aqa gcse economics revision unit - 11

Specification

1. Money In this section, candidates use the personal lifecycle as a framework to consider their needs and wants, how these are likely to change over time and how they can manage their personal finances more effectively. Candidates will be introduced to basic economic concepts to help them make informed judgements, by

weighing up costs and benefits. Candidates are encouraged to explore the moral and ethical dilemmas that arise when making decisions to do with spending, saving, investing or borrowing money.

Specification Amplification

1.1 Understanding the Personal Lifecycle stages within the lifecycle needs and wants.

Candidates should understand the idea of a personal lifecycle and the different stages within the cycle. Candidates should appreciate how at each stage, individuals will experience changes in their income, expenditure, savings and debt. Candidates should be aware of the difference between needs and wants and how these change over the personal lifecycle.

1.2 Making Decisions choices and opportunity cost costs and benefits.

Candidates should understand that as income is a scarce resource and wants are unlimited, choices need to be made. Candidates should understand the importance of weighing up costs and benefits and considering opportunity costs when making decisions.

1.3 Choosing to Spend demand and the personal lifecycle markets and prices effects of competition.

Candidates should understand the meaning of demand and the factors that affect spending. Candidates should appreciate how moving to different stages in the personal lifecycle result in changes in demand for different types of goods and services. Candidates should have a basic understanding of how markets for goods operate and understand the reasons why prices change. Candidates should understand how businesses compete and the advantages and disadvantages of competition for consumers.

1.4 Choosing to Save reasons for saving methods of saving choosing where to save.

Candidates should understand why people save and be aware of the main methods available, eg using banks, building societies and National Savings. Candidates are only required to have a basic understanding of shares and unit trusts and the working of the stock market. Candidates should be able to recommend suitable methods of saving and other financial products for different situations and justify their recommendations, appreciating the risks and rewards of each method. Candidates should know the difference between net and gross interest and understand the meaning of the Annual Equivalent Rate (AER).

1.5 Choosing to Borrow Money reasons for borrowing money methods of borrowing money choosing where to borrow money impact of changing interest rates.

Candidates should understand why people borrow money and be aware of the main methods of borrowing, eg mortgages, credit/store cards, personal loans, hire purchase and overdrafts. Candidates should be able to select suitable methods

1 Kaushik Srinivasan

of borrowing for different situations and justify their recommendations. They should take into account the degree of risk involved and the importance of the Annual Percentage Rate (APR). Candidates should be aware of the effects of changes in interest rates on borrowers and savers.

1.6 Managing your Money benefits of financial planning and budgeting planning for uncertainty moral and ethical issues influence of government on personal finances.

Candidates should understand the benefits of financial planning and budgeting, including debt management. The timings of such planning should be linked to changes in the personal lifecycle. Candidates should be aware of how factors such as redundancy, unemployment and sickness/disability, changes in interest rates and prices affect a person’s budget and how financial planning can make some allowance for these uncertainties. Candidates should explore some of the moral and ethical dilemmas that arise when making spending, saving and borrowing decisions, eg buying shares in companies making armaments or buying products from companies that exploit workers in developing countries. Candidates should understand how taxation and government expenditure on benefits and services can affect an individual’s income, saving and expenditure during the personal lifecycle.

2. Work In this section candidates consider the world of work. Candidates will consider the rewards an individual can receive both in monetary and non monetary terms. Candidates will also be introduced to the market for labour

and how this determines the reward for work.


2.1 Understanding the Purpose and Nature of Work the meaning of work specialisation and interdependence impact of ICT on work.

Candidates should understand what is meant by work and the reasons why people work or do not work. Candidates should understand how work is a key part of economic activity in which goods and services are produced to satisfy needs and wants. Candidates should be aware of the specialised nature of work and understand the advantages and disadvantages of specialisation to the worker. Candidates should be aware of how developments in Information Communication Technology (ICT) have led to the decline of some industries and the growth of others as well as affecting the nature of work, such as the development of home working.

2.2 Understanding the Reward for Work how people are paid how labour markets determine pay reasons for differences in pay the influence of government on pay and working

conditions.

Candidates should understand the main methods by which people are paid and the different items that appear on a pay slip including: deductions made for income tax, national insurance and pension contributions. Candidates should understand the difference between gross and net pay. Candidates should understand how the supply of labour is affected by a person’s decision to work or not to work, and that this is influenced by both monetary and non monetary considerations, eg incentives, location, gender and race, taxation,


state benefits etc. Candidates should understand that demand for labour is derived from the demand for the good or service produced, and that the supply and demand for labour will affect the amount that people are paid. Candidates should understand what can happen to wages when there are surpluses or shortages of labour and the benefits and limitations of the labour market. Candidates should be aware of the role of government in protecting workers, eg minimum wage, maximum working hours, health and safety and their effect on workers.

2.3 Understanding the Consequences of Unemployment impact of unemployment on individuals and

society impact of government on unemployment.

Candidates should understand the monetary and non monetary costs of unemployment to the individual and to society. Candidates should understand the reasons why the duration of unemployment might vary between individuals. Candidates should understand why government is concerned about unemployment and the benefits available to those who are unemployed, linking these to the personal life cycle. Candidates should have a basic understanding of how policies relating to education, training and the provision of tax allowances and state benefits are used to help those who are unemployed.

3. The National and Global Economy

In this section candidates consider their role as a citizen in the national and global economy.


