Commerce 2024

Question 1

What is an economy?

Answer 1

An Economy is a system in which people produce, buy and sell things.

Question 2

What is Scarcity?

Answer 2

Scarcity refers to the mismatch of unlimited wants but scarce, limited resources. This is an economic problem. This means that humans have many unlimited wants that are not all attainable since the resources needed to satisfy these wants are not currently attainable due to the use of them carelessly and wastefully. Unfortunately, this could lead to not leaving enough resources to satisfy future generations’ wants. As a result of scarcity, it is important to effectively utilise the factors of production which are labour, enterprise, land and capital. For consumers, this also means we must make choices in the form of opportunity costs for what goods we can and can’t have.

Question 3

What is opportunity cost?

Answer 3

Opportunity cost refers to the act of giving up one good to purchase another.

Question 4

What are the 5 sectors in an economy?

Answer 4

Consumers
Businesses
Financial Institutes
Government
Overseas Sector

Question 5

How can the circular flow of income be used by economists?

Answer 5

The circular flow of income can be used by economists to measure changes in the level of economic activity within an economy. This means determining whether the economy is growing or shrinking. This is done by comparing the injections into the economy to the leakages out of the economy.

Question 6

What are Leakages? Provide 3 examples and briefly explain why.

Answer 6

Leakages: Leakages are like holes in a bucket which makes the water benign to pour out. In our economy, the leakages are through which money exists instead of being spent within the economy. Examples include:
➡Saving - Households or businesses save rather than spend money on goods and services
➡Taxes - The government collects money from individuals and businesses in the form of taxes which reduces disposable income that can be spent
➡Imports - Money is spent on goods and services from other countries which do not directly contribute to the Australian economy.

Question 7

What are Injections? Provide 3 examples and briefly explain why.

Answer 7

Injections: Injections are like adding water to a leaking bucket. Similarly, in the economy injections are in the form of money being added into our economy. Example include:
➡ Investment - Money is being spent by businesses on capital goods such as machinery and equipment to expand production and/or efficiency.
➡ Government spending - Government spending is the money spent on public goods which in turn adds money into the economy. For instance, the purchasing of infrastructure, education and healthcare
➡ Exports - Money is added to the economy when other countries buy goods and services produced in Australia.

Question 8

What happens when leakages are greater than injections?

Answer 8

When leakages are greater than injections, an economy will experience an economic decline. There will be less spending, businesses will make less money, fewer job opportunities for people and decreased economic activity.

Question 9

What happens when injections are greater than leakages?

Answer 9

If the injections are greater than the leakages, economic growth occurs and the economy with expand. There will be money coming into the economy, increased spending, more job opportunities, businesses selling more goods and services and the risk of inflation becoming prevalent if it gets too high.

Question 10

What is the main way in which economic growth is measured?

Answer 10

Gross Domestic Product (GDP)

Question 11

What is the difference between nominal and real GDP?

Answer 11

Nominal GDP measures economic output at current prices, while real GDP adjusts for inflation to show output at constant prices, giving a clearer picture of actual growth.

Question 12

Explain the term ‘balance of payments’

Answer 12

The balance of payments shows the difference between what a country buys from and sells to other countries, including goods, services, and financial assets.

Question 13

Outline the role of the Household sector in the 5-sector model:

Answer 13

The household sector consists of individuals and families who play a crucial role in the economy. They earn income from firms through wages, rent, interest, and profit. This income is then spent on goods and services, a process known as consumption.

Question 14

Outline the role of the Firms sector in the 5-sector model:

Answer 14

Firms are businesses that produce goods and services for households. They hire people, providing payment in return for their labour. These businesses offer products like phones and cars and services such as haircuts and healthcare, which is known as production.

Question 15

Outline the role of the Financial sector in the 5-sector model:

Answer 15

The financial sector includes institutions like banks that act as intermediaries between savers and borrowers. This sector is vital for maintaining economic stability by facilitating loans and investments.

Question 16

Outline the role of the Government sector in the 5-sector model:

Answer 16

The government, including local, state, and federal levels, is essential for supporting the economy. It efficiently manages public spending, ensures laws promote growth and modifies the flow of money across sectors. The government also invests in community goods like roads, hospitals, and schools. This is known as government expenditure.

Question 17

Outline the role of the Overseas sector in the 5-sector model:

Answer 17

This sector encompasses international trade, including imports and exports. It highlights how global trade influences a nation’s economy, showing the importance of both exporting goods and importing necessities.

Question 18

Explain the Interdependence of the Household sector

Answer 18

The household sector provides labour to firms and in return receives income from them. Yet, they also purchase goods and services from firms and in exchange pay the businesses for them. Households also save their money in the financial sector. They also pay money towards to government sector in the form of taxes.

