commerce term 4 Flashcards
What is the 5 sector model?
The five sector model shows how money flows in the economy.
What are the groups in the 5 sector model?
Consumer households purchase goods and services, provide labour for businesses, provide savings to financial institutions such as banks, pay taxation through income and import goods and services from overseas. Businesses produce goods and services to consumer households, the government and international sector, provide employment, pay tax and borrow money from financial institutions for the future. The government manages the economy, provides services for the economy, slows down the economy through tax (leakages) and provides collective wants such as health, education and the defence force (injections). Financial institutions invest in businesses (injection), take household savings (leakage) and are made of banks, building societies, finance companies, credit unions, superannuation funds and life insurance companies. The international sector sells goods and services to Australia - imports (leakages) and buys Australia’s goods and services - export (injection).
What are injections in the 5 sector model?
Investment, government spending, exports.
What are leakages in the 5 sector model?
Savings, taxation, imports.
What is equilibrium in the 5 sector model?
An equilibrium in the 5 sector model occurs when the amount of leakages is equal to the amount of injections.
What is the business cycle? What is the difference between an expansion and a contraction in the business cycle?
The business cycle is intervals of expansion followed by contractions in economic activity. An expansion occurs when the amount of goods and services produced increases while a contraction occurs when the amount of goods and services produced decreases.
Explain the impacts of expansions and contractions in the business cycle?
During periods of expansion, more goods and services are demanded, which leads to businesses producing more and employing more workers. During contractions, less goods and services are demanded, hence businesses will produce less and employ less.
What are examples of expansions and contractions in the business cycle?
Outline the difference between demand and supply?
The difference between demand and supply is that demand refers to the quantity of a particular good or service that consumers are willing to purchase at varying prices while supply refers to the quantity of a particular good or service that businesses are willing to sell at various price levels at a given point in time.
Describe the difference between expansions, contractions, increases and decreases in both demand and supply?
In demand, a contraction occurs when the price charged increases, an expansion occurs when the price charges decreases, an increase occurs when the quantity demanded at each price increases, a decrease occurs when the quantity demanded at each price decreases.
In supply, a contraction occurs when the price decreases, expansion occurs when the price charged increases, an increase occurs when the quantity supplied at each price increases, a decrease occurs when the quantity supplied at each price decreases.
Outline how the price mechanism results in price and quantity being at the equilibrium?
The price mechanism means that if the price of the good or service is too high, there will be excess supply, meaning that businesses will reduce their prices in order sell their excess stock. This also means that demand will increase to the point of equilibrium. Similarly if the price of the good or service is too low, there will be excess demand, meaning that consumers will pay more for the product, allowing for the increase in supply to equilibrium.
How do retail markets, labour markets, financial market and stock markets differ?
Retail markets is where businesses sell their goods to consumers. Labour markets are where workers supply their labour in return for wages and businesses demand workers to produce their goods and services. Financial markets are where businesses borrow money from banks to help them grow and expand. Stock markets are were companies sell shares and shareholders buy and sell shares, making money through capital gains and dividends.
What were the customary trading practices in Aboriginal & Torres Strait Islander communities (e.g. the Yolngu people)?
The Yolngu people traded with the Makassan people for hundreds of years. They traded trepang, a sea cucumber delicacy, turtle and pearl shells for resources such as tobacco, alcohol, calico, fabrics, rice and knives.
What are positive and negative externalities?
Positive externalities occur when a company’s production positively impacts another company’s product or society. Negative externalities occur when a company’s product negative impacts another company’s product or a society.
Explain what is meant by corporate social responsibility?
Corporate social responsibility refers to businesses being concerned with the impact of their actions other than just making profit. They may change the way they obtain their workers and materials in the production if their product.
How does technology impact the decisions businesses make?
Technology has influenced many aspects of business, from administration, communication and the services they provide. The use of robots have increased the speed and accuracy of products, communication technologies like barcodes and EFTPos have increased the speed and convenience of paying for goods and telecommunication has meant that businesses are able to communicate over long distances.
Explain what is meant by the ‘Gig Economy’
The gig economy relies on temporary and part-time positions filled by independent contractors and freelancers, rather than full time employees.
How does the Gig Economy impact workers and businesses?
The gig economy can benefit employees and businesses by making work more adaptable to the needs of the moment and the demand for flexible lifestyles. However, disadvantages include the erosion of traditional relationships between businesses, employees and clients.
