UNIT 3 AOS 2 Flashcards
Material Living Standards
Measure the ability of individuals to access to goods and services.
Non-material living standards
factors that affect a person’s quality of life regardless of their income.
Difference between Non-material and material living standards
Non-material living standards are more difficult to measure as they are made up of intangible things.
Factors affecting living standards
Crime rates Life expectancy Access to goods and services Physical and mental health Environmental quality Literacy rates
Access to goods and services
Material living standards:
An improved access means a greater standard of living because we can satisfy more needs and wants. We can improve access through more production and growth.
Environmental quality
Material Living Standards:
When the production/consumption of goods and services occurs, this can affect quality of natural environment, therefore damage/pollute the environmental resources available.
Non-Material Living Standards
if someone is exposed to more pollution and poor natural environments, they are likely to experience less enjoyment in life.
Physical and Mental health
A healthy population is likely to improve non-material standards of living as being more productive and able to work more hours may increase their quality of life
Material Living standards
Those experiencing ongoing illness will have a compromised ability to participate in production which may mean they will make less income reducing their access to goods and services
Life expectancy
Material living standards
Longer life expectancy will lead to an increased ability to work and for a longer time. Thus their ability to purchase goods and services will be greater.
Non-material living standards
A longer life expectancy may increase satisfaction levels as they know they will be living for longer and increase the number of positive experiences a person has in their life. Associated with better health and higher quality of life.
Crime rates
An increase in criminal rates is usually associated with a decline in both material and non-material living standards
- Person is robbed may cause reduction in goods and services they have
- Victims of crime physical or mental well-being will have been affected as sense of safety is reduced
Literacy rates
Material Living Standards
The ability of a person to read or write may increase their chance of employment, which means their ability to earn an income is improved which affects their ability to purchase goods and services
Non-Material Living Standards
Enjoyment of life can be significantly improved through the reading of interesting and thought provoking ideas.
Aggregate Demand
The total expenditure on final Australian made goods and services
Factors the can influence the level of Aggregate Demand
● Changes in the general price level ● Disposable income ● Consumer confidence ● Exchange rate ● Rates of economic growth overseas ● Interest rates ● Business confidence
Changes in the general price level
Higher prices - reduce purchasing power of buyers. as real value of income decreases when price increases therefore purchasing power is diminished and the level of spending decreases causing AD to decrease
If prices fall - purchasing power increases and can lead to greater levels of spending causing AD to increase
Higher prices - due to inflation tend to have negative effect on international competitiveness as if higher than the price increase in other countries. This can result in fewer exports and possibly greater imports, lowering AD.
Disposable income
Disposable income is the income we have after paying taxes. Disposable income will increase with pay rises, but also if tax rates are lowered.
With greater disposable income, households are more likely to purchase goods and services - increasing consumption spending and AD.
Interest rates
If households have a lower discretionary income due to higher interest rates, they will need to pay back more on their loans, leaving less money to purchase other goods and services, adversely affecting AD.
Businesses are also affected in the same way. They will be discouraged from taking out loans for capital investment during times of high interest rates.
Consumer confidence
If Consumer confidence is high, consumers are less likely to save and more likely to spend.
If low, consumers more likely to save and less likely to spend
Business confidence
Business confidence is high, businesses are more likely to invest.
Business confidence is low, businesses are less likely to invest.
Exchange Rate
Exchange rate is high (value of the AUD increases) imports become cheaper to buy and our exports are less attractive to overseas buyers as it will cost them more - therefore net exports and AD is likely to decrease.
lower exchange rate - a cheaper AUD will encourage overseas buyers to spend on exports and our spending on imports is likely to decrease, resulting in higher net exports and increased AD.
Rates of economic growth overseas
increased incomes of individuals in overseas nations may see an increase in sales of Australian made goods and services such as tourism and education.
Aggregate Supply
total volume of goods and services that all suppliers have produced and supplied over a period of time.
Factors of Aggregate Supply
Changes in the general level of prices Quantity of factors of production Quality of factors of production Costs of production Technological change Productivity growth Exchange rates Climatic conditions
Changes in the general level of prices
Increase in AS encourages producers due to excess of goods and services to lower prices in order to clear stock.
Decrease in AS will tend to put prices up as a result of the shortage of goods and services in the economy.
Quantity of the factors of production
availability of resources as factors of production will impact on AS
- Increased availability of labour will increase production which will increase AS
Quality of the factors of production
Quality of resources can improve or worsen AS
- Better technology such as NBN can improve efficiency and AS
Costs of production
Cheaper costs improve competitiveness and allows AS to increase as it makes it cheaper for firms to produce goods and services
Technological change
Use of technology has improved productivity and often lowered costs of
production allowing AS to improve.
Productivity growth
How efficiently resources are being used in the production process.
occurs when more goods and services are produced from the same or fewer resources which can increase AS