Question 19

Explain the interdependence of the Firms sector

Answer 19

The firms sector is responsible for providing goods and services to the household sector as well as the overseas sector as exports. The firms sector also provides employment opportunities to members of the household sector. In addition, the firm’s sector receives investments from the financial sector.

Question 20

Explain the interdependence of the financial sector

Answer 20

The financial sector connects those with surplus funds with those who need funds. Loans are made via the financial sector to consumers, businesses and governments. The financial sector is an intermediary between many sectors of the economy. They provide money to firms so their business can successfully and efficiently operate. They also hold money in bank accounts when households save.

Question 21

Explain the interdependence of the government sector

Answer 21

The government sector protects and provides for many other sectors. It provides consumer protection via legislation; it also controls business activity to ensure fair trade and competition. For example the Australian Competition and Consumer Commission (ACCC). The government also taxes the household sector and makes firms pay money to them so they can spend money on government expenditures such as roads, schools and hospitals.

Question 22

Explain the interdependence of the Overseas sector

Answer 22

The overseas sector is connected to the household sector in providing imported goods and services for their use. The sector also provides imports for firms which they use in the production process. The overseas sector is connected to the government in that it regulates trade, exchange rates and the flow of investment funds into an economy. Governments also collect taxes or tariffs from international trade.

Question 23

What are the five main stages of the business cycle?

Answer 23

Upswing, Boom, Downswing, Recession, Depression

Question 24

Provide a general definition for upswing

Answer 24

The general level of economic activity is rising, marked by increasing production, employment, and spending.

Question 25

Provide a general definition for Boom

Answer 25

Occurs when economic activity reaches its peak. This phase is characterized by high growth, low unemployment, and increased inflation. This is often unsustainable in the long run.

Question 26

Provide a general definition for downswing

Answer 26

A phase where the general level of economic activity begins to decline, leading to reduced production, spending, and employment.

Question 27

Provide a general definition for Recession

Answer 27

A prolonged period of declining economic activity, officially defined as two consecutive quarters (6 months) of negative growth.

Question 28

Provide a general definition for Depression

Answer 28

A severe and prolonged contraction in economic activity, leads to widespread business failures, very high unemployment, and sometimes deflation (falling prices).

Question 29

Outline what happens to the economy during an upswing

Answer 29

Increase in production and sales and overall higher demand for the product
Decrease in unemployment
Increase in wages - attract and keep workers
Increase consumer spending due to higher wages and more money in the economy

Question 30

Outline what happens to the economy during a downswing

Answer 30

Opposite*
Decrease in production and sales and overall lower demand for product
Increase in unemployment - people are ‘let go’
Decrease in wages - consumers are willing to accept lower wages as they compete for jobs
Decrease in consumer spending - earning less money to spend and many choose to save during this period

Question 31

What does the business cycle show:

Answer 31

This model illustrates how a nation’s real GDP fluctuates over time, moving through phases of expansion and contraction in aggregate output. It provides economists with a clear depiction of the economy’s highs and lows in terms of economic activity, offering insight into the overall health of the economy and indicating whether adjustments or interventions are needed.

Question 32

Why does the level of economic activity fluctuate over time?

Answer 32

The level of economic activity fluctuates over time due to variations in total production, income, spending, and employment. These fluctuations are primarily driven by changes in total spending within the economy, which includes consumer spending (consumption), business investment, government expenditure, and exports. For example, during periods of high consumer confidence, people tend to spend more on goods and services, leading to increased production and employment (economic expansion). Conversely, when businesses cut back on investment due to economic uncertainty, or when global demand for exports declines, total spending falls, causing production and employment to decrease (economic contraction). These cycles of expansion and contraction are a natural part of the business cycle.

Question 33

Why does the number of business closures decrease during a boom?

Answer 33

During a boom, business closures decrease because companies benefit from higher consumer spending, increased demand, and overall economic growth. These favourable conditions make it easier for businesses to thrive, expand, and sustain operations, reducing the likelihood of closures.

Question 34

Outline the economic problem with a recession

Answer 34

Recession = Businesses may cut back on production and some employees might lose their jobs and income. Total spending falls and economic growth slows. As a result, this could soon lead to a depression.

Question 35

Outline the economic problem with a boom

Answer 35

Boom = During a boom, production increases, consumer spending rises, and employment levels grow, boosting both consumer and business confidence. However, the economy cannot sustain indefinite growth. As demand outpaces supply, additional spending leads to inflation—a general rise in prices. Inflation becomes a significant economic problem, which eventually ends economic growth.

Question 36

What is price mechanism?

