commerce Flashcards
on thursday first period
Characteristics of an Entrepreneur
Opportunity Recognition: Entrepreneurs see and seize business opportunities.
Market Gaps: Identify unmet demands or improvements in existing products.
Strengths Alignment: Select opportunities that match their strengths and personality.
Objectives & Vision: Establish clear goals and a motivating vision for the business.
Innovation & Resilience: Embrace change and continuously improve products/services.
Case Study - Dion Devow
Business: Founded Darkies Design in 2010, focusing on Aboriginal-themed apparel.
Market Gap: Recognized a lack of Indigenous Australian clothing.
Controversial Name: Reclaimed a derogatory term to express pride in heritage.
The Selling Process
Product Differentiation: Make products appear unique or superior to competitors.
Success Factors:
Changes in packaging or labeling.
Quality service and convenience.
Better value for money.
Factors Influencing Purchase
Customer Service: High-quality service enhances customer experience.
Convenience: Products that save time, e.g., fast food.
Value for Money: Competitive pricing strategies, e.g., tiered car models.
Quality: Durable and well-designed products stand out in the market.
Targeting Customers
Market Segmentation: Divides total market into groups based on common traits (age, gender, etc.).
Target Market: Primary (major revenue source) and secondary (backup market).
Niche Marketing: Focus on a very specific segment of the market.
Promotion Strategies
outh Targeting:
Build brand loyalty through logos and social media.
Use buzz marketing for word-of-mouth promotion.
Regulation:
Governed by the Competition and Consumer Act 2010 and AANA Code of Ethics.
ASB ensures compliance with advertising standards.
Marketing Strategies
Promotion: Methods to inform, persuade, and remind customers.
Forms of Promotion:
Personal selling.
Relationship marketing.
Public relations.
Sales promotions (coupons, free samples).
Profit and Loss Statements
Trading: Income from selling goods/services.
Income Statement Components:
Revenue: Total income from sales.
COGS: Cost of goods sold.
Gross Profit: Revenue - COGS.
Expenses: Costs incurred in running the business.
Net Profit/Loss: Gross profit - expenses.
Circular Flow Model
Definition: Illustrates connections between five economic sectors: consumers, businesses, financial institutions, government, and overseas.
Injections & Leakages: Help measure changes in economic activity.
Consumer Sector
Resources: Consumers possess land, labor, capital, and enterprise.
Consumption: Households spend their income on goods and services.
Interdependence: Consumers rely on businesses for goods/services; businesses depend on consumers for income.
Business Sector
Resource Exchange: Individuals sell resources to businesses for income.
Production: Businesses utilize these resources to produce goods/services.
Interdependence: Businesses need consumer purchases to thrive.
Financial Sector
Role of Financial Institutions: Act as intermediaries between savers and borrowers.
Saving: Leakage from the flow; money set aside for future use.
Investment: Injection into the flow; borrowed money used for business expansion.
Government Sector
Levels of Government: Local, state, and federal.
Taxation: Leakage; taxes collected from income/profits.
Government Expenditure: Injection; spending on infrastructure, welfare, education, and health.
Overseas Sector
Exports: Injection; Australian goods/services sold abroad.
Imports: Leakage; purchasing foreign goods/services.
Economic Impact:
Injections > Leakages = Economic Expansion
Leakages > Injections = Economic Decline
ACCC - Australian Consumer Competition Commission
Role: Ensures fair trading and consumer protection in the marketplace.
Ethical Decision-Making
Corporate Social Responsibility (CSR): Businesses’ commitment to ethical practices, sustainability, and community engagement.
The Business Cycle
Definition: Fluctuations in economic activity over time.
Phases:
Recession: Two consecutive quarters of negative growth.
Depression: Four consecutive quarters of negative growth.
Causes of Fluctuations: Consumer spending, investments, government spending, and exports.
Economic Changes
Contraction:
Falling output and consumer spending.
Decreasing inflation, wages, and rising unemployment.
Expansion:
Rising output and consumer spending.
Increasing inflation, wages, and lowering unemployment.
