Week 4-9

• The government may supply funding for the production of goods and services that are underproduced.
• The government may take actions to prevent the production of harmful goods and services like illegal drugs, weapons, etc.
• The government collects taxes from households.
• Tax revenue refers to funds (money) that is collected from households to fund government expenditure (spending).
• Goal of Australia’s tax system = collect the taxes it needs from the areas of the economy that can afford to pay it. 
• Main source of tax revenue = income tax, which is taken directly from the money people earn from working.
• The Federal Budget is a document that outlines the estimated revenue (money collected) and government expenditure (money spent) of the Treasury for the following financial year.
• The Treasury is the government department that is responsible for economic policy, regulating the market and the federal budget.
• Our current Treasurer is Jim Chalmers.
• Budget Surplus: extra money is leftover in a budget once expenses have been paid.
• Budget Surplus: government has spent the allocated money in the budget on things like education, defence, health etc.
• Budget Surplus: result in the government cutting taxes or providing extra funding where needed.
• Budget Deficit: federal  government spends more money than the amount it collects in revenue.
• Production and consumption also impacts others (a ‘third party’) who aren’t involved in that specific market.
• Externality: a cost or benefit received by a third party as a result of the production or consumption of a good or service that they are not involved in.
• Externalities can be considered to be negative when the social cost outweighs the private cost.
• Negative externality example: Air pollution - produced from a car company when making cars for consumers.
• Neither producer nor consumer pay for the effects of the production of a car that it has on the environment and other people. But, it impacts the health of people living in the surrounding area (the ‘third party’).
• Externalities can also be positive.
• Positive externality example: Education - the individual pays for their education, and in return receives valuable skills. 
• A third-party (ie. society), will benefit from postive externalities. For example, the more educated people are, the more likely they will make a positive impact on the economy.
• How do we resolve negative externalities? The government may tax producers and consumers for the damage or costs to part of society (third-party) and the environment.
• How do we encourage or increase positive externalities?

  The government may increase subsidies to continue producing and consuming these goods and services.
• Subsidy: when the government pays for part of the production cost of a good or service, in the form tax credits.
• Demand refers to the quantity consumers will buy at a specific price.
• Consumers aim for minimal cost to save money for other purchases.
• The Law of Demand: when prices increase, the quantity demanded by consumers decreases. 
• The Law of Demand: prices decrease, the quantity demanded by consumers increases.
• This is a demand schedule.

  
• This is a demand curve.

  
• Demand can be shown in a schedule or diagrammatically using a graph.

  1. The vertical axis or Y-axis is price.
  2. The horizontal or X-axis indicates quantity.
• Consumers prefer cheaper goods and services, while suppliers prefer higher prices.
• The Law of Supply: higher the price that a good or service can be sold for, the higher the quantity that suppliers are willing to produce. 
• The Law of Supply: lower the price that a good or service can be sold for, the lower the quantity that suppliers are willing to produce. 
• Supply can be shown diagrammatically using a graph. 

  1. The vertical axis or Y-axis is price.
  2. The horizontal or X-axis indicates quantity.
• Demand Shifters: change in consumer tastes/preferences.
• Demand Shifters: change in the number of consumers.
• Demand Shifters: change in price of related goods.
• Demand Shifters: change in consumer income.
• Demand Shifters: change in consumer expectations.