TOPIC 2: CONSUMERS AND BUSINESS

Consumers

• Consumer sovereignty
  Patterns of consumer spending and saving/dissaving
  
  • variations with income and age
  - individual consumers either spend or save their income
  - in the economy as a whole, as income rises the level of saving increases
  
  Factors influencing individual consumer choice
  
  • income
  • price
  • price of substitutes
  • price of complements
  • preferences/tastes
  • advertising
  
  Sources of income
  
  • the return for resources: wages, rent, interest and profit
  • social welfare

The production of goods and services

WATCH: What are the four Factors of Production? (YouTube clip by RatherUnfortunate)

Read some of the basic economic definitions and see if you can figure out the factors of production (needs Flash)


The distribution and exchange of goods and services

READ: Allocating goods and services


Income distribution

READ:

• Factor income
• What is GDP and why is it so important? 
  

Provision of employment and quality of life through the business cycle

WATCH: Business Cycles (YouTube video by mjmfoodie)

The circular flow of income

READ: Circular flow of income (Wikipedia)
WATCH: Circular flow (note that the figures are from 2008 and therefore quite dated)