Demand Definition
Demand: Quantity of a product consumers are willing to purchase at a specific price at a given time.
Law of Demand
Law of Demand:
As price increases, demand decreases.
As price decreases, demand increases.
Changes in Demand
Expansion in Demand: Increase in demand for goods and services.
Contraction in Demand: Decrease in demand for goods and services.
Supply Definition
Supply: Quantity of a good or service businesses are willing and able to offer at a specific price at a given time.
Law of Supply
Law of Supply:
As prices increase, quantity supplied increases.
As prices decrease, quantity supplied decreases.
Changes in Supply
Expansion of Supply: Increase in supply for a good or service.
Contraction in Supply: Decrease in supply for a good or service.
Market Equilibrium
Market Equilibrium: The point where the supply and demand curves intersect; buyers and sellers agree on a price.
Price Mechanism
Price Mechanism: The interaction of supply and demand determines the price and quantity of goods/services.
Price Changes
Price Changes: Result from changes in demand and supply, influenced by factors such as:
Rise in consumer income
Changes in consumer taste/preferences
Population increase
Substitute prices
Complementary good prices
Increase in Demand
Increase in Demand: Shifts demand curve to the right;
Results in higher equilibrium price and quantity.
Decrease in Demand
Decrease in Demand: Shifts demand curve to the left;
Results in lower equilibrium price and quantity.
Causes of Demand increase:
Causes of Demand Increase:
Rise in consumer preferences.
Population growth.
Cheaper substitutes.
Expectations of future price increases.
Causes of Demand Decrease:
Causes of Demand Decrease:
Fall in consumer preferences.
Population decline.
Cheaper substitute goods.
Expectations of future price decreases.
Increase in Supply
Increase in Supply: Shifts supply curve to the right;
Results in lower price and higher quantity.
Decrease in Supply
Decrease in Supply: Shifts supply curve to the left;
Results in higher price and lower quantity.
Factors Causing increase in supply
Factors Increasing Supply:
Increased efficiency.
Decrease in production costs.
Favorable climatic conditions.
Increase in number of suppliers.
Factors Decreasing Supply:
Factors Decreasing Supply:
Decreased efficiency.
Increase in production costs.
Unfavorable climatic conditions.
Decrease in number of suppliers.
What is a Market?
Market Definition: A situation where buyers and sellers come together to exchange goods and services.
Types of Markets
Types of Markets:
Retail market
Labour market
Financial market
Stock market
Retail Market Definition
Retail Market: Markets where consumers buy most of their goods and services.
Retail Market Examples
Examples of Retail Markets:
Shopping centres in the CBD
Local shopping centres
Shopping strips
Group of shops
Online shopping websites
Online Shopping Statistics
Online Shopping (2019):
Over $23 billion in sales.
6.6% of total retail.
80% of purchases made by Australians.
Labour Market Definition
Labour Market: The interaction of buyers (employers) and sellers (employees) of labour.
Labour Market Characteristics
Employers: Demand skills of employees.
Location: Operates without a specific location, using communication methods.
Connection Methods: Job signs, newspapers, online job boards.
Australian Wages
Wages Regulation: Minimum wage as of July 1, 2019, is $19.49 per hour or $740.80 per 38-hour week.
Financial Market Definition
Financial Markets: Connect savers and borrowers within an economy.
Financial Market Dynamics
Savers: Households deposit savings; businesses save profits.
Borrowers: Individuals seeking loans for houses, cars, vacations, and businesses aiming to grow.
Interest in Financial Markets
Interest: The cost of borrowing money.
Bank Operations:
Banks pay interest on deposits.
Charge higher interest rates on loans.
Profit from the difference, promoting funds flow and supporting savings and investments.
Stock Market Definition
Stock Market: The relationship between buyers and sellers of shares in public companies.
Shares and Investments
Shares: Represent units of ownership in a company.
Purpose: Companies sell shares to raise funds for investments; individuals and businesses buy shares to invest savings.