3.1 Understanding International Trade UK’s exports and imports advantages and disadvantages of global trade.

Candidates should be aware of the main types of exports from, and imports to, the UK economy. They should appreciate the importance of trade to the UK economy. Candidates should appreciate the advantages resulting from global trade such as lower prices, increased availability and choice of goods for consumers, but also the disadvantages in terms of unstable commodity prices and the adverse effects on producers in the UK, as well as the wider social and environmental impact.

3.2 Exchange Rates effect on imports and exports effect on individual consumer.

Candidates should understand the impact of exchange rates on the importing and exporting of goods and services. Candidates should be aware of other factors that affect the sales of imports to, and exports from, the UK. Candidates should understand the effect that exchange rates have on the individual consumer, eg how this will affect the cost of travelling abroad and goods purchased in the UK.


3.3 The Power of the Consumer. Candidates should understand how the actions of consumers can impact upon the national and global economy through activities such as: boycotting the products of ‘sweat shop labour’, purchasing fair trade or locally sourced products produced in a sustainable, ethical and environmentally sensitive manner. They should appreciate the role played by government, eg in campaigning for reductions in World poverty.

3.4 Understanding the Impact of the Global Economy on Work

effect of globalisation on the UK labour market mobility of labour impact of migration.

Candidates should be aware of the advantages and disadvantages of firms operating overseas including the difference in labour costs. Candidates should understand the positive and negative effects that globalisation has on the UK labour market, eg causing unemployment in some sectors and regions, but creating job opportunities in others. They should be aware of the role played by government in regulating the migration of labour. Candidates should be aware of the nature of migration, including regional, European and global aspects. They should understand why migration occurs, the barriers to working abroad and how both emigration and immigration can affect, and has affected, the UK labour market.


Stages within the life cycle Candidates should understand the idea of a personal lifecycle and the different stages within the cycle. Candidates should

appreciate how at each stage, individuals will experience changes in their income, expenditure, savings and debt.

Needs and Wants Candidates should be aware of the difference between needs

and wants and how these change over the personal lifecycle.

Throughout a person’s life, their incomes will change significantly Needs are those things people need to survive and wants are things that make life

more enjoyable. There is a ‘scarce resource’ needs are limited but wants are unlimited.

Milestones in a person’s life cycle:

Leaving school Either further education or into a job Gaining higher qualifications is expensive but can help a person get a job.

Gaining employment Have a wider choice of jobs if they have more qualifications Higher level of qualification, more likely to get a better paid job Choose between job that is highpay, or job that is satisfying.

Promotion Working hard and responsible, might be promoted or a better paid job. Promotion gives people an opportunity to develop skills and greater

financial commitments buy more goods and services. Unemployment

Someone loses a job for some reason, they lose their job Get compensation from government.

Retirement Age 60+ can receive state pension + additional pension from employer lower income difficult adjustments to lifestyles.

Things government does to the personal life cycle:

Education maintenance Allowance Government pays £10£30 per week for children to continue education Government can subsidise student loans

Tax Credits Increase takehome income for lowpaid workers Better off working than claiming benefits

Jobcentre Plus offices Provides benefits and services to help people find work.

Pensions Help old people if they have paid substantial National Insurance. Benefits such as winter fuel payments.


Tax allowance UK citizen can earn £6035 without paying tax, up to £9180 for a pensioner

75 and over.

Definitions Income: Total Money received from a person’s wages/salary, interest and dividends. Basic economic problem: Resources are limited but needs and wants are infinite Opportunity cost: Something given up when we make a choice Demand: The quantity of a good or service that consumers are willing and able to purchase at a particular price Supply: The quantity of a good or service that businesses will offer for sale at a particular price Bank/building society account: an account for which the main objective is to gain interest and keep money safe. ISA: individual savings account Interest Rates: an annual rate which is charged to borrowers or paid savers


Choices and opportunity cost Candidates should understand that as income is a scarce resource and wants are unlimited, choices need to be made.

Costs and Benefits Candidates should understand the importance of weighing up costs and benefits and considering opportunity costs when making decisions.

Definitions Basic economic problem: Resources are limited but needs and wants are infinite Opportunity cost: Something given up when we make a choice Demand: The quantity of a good or service that consumers are willing and able to purchase at a particular price Supply: The quantity of a good or service that businesses will offer for sale at a particular price Costs: The expense and drawbacks of a particular choice. Interest Rates: The advantages of a particular choice. Opportunity costs are something that is given up when we make a choice How demand changes over Personal Life Cycle Initially basic household goods Family goods and services for children After children leave home meals out, more expensive holidays Retirement Income falls so people cut back on expenditure.


Demand and the Personal Lifecycle Candidates should understand the meaning of demand and the factors that affect spending. Candidates should appreciate how moving to different stages in the personal lifecycle result in

changes in demand for different types of goods and services.

Markets and Prices Candidates should have a basic understanding of how markets for goods operate and understand the reasons why prices change.

Effects of Competition Candidates should understand how businesses

compete and the advantages and disadvantages of competition for consumers. Demand and the factors that affect spending. As the price increases for a good, the quantity demanded will decrease, and vice versa

Income level the most important factor Advertising and branding influence desire and loyalty for a product Prices of substitutes (similar goods) and complements (fuel is a complement of

cars) Fashion

The ‘supply’ from businesses The amount they offer for sale is called ‘supply’ the more they supply, the higher the price.

