Unit 3

1. Unit 3 The Individual as Producer Consumer & Borrower

2. Money • Money is a medium of exchange used to buy goods and services. • Types of Money: • Coins & Notes • Cheques, Debit cards & Credit cards.

3. The Functions of Money • a medium of exchange • a unit of account • a standard for deferred payment • a store of wealth

4. Medium of exchange Use it to buy and sell things 4

5. Unit of account • The ‘account’ aspect allows to place a value for the product. • Eg: Price of Milk, Egg, etc.. • These values can be added or compared.

6. Standard of Deferred Payment An agreed value of money for future payments and receipts Because all payments we make are not immediate. Payment for Electricity, Telephone, Insurance, Loans, etc I shouldn’t have told him I can’t pay him back. 6

7. Store of Wealth • Money can be ‘stored’ for a period of time, in a bank or other financial institution or safe • Determines whether you are rich or poor!!

8. A BANK is a financial Institution involved in Money transactions

12. Functions of Central Bank • Issues Bank Notes (Money) • Banker to the Government • Regulates Monetary Policy – ↑or ↓ Rate of Interest • Manages National Gold & Foreign currency reserves  • Represents the government

13. Functions of Commercial Bank • Accepting money of consumers for saving • Giving loans • To make and receive payments • Providing insurance • Provide valuables (safe deposit box) • Provide Exchange of currencies • Providing cheque services • Providing credit & debit cards and Internet Banking

14. Stock Exchange (Bourse) “A Market (organisation) where Shares & Securities can be bought and sold is called a Stock Exchange”

15. Shares = Equities = Stocks Stock Brokers is an individual, who buys and sells stocks and securities through a stock exchange to clients - retail and institutional  • Only shares of Public Companies are Listed on the Stock Exchange

17. Sample share certificate

18. Bullish Market • Bearish Market

19. Dividend & Yield

20. Dividend is the share of profit given to the shareholder per share. Yield is the dividend expressed as a percentage of Market Price.

21. Eg: If face value of a share is $20 & market price is $25, and • If the company declares a 10% dividend, then • Dividend = 20 x 10 = $2 per share 100 • Yield = Dividend per share x 100 Market Price = 2 x 100 = 8% 25

22. Functions of Stock Exchange • Allows the buyer to buy & the seller to sell shares • Allows the company to raise capital • Protects the buyer (because any company cannot sell shares to the public) • Indicates the country’s economic performance

23. Who earns the most?

24. How much do they earn? Computer Engineer S$4,165 General Manager S$11,071 What do others say? Social Worker S$2,200 Manufacturing Labourer S$1,073

25. Factors Affecting an Individual’s Choice of Occupation Non-wage factors Wage factors

28. Wage Determination “Wage, like price of product, is also determined by the Demand & Supply of labor for an occupation.”

29. Changes in Earnings (Wages) • Demand of labor changes • Supply of labor changes • Relative Bargaining power of employers and workers • Government Policies. Eg: National Minimum wage • Government polices on immigration

30. Public Opinion: Public, for a reason will claim to increase their wages 7) Anti-discrimination policies: Men & Women should get equal pay for the same work 8) Changes in technology: New technology can replace labor  supply of labor ↑  wages ↓ New technology  demand of engineer, electricians, maintainance, etc  wages↑

31. But still, differences in earning can be due to…….

32. Trade Unions “An association representing workers interest is called a Trade Union” • General Union: Workers from different industries. • Industrial Union: Workers in a specific industry. Eg: Rail Industry, Automobile Industry, etc

33. Functions of Trade Unions • Collective bargaining & negotiation for

34. Specialization “The process of doing something that you are best at is called SPECIALIZATION.” • A country or • A firm or • An Individual can choose to specialize

35. Specialization of an Individual • Also called “Division of Labor” • Each individual specialises at one task of production rather than the whole process • Hence, the output per worker increases.

36. Advantages • Time is saved • Worker can be trained more quickly • Worker becomes more skilled  if demand is more  wages will be more • Reduces the pressure of the job, because it is easy to do it

37. Disadvantages • Worker maybe bored • It may increase the per unit cost (cost of production) • If the worker is absent, his work can be covered by another worker • If can do only one job, then difficult to find another kind job

38. The Motives for • Spending • Saving • Borrowing

40. Factors affecting Spending • Disposable Income • Wealth • Confidence • Rate of Interest • Advances in Technology

42. Factors affecting Savings • Income • Wealth • Rate of Interest • Consumer Confidence • Tax on Interest • Range and quality of financial institutions • Age structure • Social attitudes.

44. Factors affecting Borrowing • Availability of loans • Rate of interest • Confidence • Social attitudes

45. Differences in Expenditure patterns of…. • Spending • Saving • Borrowing These Expenditure depends on their Incomes (Disposable Income)

47. Average Propensity to Consume • A poor person earns $1000  Spends $900  spends 90% of his income • A rich person earns $10,000  Spends $4500  spends 45% of his income • So APC ↓ with ↑ in income APC = Consumption = 0.9 Disposable Income APC = Consumption = 0.45 Disposable Income

48. Average Propensity to Save • A poor person earns $1000  Spends $900 & saves $100  saves 10% of his income • A rich person earns $10,000  Spends $4500 & saves $5500  saves 55% of his income • So APS ↑with ↑ in income APS = Savings = 0.1 Disposable Income APC = Savings = 0.55 Disposable Income