Australian Securities Exchange (ASX)
ASX: The primary stock exchange in Australia.
Share Prices: Fluctuate based on demand; influenced by company performance.
Customary Trading Practices
Trading Method: Swapping or bartering items; one item exchanged for another.
Benefits of Trade:
Access to items not locally available.
Exposure to new ideas and cultures.
Complex Trade Routes: Facilitated exchange across different regions and communities.
Cultural Exchange
Cultural Practices: Items and cultural practices passed through different language groups, enhancing inter-community relationships.
Participation in Markets- Aboriginal
Trade Variations:
Coastal tribes exchanged shells and fish.
Inland tribes exchanged herbs and stones.
Respect and Boundaries: Crucial for successful trade; involved respect for rights and cultural differences.
Contemporary Trading
Modern Enterprises: Indigenous-owned businesses now include:
Art and culture.
Tourism.
Land management.
Cultural Knowledge: Recently integrated into enterprising practices.
Case Study - Marrakulu Cultural Tours
100% Indigenous-owned enterprise.
Provides guided tours of Kakadu National Park.
Cultural Sharing: Tours focus on sharing knowledge of land, traditional practices, and stories.
Indigenous Tourism
Tourism Australia: Promotes Aboriginal tourism experiences.
Aboriginal Tourism Australia (ATA): Supports and showcases Indigenous tourism initiatives.
Reasons for Government Intervention
Market Failures: Ensures resources are allocated efficiently to correct failures in the market.
Addressing Externalities
Externalities: Government intervenes to mitigate negative impacts (e.g., pollution) through regulations.
Promoting Competition
Competition: Prevents monopolies and promotes consumer choice in the market.
Providing Public Goods
Public Goods: Ensures availability of essential resources and services for all.
Protecting Consumers
Consumer Protection: Regulates product safety and quality to safeguard consumer interests.
Redistributing Income
Income Redistribution: Reduces inequality through taxes and welfare programs.
Stabilising the Economy
Economic Stabilization: Uses policies to manage economic fluctuations and promote stability.
Encouraging Development
Development Investment: Invests in infrastructure and education to promote economic growth.
Preventing Environmental Degradation
Definition: Deterioration of the natural environment due to pollution and habitat destruction.
Government Actions for Environmen
Regulations: Imposes laws to prevent environmental degradation, such as:
Banning littering and harmful chemicals.
Restrictions on building development to protect natural areas.
Case Study - EPBC Act 1999
Environment Protection and Biodiversity Conservation Act 1999
Purpose: Balances environmental protection with socio-economic development through ecologically sustainable practices.
Main Aims:
Protect the environment, especially nationally significant areas.
Safeguard world and national heritage.
Conserve Australian biodiversity.
Promote sustainable development practices.
: Conservation of Natural Resources
Challenge: Balancing short-term resource exploitation for immediate economic gain with long-term sustainability.
Market-Based Policy on Carbon Emissions
2012 Carbon Pricing Scheme: Implemented charges for businesses emitting excessive carbon dioxide.
2014 Direct Action Plan: Government paid businesses for reducing carbon emissions.
Ethical Decision Making & CSR
Corporate Social Responsibility (CSR):
Practice of businesses considering the interests of stakeholders, society, the environment, and their economic decisions.
Benefits of CSR
Business Benefits:
Consumers recognize and favor ethical businesses.
Positive consumer reactions can enhance brand loyalty and reputation.
Positive Case Study - Patagonia
Overview: Outdoor gear company with a strong commitment to sustainability and CSR.
Patagonia Initiatives
1% for the Planet (2002):
Donates 1% of annual sales to environmental non-profits, totaling $100 million by 2021.
Actively opposes threats like national monument reductions and Arctic oil drilling.
By 2021, 81% of materials used were recycled or organic.
Negative Case Study - Airbnb
From 2013 to 2023, 35,000 complaints about hidden security cameras or audio devices.
Airbnb did not deny evidence regarding the volume of recordings.
Claims that disclosure of recordings is standard in consumer agreements.