Cost of Raw Materials Wage Rates overtime may need to be paid for higher output Productivity of the workers

Why wage prices change

Buyers and sellers come together → market is formed. Market price is determined by the amount buyers are willing to pay and the price

that businesses need to be paid to cover their costs. Goods don’t sell well → supplier lowers price Price will settle at a point where supply = demand, this is known as market price.

Competition There is more than one supplier for each good → businesses face competition

Advertising and branding


improving quality changing design and features (eg. phone updates) lowering the price by improving production methods

CONSUMER BENEFIT

Lower prices (eg. price wars between supermarkets) Greater variety (eg. more branded versions of same good in supermarkets) Better Quality (eg. Improving quality to get dominance)

CONSUMER DRAWBACK

Quality can be lowered as businesses try to cut costs Aftersales service can suffer if too many resources are put into sales.


Reasons for saving Candidates should understand why people save and be aware of the main methods available, eg using banks, building societies and

National Savings.

Methods of saving Candidates are only required to have a basic understanding of shares and unit trusts and the working of the stock market.

Choosing where to save Candidates should be able to recommend suitable methods of saving and other financial products for different situations and justify their recommendations, appreciating the risks and rewards of each method. Candidates should know the difference between net and gross interest and

understand the meaning of the Annual Equivalent Rate (AER). Why people save?

Decide not to spend all their income now → uncertainty about future events in their life cycle. Plan emergencies and planned purchases

Something special like a car, a wedding celebration or a house. Emergencies like replacing fridge, tv or even medical. To save for retirement

Definitions Annual equivalent rate (AER): a figure quoted in savings advertisements to help people compare on savings products with another Risks: the chance that something may not succeed and its consequence Reward: the return received for taking risks Shares: certificate representing a unit of ownership in a company Unit trust: a pooled investment fund usually sharesbased investments Government role on saving

The government encourages people to save ISAs, you can save £15,000 (£15,240 from April 2015) taxfree.

Gross interest is the interest rate before tax has been deducted. Net interest is the rate you receive after tax has been taken off.


Methods of saving Account Reward Risk Short,

medium or longterm

Ease of withdrawing money

Savings account

Low Medium Low Short – Long Easy – unless notice of withdrawal is required

ISA accounts Low Medium Low Medium – Long Easy

National savings and investments account

Low Very Low Medium – Long Often requires written notice of withdrawal

Unit Trusts Medium High High Long Obtaining your money may take some time

The Annual Equivalent Rate (AER) AER Earn → From savings

It is given to the interest rates of different savings so it is easy to be compared. Since some savings are compounded annually and others monthly, annually Way to compare different savings account.


Reasons for borrowing money Candidates should understand why people borrow money and be aware of the main methods of borrowing, eg mortgages,

credit/store cards, personal loans, hire purchase and overdrafts.

Methods of borrowing money

Choosing where to borrow money Candidates should be able to select suitable methods of borrowing for different situations and justify their recommendations. They should take into account the degree of risk involved and the importance of

the Annual Percentage Rate (APR).

Impact of changing interest rates Candidates should be aware of the effects of changes in interest rates on borrowers and savers.

Why people borrow?

To make large purchases when they don’t have enough money. Something special like a car, a wedding celebration or a house. Emergencies like replacing fridge, tv or even medical.

Definitions Mortgage – a loan to finance the purchase of real estate (e.g. a house). A Mortgage is secured on the house, which remains to be the property of the bank until the loan is paid off. Credit card – cards that may be used repeatedly to buy products and services on credit or to borrow money up to a pre arranged amount limit. Each month, you must pay back the minimum repayment required (usually around 35%) of the outstanding balance. You can pay more if you want, and this will reduce the interest you pay; credit card interest rates are high. Store card – cards that may be used to buy products and services on credit from the shop that issued the card, up to a pre arranged limit. Repayment terms are similar to credit cards. Personal loan – a loan given for a personal household (e.g. to buy items such as furniture) Hire purchase – instalment plan whereby the loan company owns the item, but it becomes yours when the debt if fully paid off. Overdraft – borrowing up to an agreed limit on a current account. Overdrafts must be paid back on demand. Borrowing/debt/credit: getting money from a lender that must be repaid in the future (e.g. a mortgage) Loan: amount of money borrowed Term of a loan: the length of time over which a loan can be repaid Annual percentage rate (APR): the interest rate published on loans to help compare their true costs


Type of Loan Interest Rate Is security needed?

Flexibility of payments

Mortgages Low Yes – The house. Very little – the amount changes when there are changes in the base rate.

Credit and store cards

High No High – you can pay the minimum, or more if you wish

Personal loans Medium No None

Hire purchase Medium Yes – the purchase acts as security

None

Overdraft High No High – but make sure that you do not go over the agreed limit.

The Annual Percentage Rate (APR) APR Pay → To loans

It is the interest rate quoted on loan and credit card advertisements Helps compare the cost of different loans Takes into account the interest rate and any additional costs. Higher the APR, the higher the monthly installments Credit cards are more expensive because there is no security. Each loan is made up of two parts the interest and the capital.


Benefits of financial planning and budgeting Candidates should understand the benefits of financial planning and budgeting, including debt management. The timings of

such planning should be linked to changes in the personal lifecycle.

Planning for uncertainty Candidates should be aware of how factors such as redundancy, unemployment and sickness/disability, changes in interest rates and prices affect a person’s budget and how financial planning can make some allowance for these

uncertainties.

