The Individual As Producer, consumer And Borrower Flashcards
what are the functions of money?
- a medium of exchange(widely excepted)
- a store of value(can save)
- a unit of account
- a standard of differed payment.
what is the need for exchange?
compare money to barter.
- means of exchange are essential to gain the benefits from specialisation.
- comparing money to barter, the problem with bartering is that it relies on both people wanting something this wasn’t always possible
what are some functions of central banks?
- they act as a banker to the government
- act as a lender of last resort (e.g Northern Rock 2008)
- manages the national debt of the government.
- holds a country’s reserves of gold and foreign currency.
- controls the banking system.
what are some functions of commercial banks?
- provide deposit/savings accounts
- provide loans to households and firms
- provide foreign currency.
- provide safe deposit facilities e.g. keep important documents.
- provide people with financial advice.
- provide overdrafts.
what is the role of stock exchange?
- provides a market for buying and selling of shares, bonds and other securities.
- this enables finance to be raised.
- a means of savings for both private and institutional investors.
- the share prices give an indication of how well particular firms are doing.
- it thus contributes to the growth of an economy.
what are the factors affecting an individuals choice of occupation?
-WAGE FACTORS
- wage (payment for the job)
- salary (based on a fixed annual amount)
- overtime (payment for excess from contracted hours)
- bonus (extra payment acting as an incentive)
- commission (payment based on the percentage of sales a worker makes)
what are the factors affecting an individuals choice of occupation?
NON-WAGE FACTORS
- job satisfaction
- working conditions
- working hours
- career prospects/ opportunity for promotion.
- fringe benefits (a company car)
- holidays
- pension scheme (normally attracted to a generous and safe pension scheme)
- location
what are earnings like for someone entering the workforce?
earning relatively low due to lack of skills and experience
what are earnings like for a person with an increase in skills/experience?
earnings rise significantly.
what are the earnings like for an older/end of career worker?
earnings may fall as the workers may take less responsibility close to retirement.
what are some differences in earnings between men and women?
- males may work in occupations with higher demand of labour.
- females may be concentrated in occupations with a higher supply of labour.
- f emails more likey to take a break from work to raise a family (can impact on promotion and pay)
- also discrimination to consider.
what are some differences in the earnings between skilled and unskilled workers?
LOWER DEMAND OF UNSKILLED WORKERS- lower efficiency/productivity/value added by them.
A HIGHER SUPPLY OF THEM- as there is little time needed to train/study to gain the requirements needed for the job.
why are there often differences in the earnings of workers in the public sector and the private sector?
- demand for workers may be higher in one sector (higher earnings)
- supply of workers may be lower in one sector (higher earnings)
- job security may be greater in one sector, this may encourage higher supply.
- may be more overtime available in one sector.
- skills required may be higher in one sector (reducing supply, raising earnings).
- risk involved in jobs in one sector may be higher (reducing supply).
why is a worker in the services sector more likely to receive a higher wage than one in the manufacturing sector?
- service sector includes banking, doctors and teachers.
- increase in the demand of services will increase demand of labour (pushing up the wages of the workers)
- profits in the service sector may be high (increasing the ability of the firms to pay higher wayes).
- deindustrialisation (unemployment for workers in manufacturing)
why is a worker in the services sector less likely to receive a higher wage than one in the manufacturing sector?
- manufacturering sector includes e.g. car production, food processing and furniture making.
- demand for workers in some manufacturing industries may be increasing more than the demand for workers in the services sector.
- not all workers in the service sector are skilled.
- some workers in the manufacturing sector will have more experience.
describe what is meant by trade unions?
- an association of workers.
- it engages in collective wage/salary bargaining with employers.
- protects the working conditions, health and safety of its members.
- will negotiate on behalf of the workers.
- may provide other benefit schemes for its members.
what is the role of trade unions in an economy?
ADVANTAGES
- better basic pay/overtime.
- a union has more power than one individual worker.
- better working conditions.
DISADVANTAGES
- workers have to pay a fee to be a member.
- union might bring workers out on strike.
- strike action could force a firm to go out of business.
what are some possible benefits for a firm if it’s workers join a trade union?
- may encourage more workers to apply for jobs (may expect better working conditions)
- reduces cost of negotiation (one organisation instead of many individuals)
- provides a chanel of communication.
- may promote training (increasing labour productivity).
- may reduce conflict (workers discontents can be resolved)
-
what are some possible disadvantage to a firm if it’s workers join a trade union?
- may push up wages
- increase the firms cost of production
- reduce the firms competitiveness.
- may reduce flexibility (as the union may insist that it’s members only undertake the tasks in their job description)+(only working inside working hours)
- may strike.
what is specialisation?
- the process by which individuals concentrate on producing those goods and services in which they have an advantage.
- where it relates to the dividing up of the production processes into a sequence of different tasks, it is known as the division of labour. (production line)
what are the benefits of specialisation for the worker?
- the worker can concentrate on a particular task
- and therefore become very good at it
- time can be saved
- the worker can be more productive
- can lead to greater output
what are some disadvantages of specialisation for the individual?
- the task can become very repetitive
- the lack of variety can make the job very boring
- this can lead to demotivated and lower productivity.
- dependency on other people.
what factors influence spending by households?
- disposable income/wealth
- anticipated inflation rate in the future.
- confidence
- interest rates (high interest rates will discourage borrowing but encourage saving)
- taxes
- other factors affecting the pattern of spending e.g. age, time of the year.
what factors influence saving?
- (disposable) income- those on higher incomes tend to save a higher percentage of their income.
- rate of interest
- expectations of future price rises/falls.
- confidence- more = spending
- age structure of the population.
what influences borrowing?
the main influence is the rate of interest
- a fall in the rate of interest will reduce the cost of loans/overdrafts.
- people take into account expected future interest rates.
- confidence
what is the difference in saving between high income groups compared to low income groups.
HIGH = save a higher proportion
-as they have a higher disposable income so will be better able to save.
-will have already purchased many items so less of a need to spend.
LOW = save a lower proportion.
-will have a lower disposable income so will be less able to save.
-will have more of a need to spend on basic necessities.
what is the difference in spending between high paid workers compared to low paid workers?
HIGH = spend more in total but a lower proportion.
- spend a higher proportion of their income on luxuries.
- lower proportion on necessities.
why might the poor be more likely to borrow than the rich?
- lower income so may have to borrow to buy basic necessities.
- poor may be more inclined to get into debt.
- for large purchases e.g. furniture.
- less likely to have savings to enable purchases.
why might the poor be less likely to borrow money than the rich?
- banks may be more reluctant to lend to the poor (may not get the money back)
- the poor may lack the conference that they will be able to repay the loans.
- the poor may be reluctant to borrow from previous bad experience of being in debt.
- the poor are less likely to have a bank account / access to borrowing.