Answer 36

➡ Price mechanism involves the interaction between demand and supply to determine the optimum price. The laws of demand and supply do not operate in isolation from each other. For any good or service, there will always be a certain level of demand and a certain quantity that can be supplied. The interaction of demand and supply determines the price and quantity of goods and services. This is known as the price mechanism. By using the price mechanism, businesses can work out how much they should charge for a product. This can be done by plotting both the demand and supply curves for a good or service on the same graph.

Question 37

What is supply?

Answer 37

➡ Supply is the quantity of a good or service that businesses offer for sale at a particular price at a given point in time.

Question 38

What is the law of supply?

Answer 38

➡ The law of supply states that as the price of a good or service increases, the quantity supplied also increases. If the price decreases, the quantity supplied decreases.

Question 39

What is demand?

Answer 39

➡ Demand is the quantity of a product that consumers are willing to purchase at a particular price at a given point in time

Question 40

What is the law of demand?

Answer 40

➡ The law of Demand states that as the price of a good or service increases, demand for it decreases. If the price decreases, demand for the good or service increases.

Question 41

How does a business know when they gave set the right price?

Answer 41

Everyone who wants one can buy one
There are no products left over

Question 42

Analyse the main parts of a supply and demand graph including:
The supply Line
The demand Line
Contraction
Expansion
Equilibrium
Surplus
Deficit

Answer 42

➡ The supply line is the line increasing from left to right
➡ The demand line is the line decreasing from left to right
➡ A decrease in demand or supply due to price change is called a contraction in demand
➡ An increase in demand or supply due to price change is called an expansion in demand.
➡ The point where the demand and supply curves intersect is called the market equilibrium. This is the point where buyers and sellers agree on a price
➡ A surplus occurs when the amount that producers want to sell is greater than the amount that consumers want to buy.
➡ A deficit occurs when the amount that producers want to sell is less than the amount that consumers want to buy.

Question 43

NOTE: (flip)

Answer 43

➡ If the price is set higher than the market equilibrium, supply will be higher than demand, which means that there is an oversupply of the product (a surplus)
Example - The price of a good is $5 and from the graph, the supply is 650, however, the demand is only 200. Therefore although 650 products are available, only 200 will be brought, so there will be a lot wasted.

Question 44

NOTE: (flip)

Answer 44

➡ If the price is set lower than market equilibrium, demand will be higher than supply, so there will not be enough goods produced to meet demand (a deficit)
➡ If the price is set lower than market equilibrium, demand will be higher than equilibrium, demand will be higher than supply, so there will not be enough goods produced to meet demand (a deficit)
Example - If the price of a product is $2 then from the graph, the demand at this price is 650. However, the supply is only 200. This means there will be 450 people who want the product but can’t get it.

Question 45

Although price is determined by market equilibrium, the price of some goods still changes so much. This is because other factors, not just price, affect supply and demand.
What are other reasons for the increase in demand?

Answer 45

A rise in consumer income
Change in consumer preference
Increase in population
The price of substitute goods becomes more expensive e.g. if strawberries increase in price people may buy more blueberries
The price of complementary goods becomes cheaper e.g. as milk prices fall, the price of blueberry smoothies also fall. This increases the demand for blueberries.
Prices are expected to rise in the future

Question 46

Reasons for the decrease in demand?

Answer 46

*Opposite of increase:
A fall in consumer income
Changes in consumer preference
Decrease in population
The price of substitute goods becomes cheaper
The price of complementary goods becomes more expensive
Prices are expected to fall in the future

Question 47

Reasons for the increase in supply?

Answer 47

Increased efficiency
A fall in production costs
Improved climatic conditions e.g. increased rainfall will increase the harvest of a blueberry farm
An increase in the number of suppliers

Question 48

Reasons for the decrease in supply?

Answer 48

*Opposite:
Decreased efficiency
An increase in production costs
Unfavourable climatic conditions
A decrease in the number of suppliers

Question 49

Explain how supply and demand work together to determine the price of a good or service.

Answer 49

Depending on the demand for goods and services, the amount of supply available determines whether the price increases or decreases. Producers know that the higher the demand, the more likely consumers will pay a higher price. If supply is higher than demand, producers may decrease the price to entice more consumers to buy their products or services.

Question 50

What is meant by a market?

Answer 50

A market exists in any situation where buyers and sellers come together to exchange goods and services
A market can exist in a physical location, across several locations, or can have no physical location at all.

Question 51

What are the four main types of markets?

Answer 51

Retail
Labour
Financial
Indigenous

Question 52

Outline Retail Markets

Answer 52

Markets where consumers buy most of their goods and services. This can be in person at physical stores or online. E.g. City beach

Question 53

Outline Labour Markets

Answer 53

Markets where workers offer their skills, knowledge and experience in exchange for a wage or salary from their employers. The labour market relies on a variety of means of communication between the sellers of labour (potential of employees) and the buyers of labour (employers). E.g. Job agencies or platforms like SEEK.