Moral and ethical issues Candidates should explore some of the moral and ethical dilemmas that arise when making spending, saving and borrowing decisions, eg buying shares in companies making armaments or buying products from companies that exploit

workers in developing countries.

influence of government on personal finances Candidates should understand how taxation and government expenditure on benefits and services can affect an individual’s

income, saving and expenditure during the personal lifecycle.

Financial Planning:

A process of ensuring that financial goals are met Financial planning is needed to make sure that people meet these needs and

wants Staying clear of financial problems budgeting is key Changes in income/expensive, the figures need to be adjusted. Financial advisor can help you with

buying expensive items designer clothes, new phone, furniture university fees, cost of living buying or renting a house redundancy, sickness or disability retirement

Unpredictable events means that people need to save to have something in reserve.

Those who do not make financial budgets easy to spend on credit cards, it is harder to pay back loans you owe,

interest charge will build up can cause serious debt problems → seeing an expert who will draw debt

management plan Ethical issues to do with saving

Deciding to save can be a social, moral or ethical dilemma. Body Shop and Cooperative Bank have high ethical standards pay their

workers properly. Other companies have child labour, poor working conditions, etc. and this

isn’t ethical Ethical issues to do with borrowing

Should people borrow if they might not be able to repay the money.


The meaning of work Candidates should understand what is meant by work and the reasons why people work or do not work. Candidates should understand how work is a key part of economic activity in which goods and services are produced

to satisfy needs and wants.

Specialisation and Interdependence Candidates should be aware of the specialised nature of work and understand the advantages and disadvantages of

specialisation to the worker.

Impact of ICT on work Candidates should be aware of how developments in Information Communication Technology (ICT) have led to the decline of some

industries and the growth of others as well as affecting the nature of work, such as the development of home working.

Refers to paid work where people perform jobs in exchange for money and other

benefits

Why people work Why people may not work

Pay Remaining in education

Job satisfaction (Social aspect an achievement)

Child care and Retirement

Social Status Stay at home parents

To enjoy/achievement Physically unstable

Passtime/relieve boredom Are financially stable/affluent

Specialisation occurs when an individual, firm or economy focusses on a task at which it has an advantage.

This simplifies the task of each worker. Some tasks can be mechanised Mechanised means you replace workers with machines

ADVANTAGES OF SPECIALISATION

Take advantage of different skills can become more skilled in one task rather than be involved in whole production

No wasted movement Effective use of capital items Saves time


Businesses can produce more output at lower costs, saving might be shared with workers

DISADVANTAGES OF SPECIALISATION Production will become interdependent Jobs become boring if workers are only involved in a repeated, small part process Loss of certain skills Lack of variety Loss of transferable skills

Information Communication Technology (ICT) The internet

Changed how businesses operate Removed the need for people to be employed in shops and other outlets

Email How we communicate at work faster and easier with large numbers Reduces need for telephone calls and letters

Home working People have ‘flexible working’ as it helps manage both work and looking after

family Helps businesses reduce costs as they may not have to provide facilities


How people are paid Candidates should understand the main methods by which people are paid and the different items that appear on a pay slip including:

deductions made for income tax, national insurance and pension contributions. Candidates should understand the difference between gross and net pay.

How labour markets determine pay Candidates should understand how the

supply of labour is affected by a person’s decision to work or not to work, and that this is influenced by both monetary and non monetary considerations, eg incentives, location, gender and race, taxation, state benefits etc.

Reasons for differences in pay Candidates should understand that demand for labour is derived from the demand for the good or service produced, and that the

supply and demand for labour will affect the amount that people are paid. Candidates should understand what can happen to wages when there are

surpluses or shortages of labour and the benefits and limitations of the labour market.

The Influence of government on pay and working conditions Candidates should be aware of the role of government in protecting workers, eg minimum wage, maximum working hours, health and safety and their effect on workers.

How people are paid: Salaries stated as annual earnings but are paid monthly. Mainly applies to full time workers, but can apply to part time workers. Jobs paying salaries are more likely to be skilled – non manual occupations. Pay stated as a yearly total Wage – wages are calculated as an hourly rate multiplied b the number of hours worked. Wages are normally paid weekly. More likely to apply to lower skilled jobs, and for part time or temporary work. Pay calculated on an hourly rate multiplied b the number of worked hours Commission – workers paid by commission receive payments for achieving certain targets – often connected with sales. A worker who adds to the firms sales receives a percentage of the sales value as a reward. Commission encourages workers to achieve more sales. Workers can be paid partly or fully on commission. Payment made to workers for achieving certain targets Overtime payment – Businesses sometimes need workers to work longer hours. This is especially true when production needs to be higher than usual but this will be temporary. Rather than having to employ more workers, companies will encourage its workforce to work longer hours. These extra hours are paid at a higher rate and are known as overtime payments. Workers are paid a higher amount for hours worked outside of their normal working hours.


Shift work payment – some workers will not work traditional hours but will work in shifts. This often occurs when a business needs to be kept open for longer than the working day. Work patterns which do not follow the standard working hours BACS – stands for the bankers automated clearing services and is a system used within the UK for allowing the electronic transfer of money between banks. This means that it avoids the need for paper based documents when making payments. The payments can take up to three days to move from one bank to another. Automatic transfer of funds between bank accounts. Fringe benefits – When worker are paid in ways other than money, For example, fringe benefits of a job could include a company car, private health care or schooling fees. They are often paid for highly skilled and highly paid jobs. Gross Pay –Is a worker’s pay before any deductions are made. Useful to compare

different jobs. Net pay – refers to the pay after all deductions have been made. E.g. tax, national

insurance and pension contributions. Not comparable, depends on level of income and type of pension.

