Topic 3 of 6 · Form 3
Microeconomic decision-makers
Functions of money; characteristics; central bank and commercial bank functions.
Notes for this topic 1 file, in order
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Money and banking
Functions of money; characteristics; central bank and commercial bank functions.
Households
Influences on spending, saving and borrowing (income, interest rates, confidence, age).
Workers
Factors affecting choice of occupation (wage and non-wage factors); wage determination; why some earn more than others; division of labour and specialisation.
Trade unions
Role in collective bargaining, wages and working conditions; factors affecting their strength.
Firms
- Classification by sector and ownership; small and large firms; reasons for small firms surviving.
- Growth: internal and external (horizontal, vertical, conglomerate integration); economies and diseconomies of scale.
- Demand for factors of production; labour- and capital-intensive production.
- Costs: fixed, variable, total and average costs; revenue (total and average); profit.
Worked example: Fixed costs US$500; variable cost US$4 per unit; output 250 units sold at US$8. Find total cost, average cost and profit.
TC = 500 + 1 000 = 1 500; AC = 1 500 ÷ 250 = US$6; TR = 2 000 → profit US$500
- Objectives: survival, social welfare, profit maximisation, growth.
Market structures
Competitive markets and monopoly – characteristics, advantages and disadvantages.
Check yourself
- Give two functions of money.
- Why might a worker accept a lower wage in one job than another?
- Give one advantage of a monopoly.
Show answers
- Any two: medium of exchange, measure of value, store of value, standard of deferred payment.
- Non-wage factors such as job security, holidays, working conditions or job satisfaction.
- Any one: economies of scale, funds for research and development, avoiding wasteful duplication.
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