Question 54

Outline Financial Markets

Answer 54

These markets are the intermediaries between savers and borrowers in an economy where financial assets like stocks, bonds, and currencies are traded. They allow consumers to save money to earn interest and are where businesses and consumers can borrow money for investment E.g. Banks

Question 55

Outline Indigenous Markets

Answer 55

Markets involving the sale of goods and services that reflect Indigenous culture, traditions, and practices. Often includes handmade art, crafts, and cultural experiences. These markets also refer to the practice of bartering one item for another such as trading trochus shells. E.g. Aboriginal art markets or cultural tourism businesses.

Question 56

Another type of market is a Stock Market also known as an equity market, what is this?

Answer 56

They involve the exchange of money for a share or ownership (equity) in public companies. E.g. Activity on the Australian Securities Exchange (ASX)

Question 57

How has online shopping changed retail markets?

Answer 57

Online shopping has greatly impacted the current marketplace. With online shopping ease, convenience and speed many consumers are choosing this as their preferred method of shopping. This money that is now going to online retailers is the money that brick-and-mortar businesses used to earn. Due to this growing competition between retailers, these shops are trying to offer better customer experiences to draw in customers and keep their shops going. Additionally, many traditional brick-and-mortar stores are expanding their online presence. An example of this happening is ‘The Amazon Effect’. The Amazon Effect has drastically changed shopping since 1994. This term refers to the effect e-tailers have on the traditional forms of commerce. The Amazon Effect has made even more people switch to online shopping- and the numbers keep increasing. The increasing number also poses the issue of inefficient order fulfilment and delivery.

Question 58

How does Market Failure Occur

Answer 58

Market failure occurs when goods and services are not distributed fairly or efficiently to consumers.
This can happen due to market dominance and unfair competition, including:
The development of a monopoly or oligopoly - A market structure where a small number of firms
have significant control over the market)
Collusion - this occurs when an oligopoly exists and the firms in this oligopoly collude on pricing
or conditions.
Unfair business competition and business practices

Question 59

What is government intervention?

Answer 59

when the government gets involved in the marketplace to impact the economy.

Question 60

What are some of the reasons for government intervention?

Answer 60

Prevention of Environmental degradation
Conservation of natural resources
Reduce the harmful effects that arise from the sale of products, such as alcohol and cigarettes
Provide merit goods (goods that are beneficial to society). Some businesses avoid these types of goods as they do not bring high enough profits for businesses. Government intervention is needed to ensure these are available to people. Examples of merit goods include education and healthcare.

Question 61

Outline ways in which the government can intervene in an economy

Answer 61

Regulation: Establishing rules and laws to control business practices, protect consumers, and ensure fair competition. This includes minimum wage distribution.
Fiscal Policy: Adjusting government spending and taxation to influence economic activity, such as increasing spending during a recession to stimulate growth.
Monetary Policy: Controlling the money supply and interest rates through central banks.
Subsidies: Providing financial support to specific industries or sectors to encourage production and reduce prices for consumers.
Public Services: Offering essential services like education, healthcare, and infrastructure to enhance overall economic well-being and productivity.
Trade Policies: Implementing tariffs, quotas, or trade agreements to protect domestic industries and regulate international trade.
Social Welfare Programs: Providing support for individuals in need, such as unemployment benefits to maintain consumer spending and reduce poverty.

Question 62

Identify the advantages and disadvantages of government intervention.

Answer 62

Pros:
Provide public goods
Provide merit goods
Reduce inequality and poverty through tax and benefit system
Can protect the environment, workers and consumers
Protect long-term interests of the environment
Limit monopoly power
Cons:
Government failure - when government actions don’t solve problems as expected or the situation worsens
Lack of incentives to be efficient in the public sector
The government is influenced by powerful pressure groups who focus on the benefit of themselves and not the public
Disincentive effects of higher taxes
Disincentive effects of welfare programs - these programs may discourage people or businesses from working or investing
Government ownership may lead to fewer choices

Question 63

What is meant by deregulation? Give an example of an industry that has been deregulated

Answer 63

Deregulation refers to the process of removing or reducing government rules and regulations on industries, with the goal of increasing competition and efficiency. An example of an industry that has been deregulated is the airline industry. In many countries, governments have reduced control over airline routes, pricing, and services, allowing more competition between airlines and leading to lower prices and more flight options for consumers.

Question 64

Identify and describe the different types of businesses that can operate in an economy. Provide an example for each.