DEDUCTIONS Income Tax: tax on money paid to the worker, although not all income is taxed, the income tax will be paid as a percentage of earnings. People only pay income tax on earnings above a tax free allowance, and the percentage of tax paid depends on the amount of income – indicated by a tax code. A tax calculated as a percentage of the workers income. Income tax in the UK is paid in two main ways

PAYE – pay as you earn, tax is deducted by the employer before the income is paid to the worker

SA – self assessment, for workers who are self employed. Tax is paid by the worker.

National Insurance (NIC): are paid by employees on incomes to build up an entitlement to certain benefits and the state pension. Like income tax, national insurance is paid as a percentage of income earned. The rates it is paid are different to those of income tax. A tax paid by workers which entitles them to qualify for benefits when necessary Pension contributions: some workers will pay fewer NICS because they make payments to either a private or a company pension scheme. Workers pay a percentage of their income, which will then be invested. The worker will receive the pension when reaching retirement. A deduction from a worker’s pay, which is meant as a contribution for their future retirements. Other deductions: trade union subscriptions, staff association membership fees and repayment of student loans


Impact of unemployment on individuals and society Candidates should understand the monetary and nonmonetary costs of unemployment to the individual and to society. Candidates should understand the reasons why the

duration of unemployment might vary between individuals. Impact of government on unemployment Candidates should understand why government is concerned about unemployment and the benefits available to those who are unemployed, linking these to the personal life cycle. Candidates should have a basic understanding of how policies relating to education, training and the provision of tax allowances and state benefits are used to help those who are

unemployed.

Monetary factors, gender, ethnic origin, taxation and state benefits are contributions as to why people may not work.

Types of unemployment Seasonal

Seasonal changes in employment due to demand Tourism (high demand during holiday times) Construction

Frictional

When people are looking for work after a job or a long gap includes returning entrants to labour market

Structural

When a person’s qualifications mismatch job opportunities as the pattern of labour demand in the economy changes

Often involves longterm unemployment In regions of longterm decline.

mining Textiles

Cyclical Caused by a fall in total demand leading to a loss of real national output and

employment.


Reasons for difference in wages Training and skills – Jobs which require more training and higher skills are likely to be paid more, because the supply of people with these skills is not a lot. Businesses need to pay more so that they can attract these workers. Gender – Women are likely to be paid less than men. This is partly due to the fact that women are more likely to take a career break to raise children so they would have to miss out on training and opportunities. Women’s wages are around 85% of men’s. Age – older workers are likely to be paid more than younger workers. This is because they are likely to have more experience and have the skills needed for higher paid jobs. Trade unions – organizations that workers can decide to join, which offers protection and negotiate for higher wages for their members. Achieving this by the treat of industrial action. E.g. strikes. Government Influence the government introduced a minimum wage in the 1990’s, so now people cannot be paid unfairly low wages. The minimum wage is the legal minimum hourly rate that can be paid to workers, varying depending on the age of the worker. Derived Demand When the supply of a good/service/job is dependant on the demand for another good. eg. demand for gold is derived from the demand for gold sovereigns Reasons why wages rates change Surpluses of labour – where more people want to work in a particular occupation than the number of jobs available. This is likely to lead to lower wages because the supply of available people has risen. Also because the business can afford to pay less for a higher amount of staff. Shortages of labour – If there is a shortage of labour, businesses will need to offer higher wages. This will encourage more workers to supply their labour for that industry. Monetary costs of unemployment

A person will not receive any income The government will need to spend money in issuing benefits.

Non monetary costs of unemployment

Loss of skills Health – due to possible family breakdown and stress


Government strategies to help the unemployed: Tax allowances – allowing people to earn up to a certain amount before they have to start paying income tax. This is designed to ensure that the unemployed who take on jobs will not be worse off than if they were receiving benefits. Jobseekers allowance – the benefit payments to the unemployed re linked to the person providing evidence that a person is actively seeking work. Working tax credits – Some people will have family commitments, so the government ensure they receive benefits through working tax credits. Meaning they don’t lose all the benefits that they had whilst unemployed. New deal – focuses on providing training for people who have been unemployed for an extended duration. It particularly concentrates on those ages under 25 because it is believed that they are the most likely to be unemployed because of lack of skills. Education the government is encouraging more students to undertake vocation qualifications in schools and colleges. To ensure that children who find academic work difficult do not leave school without decent qualifications. Apprenticeships apprentices work alongside experienced staff and gain job specific skills. The apprentice will normally receive training with a local training provider such as a college possibly on a day release scheme e.g. one day a week away from the workplace. This helps the business, meaning they don’t get the same wage as a normal employee would. But also helps the apprentice because they gain skills that make them employable.


National and Global Economy

UK’s exports and imports Candidates should be aware of the main types of exports from, and imports to, the UK economy. They should appreciate the

importance of trade to the UK economy.

Advantages and disadvantages of global trade Candidates should appreciate the advantages resulting from global trade such as lower prices, increased availability and choice of goods for consumers, but also the disadvantages in

terms of unstable commodity prices and the adverse effects on producers in the UK, as well as the wider social and environmental impact.

