely to borrow less,
however, their spending patterns
won't change very much

The influence of confidence on spending, saving and borrowing

When an economy is doing well, firms sell goods and services and pay wages for the labour
required to produce them.

Firms will also invest in new technology which further boosts economic growth , referred as a
boom period of economic growth.
 A recession is the opposite fo a boom and is a period of 6 months or more of negatifevc
economic growth

For medium and high income households, spending and borrowing usually decrease with a
decrease in confidence, while saving increases. Low income households continue to spend
most of their income on meeting their needs.

In recession, households fear for the future as employment often remains uncertain. Scared
of losing their jobs, employees save as much as possible.

The opposite is true in a boom. Consumption and borrowing often increase, while savings
can decrease as households believe their income for the foreseeable future is secure.

Workers

Factors affecting an individual’s choice of occupation

There are thousands of different types of jobs to choose from. These include highly skilled
jobs such as surgeons or ariforce pilots; white collar jobs such as bankers lawyers,
politicians, book-keepers or supply-chain managers; people-related jobs such as teachers or
customer-service agents; blue collar jobs such as plumbers, construction workers and
drivers; creative jobs such as journalists, media-producers and artists. However, when
people choose which job career they wish to pursue, they are influenced by wage and
non-wage factors associated with each occupation

Wage factors

Wage factors can be defined as the financial payments that workers receive for their labour.
There are many different forms of financial remuneration to consider when evaluating the
rewards for your work

Type of Payment Description Example

Salary Amount of money paid on a The average salary for a doctor

agreed regular basis, usually in france in 2020 is 143 000
monthly. Employment contracts EUR. This would equate to a
will often state an annual salary monthly salary of 11 917 EUR
which is then divided and paid
 monthly. Monthly hours worker
may vary but the pay does not

Wages An agreed amount of money per Students who work in a coffe

hour. It is usually linked directly to shop in Berlin are usually paid an
the number of hours worked. hourly rate of 19.9 EUR. This rate
Often paid to the worker has been set by the government
fortnightly and is called a minimum wage.

Bonus Paid in addition to a salary and is Tim Cook (CEO of Apple)

usually a one-off payment. It is received 12m USD bonus at the
dependent on the company start of 2019 as a result of
earning high levbels of profits, or Apple’s high profits in 2018
a reward for exceptional worker
performance.

Commision A payment which is typically a Real estate agents in canada

percentage of the value of the charge their cluenbts with a
transaction involved. commission rate of 3%-7% of the
value of the property sold

Piece Rate Pay An agreed amount paid per Used in the clothing industry in
completed item that the worker Bangladesh
produces

Performance-related pay (PRP) Payment to the worker based on From 2006, The Uk Goverment
how well they perform. Workers introduced PRP inkto many
doing exactly the same job may public cestor remuneration
be paid differently if one person policies. This included teaching
excels and nursing

Share Option Payment through the issuing of Elon Musk, The CEO of tesla
additional shares in the company. received 2bn USD of share
The value of the payment can be option in Tesla in 2019
calculated on any given day as:
number of shares x share price.

Fringe Benefits Benefits provided in addition to Working for google provides

the normal salary such as benefits from free meals to free
healthcare, schooling, a company massages
car or free lunches

Non Wage Factors

● Family Influences : Families share their passions and skills with each other, which
often leads to an occupation choice in a similar or related industry
● Job Secutiry : Occupations offer different contracts with varying levels of job
security.
● Length of Training or Level of Education Required : The longer the training
required, the less likely people are to choose that occupation
 ● Job Satisfaction : Doing what you love is a major motivator in pursing an
occupation.
● Career Prospects : Jobs with a clear pathwayfor an advancement (and
accompanying salary increases) are often more desirable.
● Level of Challenge : Is the job interesting and does it provide a rewarding challenge
on a daily basis? If so, this keeps workers motivated for longer periods of time.
● Status : Some jobs carry a higher recognition in society, for example doctors,
lawyers and bankers.

Wage determination: Demand & Supply

What determines the level of pay for a job

There are a number of factors that work together to determine the wage for a specific job.
These are called wage determination factors and include the demand and supply of labour,
the relative bargaining power of the woroker, and government policy regarding minimum
wages or welfare payments

Demand & Supply

The demand for labour by firms is said to be a derived demand, This means the demand
exists because it is dependent on the demand for goods and services. If demand for goods
and services falls, then the demand for labour galls and vice versa. If there is a high supply
of labour in relation to the demand for labour then the price of that labour will be low. If there
is high demand for labour in relation to the supply of labour then the price of that labour will
be high.