Answer 64

Online businesses - e.g. Amazon
On-demand businesses - e.g. Uber
Small to large businesses - e.g. Local cafes (small) and Apple (large)
Global businesses - e.g. Mcdonalds
Offshore businesses - e.g. Ford Motor Company
Government business enterprises - e.g. Australian Post
Not-for-profit businesses - e.g. The Red Cross

Question 65

Identify the types of decisions that business owners have to make.

Answer 65

Financial decisions: How to allocate funds, manage cash flow, and secure financing for operations or growth.
Product and service decisions: What products or services to offer, how to price them, and when to expand or discontinue them.
Marketing decisions: How to promote the business, target customers, and set advertising strategies.
Operational decisions: How to manage day-to-day activities, including supply chain management, production processes, and service delivery.
Human resources decisions: Hiring, training, and managing employees, as well as setting wages and benefits.
Strategic decisions: Long-term planning, such as expansion, partnerships, or adapting to market changes.
Legal and compliance decisions: Ensuring the business follows regulations and meets legal obligations, including taxes and employee rights.

Question 66

What is a business?

Answer 66

A business is a venture that sells goods and services to satisfy the unmet needs/wants of a population

Question 67

What two factors classify businesses?

Answer 67

Size and turnover

Question 68

Describe how they are classified by size

Answer 68

Micro (Up to 5 employees)
Small (Up to 20 employees)
Medium (Up to 100 employees)
Large (More than 200 employees)

Question 69

Describe how they are classified by turnover

Answer 69

Small to medium businesses earn $10 million or less in turnover each year
Large businesses earn over $10 million

Question 70

What 3 factors influence business decisions?

Answer 70

1. Technology
2. The Business Cycle
3. Globalisation

Question 71

Explain how technology influences business decisions

Answer 71

Technological advancements have changed many aspects of business, from administration tasks, communication and service provision to manufacturing processes. This also allows for consumer accessibility and increased economic activity. By using new technologies, businesses can increase efficiency and productivity and improve the quality and range of products and services. Global markets have become more accessible to businesses due to advancements in communication technology, robotics and transport. Businesses are not limited to their country of origin and have the ability to access labour markets and consumer markets overseas.

Question 72

Explain how the Business cycle influences business decisions

Answer 72

If the business cycle is experiencing a recession, businesses may need to cut costs by retrenching workers and reducing the quality of products and services. This can harm employee morale and drive customers away, further weakening the business and delaying recovery. However, if the business cycle is experiencing a boom, businesses benefit from increased demand, allowing them to expand operations, hire more workers, and improve product quality or services. This boosts profits and fuels further growth and the business makes decisions accordingly.

Question 73

Explain how globalisation influences business decisions

Answer 73

Globalisation is the process by which the world is becoming increasingly interconnected as a result of increased trade and cultural exchange. Globalisation has allowed for the easier transfer of goods to take place within countries and reduced trade barriers, investment, and labour across national borders. Free trade agreements have reduced tariffs and allowed Australians to enjoy products from overseas. It has also led to the ability to globally source materials and resources to reduce the costs of production.

Question 74

What are the positive effects of globalisation?

Answer 74

Positive effects include expanding markets, cheaper materials, and greater access to labour.

Question 75

What is Entrepreneurship?

Answer 75

refers to the ability to accept all risks and rewards when starting a business venture

Question 76

What are the negative effects of globalisation?

Answer 76

Negative effects include increased competition, unemployment, environmental issues, and social problems.

Question 77

What is Innovation?

Answer 77

refers to an enhancement of an existing product, method or idea that has been a driver of economic growth. Think of sharing rice services, smartphones and social media platforms.

Question 78

What is Corporate Social Responsibility?

Answer 78

Corporate Social responsibility (CSR) is when businesses take responsibility for their impact on society and the environment, going beyond making profits to benefit the community. Businesses consider the interests of stakeholders, society and the environment when making economic and business decisions. It involves ethical decision-making, where businesses go beyond legal requirements. CSR can be good business for an organisation because customers eventually find out which businesses are acting responsibly, and which are not. Customers tend to reward socially responsible businesses by purchasing their products.

Question 79

What is Ethical responsibility?

Answer 79

Ethical responsibility is when businesses make morally right decisions, ensuring fairness, honesty, and integrity in their practices.

Question 80

What is an example of CSR?

Answer 80

An example of CSR includes when businesses engage in environmentally sustainable practices, such as reducing their carbon footprint or using eco-friendly materials. For instance, a company might implement recycling programs, switch to renewable energy sources, or reduce waste in their production processes. These actions demonstrate the business’s commitment to positively impacting the environment and society, beyond just focusing on profits. This, in turn, has a positive effect on consumers, as they often prefer purchasing goods from companies that demonstrate social responsibility.

Question 81

Identifying a business opportunity is not just about having an idea. An opportunity is something that a person can see as an avenue to success. It is often identified when a person feels they can provide goods or services in a better or different way from that already in the market.