Exports are goods and services that the UK sells to buyers in foreign countries (e.g.

Jaguar Cars) (MONEY COMES INTO THE COUNTRY) Import are goods and services that the UK buys from foreign countries (e.g.

Volkswagen Cars) (MONEY GOES OUT OF THE COUNTRY)

Goods that can be physically handled ‘visibles’ television, cameras Services that cannot be physically handled ‘invisibles’ tourism, insurance

Balance of Payments A record of the value of the country’s exports, imports and

financial transactions with the rest of the world over a year (or) the difference between the value of all the exports and all the imports.

Importance of Trade

International trade provides jobs Different countries have different specialities (raw materials, climates,

cultures). UK can specialise in producing goods that make it better and more

efficient The surplus goods can be sold abroad, creating jobs for UK citizens.

Globalisation the process of increasing international trade and economic

interdependence between countries ADVANTAGES OF TRADE

Income increased production means more workers needed → more jobs Growth growing exports → increasing production → higher economic

growth (GDP will rise)


Choice and product differentiation UK citizens can choose from goods not otherwise available in the UK

Prices Goods are imported from China and India → lower labour costs and good levels of technology → produce more goods cheaply

Competition and Innovation work harder to attract customers from competitors → try to lower prices and develop more attractive and better quality products

Raw materials the UK is relatively poor in raw materials → essential that we import materials that we need.

DISADVANTAGES OF TRADE

Competition increased competition means cheaper goods → UK firms find it difficult to compete → lower labour costs than UK

Economic dependency UK imports large variety of foods → interruption might threaten survival

Unstable commodity prices prices of raw materials and foodstuff can change by large amount very quickly → affects production and prices to consumers → good and bad effects

Power of MNCs they are becoming powerful → govts. finding it hard to control MNCs

Social and Environmental Impacts Carbon footprint: the total greenhouse gas emissions caused by an

individual, event, organization or product or good traded by the UK. direct emission of CO2 from activities the organization controls

(eg. using energy for production, running vehicle fleet) indirect emissions of CO2 the carbon that is emitted in the

preparation and transport of the raw materials used, employee travel to work, so on.


Effect on imports and exports Candidates should understand the impact of exchange rates on the importing and exporting of goods and services. Candidates should be aware of other factors that affect the sales of imports to, and exports

from, the UK.

Effect on individual consumer Candidates should understand the effect that exchange rates have on the individual consumer, eg how this will affect the cost of

travelling abroad and goods purchased in the UK.

Exchange Rate The rate at which one currency exchanges for the other

SPICED (Strong Pound Imports Cheap Exports Dear)

When the value of the pound (against the dollar) increases before it was £1:$1 and now it is £1:$2 this means that before, £1 was required to buy $1. Now only £0.5 is required to buy the same ($1). The purchasing power of the Pound has increased.

Effects on exports

If the value of the pound appreciates (against the euro), the Euro has less purchasing power so they can buy less goods the exports become dearer.

Travel to the UK will now be more expensive → less people will take holidays in the UK.

Exports will decrease Affects UK exports, jobs, income and growth

If the value of the pound depreciates (against the euro), the Euro has more purchasing power so they can buy more goods the exports become cheaper.

Travel to the UK will now be cheaper → more people will take holidays in the UK. They will also buy goods in UK while here.

Farmers can export abroad easier, making their goods cheaper Exports will increase

Affects UK exports, jobs, income and growth Effects on imports

If the value of the pound appreciates (against the euro), the pound has more purchasing power so it can buy/import more foreign goods.

Imports in UK will increase The UK will be more incentivised to travel abroad as their holidays become

cheaper Foreign economies will develop as their exports will increase


If the value of the pound depreciates (against the euro), the pound has less purchasing power so it can buy/import less foreign goods.

Imports in UK will decrease The UK will be less incentivised to travel abroad as their holidays become

more expensive Foreign economies will not develop as their exports to the UK will

decrease. Effects on individual consumer

If the value of the pound appreciates (against the euro), the pound has more purchasing power so it can buy/import more foreign goods.

UK people will go on holidays abroad as it is cheaper People will buy imported cars and goods as it is deemed cheaper Imported foods from supermarkets

Local farmers will suffer as their goods are more expensive. More likely to withdraw from cash machines abroad.

If the value of the pound depreciates (against the euro), the pound has less purchasing power so it can buy/import less foreign goods.

UK people will not go on holidays abroad as it is more expensive People will buy less imported cars and goods as it is deemed more

expensive Exported foods (locally grown) from supermarkets

Local farmers will flourish as their goods are cheaper → can sell more.

Less likely to withdraw from cash machines abroad. Factors that affect sales of imports and exports

Style and image Quality Reliability

BMWs from UK are bought because of its quality and style

Fine wines and champagne from France Caviar from Russia

Oil is something which UK depends prices make little difference to the amount UK exports.


The Power of the Consumer Candidates should understand how the actions of consumers can impact upon the national and global economy through activities such as: boycotting the products of ‘sweat shop labour’, purchasing fair trade or locally sourced products produced in a sustainable, ethical and environmentally sensitive manner. They should appreciate the role played by government, eg in

campaigning for reductions in World poverty. Consumers can wield a large influence over producers. Boycott to stop buying or using a product as a protest, to force a company to do or

stop doing, a particular action.

