econs

• four function of money:

  store of value

  standard of deferred payment

  medium of exchange

  measure of value
• medium of exchange = enable people to buy and sell goods and services
• store of value = enables people to save
• measure of value = enable different goods value to be compared
• standard of deferred payment = allow borrowing and lending
• characteristic of money:

  durable

  visible

  limited in supply

  generally accepted
• function of commercial bank:

  accept savings and give interest

  offer loans and charge interest

  allow receipt payment to be made

  offer financial advice about wealth management and investement

  deals in foreign currency
• function of central bank:

  • act as govts banker - accepts tax payment from government and make payment for public sector spending
  • acts as lender of last resort - gives loan to commercial bank
  • set monetary policy - adjust interest rates to influence saving and borrowing
  • issues notes and coins - control money supply in circulation with economy
  • manages foreign currency - control inflow and outflow of foreign currency to keep exchange rate stable
• spending pattern of rich:

  spend more but spend lower proportion of their income

  able to save more for the future

  able to borrow more to buy luxury goods as they are more likely to repay debt in the future
• trade union:

  organisation of worker within the same industry that gain collective bargaining power to protect their rights
• demand for worker:

  demand for good/service which bring profit

  productivity of worker

  cost of substitute
• trade union fights for:

  higher wage

  better working condition

  training

  fair compensation during retrenchment
• trade union negotiates with firm through:

  work to rule - work but reject overtime

  go slow - reduce productivity at work

  strike - protest and do not turn up to work
• reason for difference in workers earning:

  discrimination of gender and race

  trade union

  demand and supply of workers
• advantage of trade union:

  protect rights of workers
• disadvantage of trade union:

  discourage firms from setting up

  result in unemployment and higher price of good
• reason for small firm in an economy:

  supply chain for larger firms

  offer specialized products according to individuals demand

  more responsive to changes
• reasons why small firm may fall:

  lack of funds to start, operate and manage unexpected events

  lack recognition in the market

  lack differentiation to distinguish product from competitors
• types of EOS:

  • purchasing
  • technical
  • managerial
  • Financial
  • Risk bearing
• purchasing EOS: large firm buy raw material in bulk, able to bargain for trade discount
• technical EOS: Large firm spread cost of capital over more units of output to reduce cost
• managerial EOS: large firm practice extensive specialization and hire specialists to reduce error and cost
• financial EOS: large firm is able to negotiate for lower interest rate to reduce cost of borrowing
• internal EOS = a firm enjoy lower average cost when firm grow larger
• external EOS = a firm enjoy lower average cost when industry grow larger
• EOS: average cost fall when firm produce more
• disEOS: average cost rise when firm produce more
• internal disEOS:

  lack of control over firms operation, management is unable to supervise workers process closely
• external disEOS:

  cost of resources rise when there are too many firms in the industry which demand the same raw materials