Australian Resource Boom Overview
Resource boom began in the early 2000s, with significant growth starting in 2003.
Demand Surge
Demand Increase: Rapid rise in demand for Australian minerals from China.
Price Impact: Dramatic increases in coal and iron ore prices boosted Australia’s economic growth.
Benefits of the Boom
Foreign Investment: Increased investment in new mining projects.
Employment Growth: Creation of jobs in mining and related industries.
Economic Growth: Higher overall economic growth rates.
Government Revenue: Increased tax revenue (especially company tax), resulting in 12 years of budget surplus.
Infrastructure Development: New infrastructure projects enhanced regional development.
Living Standards: Improved living standards for many Australians.
Problems Related to the Boom
Rising Prices: Increased costs for consumers as commodity prices soared.
Wage Inflation: Skilled labor wages increased, putting pressure on businesses.
Currency Appreciation: The Australian dollar appreciated, making it harder for other industries to compete internationally.
Stages of the Boom - Stage 2
Increased Global Investment: Other countries began investing in mining, leading to increased global supply.
Price Decline: As supply rose, the price for Australian ore began to decrease despite earlier high demand from China.
Stages of the Boom - Stage 3
Investment Slowdown: Australia experienced a slowdown in new investments.
Production Phase: While prices dropped, the volume of mineral exports remained high, initially cushioning the economic impact.
Economic Growth Slowdown: Lower prices for minerals led to a decrease in overall economic growth.
Mining Boom Stages
Stage 1: Rising commodity prices boost domestic incomes and make mining investments more viable.
Stage 2: Increased mining investments as high commodity prices green-light more projects.
Stage 3: New mining capacity comes online; exports ramp up despite slowing investments.
Stage 4: Maintaining high commodity prices post-2017, influenced by changes in consumer diets and global events (e.g., China’s food scandals, Brazil’s dam collapse in 2019).
COVID-19 Pandemic Overview
Economic Model: GDP = C + I + G + X – M
C: Consumers
I: Investment
G: Government expenditure
X: Exports
M: Imports
Consumer Impact
Consumer Role: Represents 60% of the circular flow.
Lockdowns: Prohibited economic activity, drastically reducing consumer spending.
Spending Shifts: Increased spending on emergency supplies and home entertainment.
Investment Impact
Investor Sentiment: Share market fell by 73%.
Delayed Plans: Businesses postponed investment projects due to uncertainty.
Savings Behavior
Savings Surge: Household savings increased dramatically by 20%.
Concerns: Heightened worries about job security and healthcare costs.
Government Expenditure
Increased Spending: Government expenditure rose significantly.
Budget Deficit: $132 billion spent on welfare for the unemployed.
Tax Revenue Impact
Declining Taxes:
Less income tax collected due to rising unemployment.
Decreased GST revenue from low consumer spending.
Lower company tax revenue due to decreased business earnings.
Reduced capital gains tax from falling share prices.
RBA Overview
RBA (Reserve Bank of Australia): Responsible for monetary policy and maintaining economic stability.
Objective: Support the circular flow of income during the COVID-19 pandemic.
Monetary Policy
nterest Rates: RBA lowered cash interest rates to 0.1%.
Impact: Cheaper borrowing costs for consumers and businesses.
Outcome: Encouraged spending and investment.
Definition: Actions by a central bank to manage the money supply and interest rates.
Expansion: Lower interest rates and increase money supply to stimulate growth.
Contraction: Raise interest rates and reduce money supply to curb inflation.
Fiscal Policy Overview
Budget Deficit: Significant deficit of $161 billion in 2020.
Government Initiatives: Aimed to support jobs, spending, and economic recovery.
Definition: Government decisions on taxation and spending to influence the economy.
Expansion: Increase spending and/or cut taxes to boost demand.
Contraction: Decrease spending and/or raise taxes to reduce deficits and control inflation.
JobKeeper Program
Unemployment Spike: Reached 8% mid-2020.
Payment Increase: JobSeeker payment doubled to $1,100 per fortnight.
Outcome: Boosted consumer spending on essentials.