Consumer empowerment consumers demonstrating their needs, wants and demands through their purchase decisions in the marketplace.

Consumers demand cheap products → UK manufacturers moved abroad to low

labourcost countries in order to compete with cheap imports.

Fairtrade products aims to help poorer producers in developing countries gain economic self sufficiency by encouraging the payment of pair prices for products such as coffee, cocoa and fresh fruit. Shops have adopted to Fairtrade products because consumers

demand them.

Tesco, ASDA and Sainsbury’s have committed to sourcing foods locally where possible → greatly cuts down transport needed → pollution is reduced.

The UK Government’s role in reducing World Poverty

Tackling causes of poverty Settling conflicts Increasing trade

Aid is also given directly to foreign governments of poor countries. Reducing import taxes on these goods Making foreign consumers pay fair prices.


Effect of globalisation on the UK labour market Candidates should be aware of the advantages and disadvantages of firms operating overseas including the

difference in labour costs.

Mobility of labour Candidates should understand the positive and negative effects that globalisation has on the UK labour market, eg causing unemployment in some sectors and regions, but creating job opportunities in others. They should be aware of the role played by government in regulating the migration of labour.

Impact of migration Candidates should be aware of the nature of migration, including regional, European and global aspects. They should understand why migration occurs, the barriers to working abroad and how both emigration and

immigration can affect, and has affected, the UK labour market. ADVANTAGES OF FIRMS OPERATING OVERSEAS

Lower operation and labour costs Firms have increased competition can drive prices lower Exchange rates if the exchange rate falls it lowers export prices Firms nearer to markets and raw materials reducing transport and

distribution costs DISADVANTAGES OF FIRMS OPERATING OVERSEAS

Jobs lost in the UK Difficulty in controlling operations Unfamiliar languages and cultures Transport costs to home markets Exchange rate changes changes can go against you, making trading more

expensive and reducing profits from overseas factories. Why foreign firms choose to operate in the UK

High skilled labour force and higher quality production Tarifffree access to the European Single Market (500 million consumers) to buy existing UKowned brands and distribution networks English is an accepted international language of business, science and

technology Effects of closing a plant on the UK economy

jobs are lost from the plant itself jobs are lost from other UK companies who supply to the plant


Globalisation and the Mobility of Labour Mobility of Labour the ability of workers to change between jobs.

Globalisation is increasing the mobility of UK workers by offering them a growing variety of jobs abroad.

UK is a very open economy, so places will highskilled labour will experience a growth in employment as new companies dependent on such skills relocate to the UK.

ADVANTAGES OF GLOBALISATION (in UK labour market)

Jobs are created in sectors where the UK does well (eg. financial services and highly specialised manufacturing)

New migrant labour skills lower costs and increase competitiveness (eg. Polish plumbers in UK)

There are opportunities to increase exports to new markets DISADVANTAGES OF GLOBALISATION (in UK labour market)

Lowskill jobs are lost, particularly affecting manufacturing regions in the UK

Increase in immigrant labour lowers wages higher supply and they are willing to work for less

Relocating production overseas can cause unemployment Immigration on the UK Economy

Workers migrate to where wages are highest, both within their country and internationally.

Easier to work abroad so large amount of migrants Immigration affects the UK POSITIVELY

Bringing new knowledge and skills, filling gaps in the market Reducing wage inflation and increasing competitiveness Providing more workers to support the UK’s ageing population Increasing the number of consumers as well as producers


NEGATIVELY

Lowers wages and can replace lowskilled workers Increases strain on social services, education and producers

Emigration affects the UK

Reducing unemployment in recession Losing valuable skills/human capital ‘the brain drain’

BARRIERS TO WORKING ABROAD:

language and cultural barriers visa, work permits and so on restrictions by foreign governments

Government action to regulate labour migration

Points system potential immigrants score points according to how well their skills match those needed by the UK.

the SAWS Seasonal Agricultural Workers Scheme which allows farmers and growers to bring foreign persons to the UK to do seasonal and agricultural work.


Other Notes Eco Unit 11 revision: Demand: the quantity of a good for service that consumers are willing and able to purchase at a particular price Bank/Building society savings account: an account for which the main objective is to gain interest and keep money safe Unit trusts: a pooled investment fund usually in sharesbares investment saving products that spread risk by investing in a range of shares Government securities: stocks, bonds and bills of exchange issued by a government to raise the funds Where to save National Savings Account + Investment account low reward very low risk mediumlong term requires written notice for withdrawal Savings Account lowmedium reward low risk shortlong term easy to withdraw money ISA Account lowmedium reward low risk mediumlong term easy to withdraw money Unit Trusts mediumhigh reward medium high reward long term obtaining money may take time Where to borrow Mortgage low interest rates very little flexibility of repayments security needed (house) Hire purchase medium interest rates no flexibility of repayments security needed (purchase) Personal loans medium interest rates no flexibility of repayments no security needed Overdraft high interest rates high flexibility of repayments (but need to be under agreed limit) no security needed Credit + Store cards high interest rates high flexibility of repayments no security needed Budget: a financial plan of future income and spending Debt management plan: a structured repayment plan ———————————————————— Benefits of specialisation (7)

workers become more skilled if the focus on one task, output produced quicker as workers are more familiar with what they have to do businesses produce output at lower cost due to faster+higher skilled workers (can still sell for

same amount) workers get higher earnings workers can stay more concentrated at task get training that is more based towards skill efficiency of workplace and product production increases