Analyising changes to the labour market

Whenever any change occurs to either the demand or supply of labour, there will be a shift in
one of these curves (QuantityxWage) which will readjust the wage rate and quantity of
workers in the market.

Factors that can shift the demand curve for labour include :
 ● Changes to the demand for goods and services that th labour is used to produce.
● Changes in the productivity of the workers.. If workers are more procucitve, demand
for them increases; if they are less productive then the demand will decrease
● Changes to the production process. For example, a move from labour intensiver to
capital intensive production would decrease the demand for labour.

Factors that can shift the supply cure for labour include :

● Changes to a country population, eityher through birth, death or net migration. A

higher populatiuon will see the supply of workers increase the the wage will likely fall.
● Changes in the access for education and training. Seven countries in Europe offer
free university education and this has increased the supply of skilled workers

Wage determination: bargnaining power and government policy

Relative Bargaining Power

Several factors can give workers more bargaining power in wage negotiations. If they belong
to a trade union, have excellent skills and experience, or have worker for an admired
company, they are likely to be able to negotiate higher wages. Generally, the less experience
that workers have, the less bargaining power they have.

Government Policy

A minimum wage i sa wage that is set above the normal market rate and is the legal
minimum that can be paid to a worker in any industry. Different countries and states have
different minimum wages.

Another factor that determines starting wage levels is the amount of welfare the poor or
unemployed receive from the government.

General Stuff

Land
Land is a factor of production that comes from nature, if any part of nature isused in the
production of goods or services, it will be recognised as land.
Labour
Labour is a factor of production that includes both the pyhiscal and mental skils used to
assist in bringing a product of service to a market. For example, Assembly line, construction
and mining work all use physical skills more than mental ones

Captial
Manufactured products that are used to produce goods and services are capital. These
manufactures products are normally tools such as plant and equitment that are used to
produce goods and services.

Enterprise
Enterprise is the final factor of production, and it is the factor that packages all the other
inputs into a sellable good or service in the product market. The entrepreneur must have a
willingness to accept the unpredictable nature of markets and the profits or losses that may
result.

PPC

Shifts

Causes:

● Capital: If an economy is using the latest tools available then productivity or output
per labourer will rise, and the PPC will shift outwards. However if an economy does
not update its machinery and uses outdated tools and equipment, then the output per
worker will fall, and the PPC will shift inwards
● Labour: The more highly skilled an economy’s labour force is, the better the quality of
goods produced. On the otherhand countries that do not invest in human capital will
experience lower economic growth and an inward-shifting PPC. If the quantity of
workers in an economy were to increase, for example through legal migration
policies, then the PPC would shift outwards.
● Land: If there were new discoveries of these resources, this would increase the
capacity of the economy and give workers more inputs to work with, increasing
production capacity. This would shift the PPC outwards.
● Technology: Improvements in technology will shift the PPC outwards as more goods
and services can now be produced with the same inputs.
Types of competition:

Price:

● Competing with rival suppliers on product price

However
● If demand is price inelastic, with lower prices revenue will fall
● If price is cut below average cost, each unit will be sold t a loss

Non Price:
● Competing on [roduct features other than price
● For example, product variation such as offering a range of colours, after-sales care
an promotions including loyalty cards, competitions, etc

The Power of Advertising

● It can create and increase demand which mean a higher quantity sold and price
● It can create a powerful brand image for a product and increase customer loyalty

Monopoly

- A single firm with sufficient market power to restrict competition and set the market
price is a monopoly

Market Share

Why monopolies can be bad for the society?

When a monopoly exists in a society, it usually dominates the market of a certain product,
take Apple for example. They are a monopoly because they mainly dominate the market of
mobile devices.

However when a monopoly exists in a society, usually they can increase the prices of their
products to generate more revenue, doing this will not decrease their sales marginally
because they are a monopoly, and this will cause their customers to spend more money on
their products.
In addition, the youth of the society will have the mindset that if they were to have that type
of product, it would have to be from that monopoly, causing their parents to spend more on
them, and this could be bad for the economy because the competition of the market would
have decreased sales and that usually leads to laying off people to minimise loss of profits.

Thus, having a monopoly that is dominating an industry can be quite bad for a society
because it can cause families to spend more money, and can also cause people in rival
companies to be laid off.

Barriers to entry

Natural Barriers

- Natural barriers to entry include monopolization and high startup costs, while artificial
ones include predatory pricing and patents

Artificial Barriers

- Artificial barriers to entry may arise when firms in a certain market engage in
practices that make it more difficult for other firms to enter.