Unit 3- Macroeconomic decision makers Flashcards
What is real disposable income and its relation to consumer expenditure
Real disposable income refers to the amount of income an individual has after all income and tax related charges have been deducted. If a consumer has a high disposable income their consumer expenditure increases.
What contributes to household earnings and how do they spend that income
Contributes- dividends, rends, investments in saving, wages salaries, and profits from firms
Spent- Goods and services, education, groceries, rent
What are the factors that influence spending in a country and inidvidually
Country- Income, consumer confidence, rate of interests
Individual- real income, gender, age, spending patterns
Why do people save
- availability of saving schemes(govt)
- savings for investment
- if consumer consumer is low
- if there is a higher interest rate
What can government do to instill saving?
- employment opportunities
- high interest rates
- tax cuts
- public goods provision
Why do households and businesses borrow money? What are the influences
Households: Down payment, mortgage, vehicles, personal borrowing, education
Businesses: Investments in factors of production like capital
Main(Influences): Consumer confidence, interest rate, income
What can government do to increase or decrease borrowing in an economy?
Increase-
Reduce interest rates
Increase taxes
Decreases-
Increase interest rates
Decrease taxes
Provide subsides to firms
What are some wage factors that we take into account when selecting a job
- time rate system
- piece rate system
- fixed annual salary
- performance related pay
What are some non-wage factors that we take into account when selecting a job
- holiday entitlement
- hrs of work
- hrs it takes to commute to work
- opportunities for promotion
How is wage determined in the market and what is a labor market?
- Amount of time spent
- Skill set
- Demand for product
- Amount of tasks done(productivity)
- Mobility of a laborer
Laborer market- marketplace where firms and workers meet to fill the demand and supply for labor.
What factors affect demand and supply in a market
Demand
- Change in labor productivity
- Change in consumer demand for product
- Change in price for capital intensive methods
Supply
- Change in size of population
- Change in net advantage for occupation
- Change in provision of quality education
Why will a govt increase minimum wage
- Reduce borrowing, increase saving culture. Also to increase consumption, because more disposable income.
What are factors that affect the demand for factors of production?
- Derived Demand
- Factor productivity
- Factor availability
- Factor price
- Factor substitutes
Three questions to answer (on your own): - How does demand for factor of production affect their price
- How does the price factor of production affect their price
- How does the availability of factors of production affect firms revenue
What is production(how we calculate it) and productivity? (Definitions)
- Productivity- Is the amount made by an employee over a period of time.
- Production-Production is thus, the transformation of raw materials (input) to finished or semi-finished goods and services (output)
What are factors that influence production?
- demand for the good/service
- influenced by the state of the economy
- supply for factor of production
What are the factors that influence productivity
Provide analysis points
- the total output and revenue is more with the same amount of resources
- the total output and revenue is the same with less resources
Analysis:
- increase workers wages- more loyal- increase productivity
- increase output of product- economies of scale
- ability to compete- economic growth
- taxes paid- govt revenue increases
What is total, variable and fixed costs?
Fixed costs: Costs that don’t change despite the output: cost of machinery
Variable cost: Costs that vary directly with the output: If output increases workers wages do too.
Total cost: Sum of total fixed cost+ total variable cost
How do we calculate total variable cost, average fixed cost, average variable cost, average total cost
total variable cost= variable cost x quantity
average fixed cost = total fixed cost / quantity
average variable cost = total variable cost / quantity
average total cost = total cost / quantity