Limitations of specialisation (5)

workers and production becomes interdependent as they rely on each other (causes problems if one area failsbottle necks)

jobs become boring if they have to focus on one thing repeatedly moral falls as jobs become repetitive and labour turnover may rise if worker is absent it is hard to arrange a cover of their specialised section of work as others are

untrained in that


workers become less flexible and its harder to find other jobs or adapt if new types of goods need to be made (keeping options narrow as not able to do other things)

impacts of ICT in workplace

job loss training needs obsolete skills lower or higher earnings flexible work practice creates new markets for new products

Factors affecting demand for labour: derived demand, government influence and the demand for labour, low wage more people want to work but less jobs available (supply > demand) high wage more labour wanted but less people want to work (demand > supply) Reasons for differences in wages: Training and skills required Gender (women take career break) Age (older more experienced) Unionised jobs/ Trade unions (set better wages for employees) Government influence (minimum wage, rules for work hours) How much revenue it generates (person and market/job) How necessary it is (the product. e.g. doctors) Alternatives/ substitutes (can be done by technology?) Scarce supply or not (how many) Government strategies to help unemployed: Tax allowance (allow them to earn up before they pay income tax so they aren't worse off when they lose their benefits) Job seekers allowance (extra money to help them when looking for jobs so more people want to start looking), New deal (training for unemployed) Education and apprenticeships ————————————————————— GDP: the total value of goods and services produced by an economy in one year Globalisation: the process of increasing international trade and economic interdependence between countries.It has made it easier to buy products produced around the world and for UK producers to sell in other countries Advantages of trade:

Income (more production means more workers needed and so more jobs), growth (higher GDP), choice and product differentiation (choose from products out of UK), prices (lower labour costs made in china, can producer cheaper than UK manufacturers), competition and innovation (companies work harder to attract more customers as there are

more lower prices and produce hire attractive and better quality products for this) raw materials (uk has little essential to import materials needed)


Unstable Commodity prices (price of raw materials and products can change by large amounts quickly affects production costs and prices for consumers can have good and bad effects)

Get more natural resources which the country doesn’t have Disadvantages of trade:

Competition (benefits customers lower prices, more variety, better quality. but difficult for firms to compete other countries have lower labour costs than UK and their workforce is well trained so they pay less and work better)

Economic dependency (imports large variety of things that the people now need and depend on interruption may threaten survival)

Unstable Commodity prices (price of raw materials and products can change by large amounts quickly affects production costs and prices for consumers can have good and bad effects)

Power of MNCs (becoming very powerful governments finding hard to control them), Environment and Sustainability

advantages of firms operating abroad: lower operating and labour costs firms have more competitiveness, exchange rates (if fallsexport prices lowered) firms nearer to markets and/or sources of material (reduce transport and distribution costs)

disadvantages of firms operating abroad: jobs lost in UK, difficulty in controlling operations, unfamiliar cultures and languages, transport costs to home markets, exchange rates (if goes up exports price higher can go against you making trade expensive

and reducing profit from overseas) reasons why foreign firms locate in the UK:

highskilled labour force and higher quality production, tarifffree access to the europen single market, to buy existing UK owned brands, english language is the accepted internationally

Benefits of globalisation for the labour market: Jobs are created in sectors where the UK does well (e.g. financial services) There are opportunities to increase exports to new markets New migrant labour skills lower costs and increase competitiveness (e.g. skilled plumber emigrating to UK eased shortage of those skills) Drawbacks of globalisation for the labour market: Lowskill jobs are lost, particularly affecting manufacturing regions of the UK Increase in immigrant labour depresses wages Relocating production overseas can cause unemployment Impact of migration MNCs create new job opportunities across the globe. Workers naturally migrate to where wages are highest (nationally and internationally) Immigration affects the UK labour market by: Bringing new knowledge and skills and filling gaps in the labour market Reducing wage inflation and increasing competitiveness Providing more workers to support the UKs ageing population


Increasing the number of consumers as well as producers BUT Depresses wages and can displace low skilled UK workers Increases strain on social services, education and hospitals Emigration affects the UK labour market by: Reducing unemployment in recessions Increasing opportunity BUT Loses valuable skills/human capital the brain drain (language and cultural barriers, visa work permits and so on are needed outside EU, restrictions by foreign governments) exchange rate = equilibrium price between demand and supply of a currency Demand ^ = Value ^ = appreciates Supply ^ = Value v = depreciates Currency ^ = easier/cheaper to import (can buy more) harder to export Currency v = easier/cheaper to export (can sell more) harder to import some countries keep their currency cheap on purpose. Cheap currency = its products cheap + foreign products expensive (good for balance of payments as more people will buy local products instead foreign ones so they need to purchase fewer imports but will be selling more exports by devaluing their currency they can increase exports,jobs, income and growth it boosts the economies and the income will be more. you can export more as the currency value falls imports become more expensive as the currency value falls it will help local firms as people buy more of their products as foreign ones are more expensive (boost income and economy for UK) more expensive for pound holders to buy goods in euros (less attractive) if the currency appreciates (is stronger) the holders of that currency will be able to: have cheaper foreign holidays get more from banks abroad (as it is worth more) goods in supermarkets imported goods direct imports 12 MARKER point justify advantages + disadvantages link to person point 2 justify advantages + disadvantages link to person overall judgement insight on circumstances (RELATE TO CASE STUDY)