Home Builder Program
Renovation Grants: $25,000 grant for home renovations and new builds.
Market Impact: New home sales increased by nearly 50% in late 2020.
Sector Support: Stimulated the construction industry and job creation.
Infrastructure Spending
Investment: $10 billion allocated for metro and road upgrades.
Benefits: Created jobs and improved long-term productivity.
Cash Payments to Low-Income Earners
Direct Support: Two cash payments of $750 each.
Impact: Benefited 6 million Australians; immediate economic injections.
JobMaker Program
Youth Employment: Aimed to create 459,000 jobs for young people.
Support: Subsidized 50% of wages for eligible positions.
JobTrainer Program
Reskilling Initiative: Offered 350,000 free or low-cost training places.
Goal: Combat labor shortages by enhancing workforce skills.
Free Childcare Initiative
Support for Families: 6 months of free childcare.
Impact: Benefited 1.2 million children, allowing parents (especially women) to work.
Business Support
Tax Concessions: $5 billion in grants for small to medium enterprises.
Goal: Help businesses survive and thrive during the crisis.
Health Investment
COVID-19 Health Allocation: $3 billion for testing and vaccination programs.
Objective: Ensure public health and safety, supporting economic recovery.
2020
GDP: Likely contracted due to COVID-19.
Unemployment: Peaked significantly, especially among youth.
2021-2022
2021-2022
Monetary & Fiscal Policies:
Expansionary measures stimulated GDP growth.
Fiscal Policy: Increased government spending and tax cuts to boost activity.
Monetary Policy: Lowered interest rates and increased money supply to encourage spending.
2022-2023
Ukraine Invasion Impact:
GDP remained high due to increased export income (gas and wheat).
Inflation: Spiked due to rising food and energy costs.
2024
Policy Shift:
Transitioned to contractionary policies to manage inflation.
Implemented surplus budgets to stabilize the economy.
Current Economic Outlook:
Inflation: High at 3.8%.
Growth: Slowed to around 1%.
Commodity Prices: Fallen due to reduced growth in China.
Observations (March 2024, ABS Data)
Consumers are cautious, leading to decreased spending.
High cost of living affecting savings rates.
Investment levels impacted by uncertainty and rising costs.
Downswing
Key Definition: A period of declining economic activity characterized by reduced consumer spending, increased unemployment, and lower production.
Characteristics:
Decrease in GDP
High unemployment rates
Decline in consumer confidence
Effects:
Business closures
Reduced investment
Strained government budgets
Upswing
Key Definition: A phase of economic growth marked by increased consumer spending, job creation, and higher production levels.
Characteristics:
Increase in GDP
Lower unemployment rates
Rising consumer confidence
Effects:
Business expansion
Increased investment
Higher government revenue
Strategies:
Expanding product lines
Investing in marketing
Hiring additional staff
Peak
Key Definition: The highest point of economic activity before a downturn, characterized by maximum output, employment, and consumer spending.
Characteristics:
High GDP growth
Low unemployment rates
Increased consumer and business confidence
Effects:
Strain on resources
Inflationary pressures
Potential for overheating economy
Strategies:
Prepare for potential downturns
Evaluate investment opportunities
Focus on sustainability and efficiency
trough
Key Definition: The lowest point of economic activity in the business cycle, signaling the end of a recession before recovery begins.
Characteristics:
Low GDP and high unemployment
Decreased consumer spending
Low business investment
Effects:
Market stabilization
Opportunities for bargain investments
Increased government intervention
Strategies:
Monitor signs of recovery
Optimize operations for efficiency
Explore new markets or products
Recession
Key Definition: A significant decline in economic activity across the economy lasting more than a few months, often identified by falling GDP and rising unemployment.
Characteristics:
Two consecutive quarters of negative GDP growth
Rising unemployment rates
Decreased consumer and business spending
Effects:
Increased business failures
Greater reliance on government assistance
Decline in stock market values
Strategies:
Cut costs and improve efficiency
Focus on core business activities
Explore alternative revenue streams