Answer 81

Price
Which product is more sustainable
Customer service
Value - consumers want the best value for their money
Benefits

Question 81

Explain the importance of location

Answer 81

Location is important for drawing in customers and also the right customers for the service you are selling. For example, you would not want to be selling activewear for young women right near a retirement home or in an area that has an older demographic. The most suitable location will depend on the nature of the business. For example, If a business relies heavily on regular foot traffic, a densely high-traffic area such as Pitt Street Mall would be a good location.
E-commerce is becoming increasingly popular and is putting more pressure on traditional brick-and-mortar stores to create more of an experience in addition to the retail service they provide.

Question 82

What is meant by competition

Answer 82

Competition refers to rivalry among businesses that try to supply the needs and wants of a market. Businesses need to be able to gain a competitive advantage over their competitors.
A sustainable competitive advantage refers to the ability of a business to develop strategies that will ensure it has an ‘edge’ over its competitors for a long period of time.

Question 83

An entrepreneur needs to understand the changes that are taking place in the make-up of the population. Demographic factors are population characteristics that affect customer spending and include:

Answer 83

Age
Ethnicity
Gender
Marital status
Family size
Income

Question 84

What is a target market?

Answer 84

A target market is a group of people with common demographic characteristics that a business will aim its product(s) at.

Question 85

What is Market segmentation

Answer 85

Market segmentation is used to identify an appropriate target market. It uses market variables to subdivide people who share one or more common characteristics into subgroups of the whole market.

Question 86

What are the main features used to segment the total market?

Answer 86

Age
Gender
Income level
Educational background
Geographical location
Lifestyle
Family structure.

Question 87

Why is market research important for entrepreneurs?

Answer 87

Market research helps the entrepreneur to make better decisions by understanding consumer behaviour. By collecting and assessing information about the needs and wants of consumers, a more accurate and responsive marketing plan can be designed and, therefore, the risk of failure can be reduced.

Question 88

Briefly outline the two types of market research.

Answer 88

Primary research – conducted by the business for the new business venture and includes completing a survey, conducting a focus group or participating in an observational study
Secondary Research - research conducted for other activities but can still be used to assist in understanding the market and potential livelihood of a new venture. Examples include using published media reports (newspapers, journals), ABS for demographic information and existing sales/ reports from previous business ventures.

Question 89

What are The three steps of market research?

Answer 89

Determining information needs - The problem is clearly and accurately stated to determine what needs to be measured and the issue involved
Collecting data from primary and secondary sources - At this stage, the researcher knows the facts that are needed and those that are already available. Plans must be made to gather missing data. This is then collected from primary and secondary sources.
Analysing and interpreting data - Information needs to be analysed and interpreted to determine what it means

Question 90

What is an entrepreneur?

Answer 90

An Entrepreneur is someone who starts, operates and assumes the risk of a business venture in the hopes of making a profit

Question 91

What are the characteristics of an entrepreneur?

Answer 91

Determined
Big dreams
Driven from a young age
Confident
Believe in themselves
Passion
Optimism
Discipline
Decision-making
Risk taker
Persistent
adaptability

Question 91

What are the qualities of an entrepreneur?

Answer 91

The ability to see and take advantage of an opportunity
The ability to establish a shared vision
Initiative, innovation, and resilient
An appreciation of the role of failure in success

Question 92

Explain what is meant by risk profiles

Answer 92

A risk profile refers to an individual’s or business’s willingness and ability to take risks. In the context of an entrepreneur, this means their tolerance for uncertainty, such as investing in new ventures, navigating market fluctuations, or introducing innovative products. Entrepreneurs with a high-risk profile are more comfortable with taking bigger risks for potentially greater rewards, while those with a low-risk profile may be more cautious.

Entrepreneurs usually have a high-risk profile, as the path to bringing their ideas to life is accompanied by significant risks. For example, to start a business or idea they will usually have to spend large sums of money without knowing whether it will succeed and if a profit will be made. To add, even just starting the business venture is a huge risk but entrepreneurs need to recognise that gap in the market and take the risk that it will be a success.

Question 93

Identify and explain the various movements of money around the economy.

Answer 93

Money moves around the economy in a circular flow seen in the circular flow of income 5 sector model. This involves key interactions between the 5 sectors; household, business, financial, government, and the overseas sector. Households spend on goods and services that businesses offer, while businesses pay wages to households, allowing this consumerism to occur. Both households and businesses pay taxes, which the government uses in the form of government expenditure to provide services such as hospitals and schools - this injects money back into the economy. The financial sector plays a key role by accepting savings and providing loans to businesses for investment - creating leakages in the economy. Businesses also engage in trade with foreign markets through imports and exports, allowing for money to not only flow around one country’s economy but various other countries’ economies as well. This flow sustains economic growth and production.

Question 94

Describe the role of the government and government organisations in protecting
consumers.

Answer 94

The government and its organizations play a vital role in protecting consumers by ensuring fairness, safety, and transparency in the marketplace. The government can step in and make laws to how goods are made/or brought. The government ensures that the sectors are regulated to ensure that positive outcomes across all sectors are achieved. This is done through investment bodies such as the Australian Securities and Investment Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC). ASIC regulates the financial sector to ensure practices are fair and do not exploit an individual. While ACCC regulates business behaviour through the Australian Consumer Law and the Competition and Consumer Act. For example, ACCC can impose penalties on businesses that price collude or present false information to consumers. These both ensure that businesses do not participate in any anti-competitive activities or aim to mislead consumers in any way.

Question 95

Explain the effect of increased investment on the different sectors and the economy as a whole

Answer 95

​​Increased Investment: This is an injection into an economy due to money being spent by
businesses on capital goods such as machinery and equipment to expand production
and/or efficiency. This boosts economic growth and contributes to leads to higher
consumer spending, increased business profits, and greater innovation, contributing to
overall GDP growth. The financial sector also benefits from more borrowing and lending
activities. Overall this expands the economy as more money is flowed around the circular flow.

Question 96

Explain the effect of lower tax rates on the different sectors and the economy as a whole

Answer 96

Lower Tax Rates: Lower tax rates leave businesses and households with more disposable
income, encouraging higher spending, investment, and business expansion.
This stimulates economic activity, driving growth, and increasing demand for goods and
services. However, it may reduce government revenue, potentially impacting public
services. Overall there will be more money in the economy, however, less money available
for government expenditure.

Question 97

Explain the effect of increased government spending on the different sectors and the economy as a whole

Answer 97

Increased Government Spending: When the government increases spending on infrastructure,
public services, or welfare, it stimulates economic activity by creating jobs and boosting
demand for goods and services. This can lead to higher consumption, increased business
profits, and overall economic growth, especially during times of recession. However, long-term
increases in government spending may result in higher national debt if not carefully managed.

Question 98

Explain the effect of stimulus packages on the business cycle

Answer 98

Stimulus Packages: involve government spending and tax cuts designed to boost economic activity.
This injection of funds can lead to increased consumer spending and business investment, stimulating
demand. As a result, economic growth may accelerate, reducing unemployment and moving the
economy from a recession or slowdown toward expansion. However, if the stimulus is not managed
carefully, it can lead to inflationary pressures.

➡ A stimulus package is a coordinated effort to increase government spending—and lower taxes and interest rates—to stimulate an economy and lift it out of a recession or depression.

Question 99

Explain the effect of exchange rate changes on the business cycle

Answer 99

A depreciation of the national currency makes exports cheaper and imports
more expensive. This can boost domestic industries as foreign demand increases, stimulating production
and economic growth. Conversely, an appreciation of the currency can have the opposite effect, leading
to decreased exports and potentially slowing down economic growth. Exchange rate fluctuations can
thus significantly impact the business cycle, influencing trade balances and economic activity.

Question 100

Explain the effect of interest rate changes on the business cycle

Answer 100

Lowering interest rates makes borrowing cheaper, encouraging consumer
spending and business investment. This can lead to economic expansion, pushing the business cycle
toward growth. In contrast, raising interest rates can dampen spending and investment, leading to slower
economic activity and potentially pushing the economy into a downturn.

Question 101

Explain the effect of Technological Advancements on the business cycle

Answer 101

Technological innovations can lead to increased productivity and efficiency, driving economic growth. Businesses may expand operations and hire more workers, contributing to an upswing in the business cycle. However, rapid technological changes can also lead to job displacement in certain sectors, creating short-term disruptions before the economy adjusts.

Question 102

Explain how change in demand is reflected on the demand curve

Answer 102

Increase in Demand: The demand curve shifts to the right, indicating that consumers are willing to buy more. As a result, the equilibrium price and quantity in the market rise.
Decrease in Demand: The demand curve shifts to the left, indicating that consumers are willing to buy less. As a result, the equilibrium price and quantity in the market decrease.

Question 103

Explain how changes in supply is reflected on the supply curve

Answer 103

Increase in Supply: The supply curve shifts to the right, indicating that producers are willing to supply more. As a result, the equilibrium price decreases, while the quantity supplied increases.
Decrease in Supply: The supply curve shifts to the left, indicating that producers are willing to supply less. As a result, the equilibrium price increases, while the quantity supplied decreases.

Question 104

Explain how changes in price is reflected on the demand and supply curves

Answer 104

Price Increase: There is usually a movement up the demand curve, decreasing the quantity demanded. At the same time, it causes a movement down the supply curve, increasing the quantity supplied.
Price Decrease: There is a movement down the demand curve, increasing the quantity demanded. At the same time, it causes movement up the supply curve, decreasing the quantity supplied.

Question 105

Explain market equilibrium

Answer 105

This is the point where the quantity demanded equals the quantity supplied at a specific price, resulting in no shortages or surpluses.

Question 106

Explain Surplus

Answer 106

A surplus occurs when the quantity supplied exceeds the quantity demanded at a given price.

Question 107

Explain deficit

Answer 107

A deficit arises when the quantity demanded exceeds the quantity supplied at a particular price, usually due to prices being set too low.

Question 108

Define a market and how it relates to the economy.

Answer 108

A market exists in any situation where buyers and sellers come together to exchange goods and services. A market can exist in a physical location, across several locations, or can have no physical location at all. It plays a vital role in the economy by determining prices, allocating resources, and driving economic activity through trade. Markets influence supply and demand, which in turn affects production, employment, and overall economic growth.

Question 109

Outline the way that Indigenous Australians traded

Answer 109

Indigenous Australians primarily used a barter system, exchanging goods and services directly without the use of money. This system relied on mutual agreements regarding the value of items.

Question 110

Explain how modern-day trade has had an impact on traditional indigenous trading practices.

Answer 110

Modern trade has significantly impacted traditional Indigenous trading practices. The shift to cash economies has reduced reliance on traditional barter systems, while increased access to various goods has decreased demand for traditional items. Additionally, the commercialization of resources can diminish the cultural significance of traditional trade. Furthermore, modern trade often exploits natural resources, disrupting ecosystems that support traditional practices. Legal complexities surrounding land rights and ownership also challenge Indigenous access to traditional lands and resources. Overall, these changes threaten the sustainability and cultural integrity of Indigenous trading practices.

Question 111

Outline ways in which the government can intervene in an economy.

Answer 111

Regulation: Establishing rules and laws to control business practices, protect consumers, and ensure fair competition. This includes minimum wage distribution.
Fiscal Policy: Adjusting government spending and taxation to influence economic activity, such as increasing spending during a recession to stimulate growth.
Monetary Policy: Controlling the money supply and interest rates through central banks.
Subsidies: Providing financial support to specific industries or sectors to encourage production and reduce prices for consumers.
Public Services: Offering essential services like education, healthcare, and infrastructure to enhance overall economic well-being and productivity.
Trade Policies: Implementing tariffs, quotas, or trade agreements to protect domestic industries and regulate international trade.
Social Welfare Programs: Providing support for individuals in need, such as unemployment benefits to maintain consumer spending and reduce poverty.

Question 112

What is meant by deregulation? Give an example of an industry that has been deregulated

Answer 112

Deregulation refers to the process of removing or reducing government rules and regulations on industries, with the goal of increasing competition and efficiency. An example of an industry that has been deregulated is the airline industry. In many countries, governments have reduced control over airline routes, pricing, and services, allowing more competition between airlines and leading to lower prices and more flight options for consumers.

Question 113

Explain the importance of entrepreneurship and innovation to the economy.

Answer 113

Entrepreneurship and innovation are vital to the economy because they drive growth, create jobs, and foster competition. Entrepreneurs introduce new ideas, products, and services that meet changing consumer needs, which can lead to the development of new industries. Innovation enhances productivity by improving processes, technologies, and efficiency, helping businesses stay competitive. Together, they fuel economic development, generate wealth, and improve overall living standards.

Question 114

Identify examples of entrepreneurship and innovation.

Answer 114

Entrepreneurship: Bill Gates co-founded Microsoft Corporation, Steve Jobs founded Apple Landmark Zuckerberg co-founded Facebook

Innovation: Innovation of smartphones, computers, cars, ride-sharing services and 3D printing.

Question 115

NOTE: (flip)

Answer 115

Innovation refers to the creation of new ideas or methods, while entrepreneurship is the process of putting those ideas into action and building a successful business around them.

Question 116

Identify good and bad examples of businesses using corporate social responsibility.

Answer 116

Good:
Ben & Jerry’s: Advocates for social justice issues, support fair trade, and uses ethical sourcing
practices for its ingredients.

Cotton On: Going carbon neutral by 2030 as well as aiming for 100% use of renewable energy, reusable
and recyclable products, products made with sustainable attributes, certified responsible materials
used and and all packaging made from 50% recycled content by 2025.

Bad:
Volkswagen: Involved in the emissions scandal, where the company falsified data on its vehicles
environmental impact, which misled consumers and damaged its reputation.

Nestlé: Faced criticism for unethical practices, such as exploiting water resources in developing
countries and aggressive marketing of baby formula in poor regions.