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Functions of money
Medium of exchange
Store of value
Unit of account
Standard for deferred payment

Need for exchange

If someone produces pens and has to buy a eraser then he/she will need
money to buy it.
Money aids trade and specialization

Functions of central bank

Government’s bank
Banker’s bank
Issues notes/money
Implements monetary policy
Lender of last resort
Regulation of banking system

Functions of stock exchanges

Providing trading facility to buyers and sellers
Describing market trend bullish or bearish
Generating capitals for companies by providing shares for sale
Promote savings and investment
Establishing rules and regulations for sale and purchase or shares

Functions of commercial banks

Receiving deposits
Granting loans/ lending
Providing payment options for example
Credit cards, cheques and debit card
Agency services
Investment

Factors affecting individual’s choice of occupation

Wage factors
Non-wage factors
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Wage factors
Wages
Overtime aka moonlighting
Bonuses
Commission

Non-wage factors
Job contentment
Working conditions
Fringe benefits
Location and size of the firm
Chances of promotion

Changes in earnings over time for an individual

Change in earnings occurs due to change in demand for labor and change is
supply of labor
If demand for labor increases the earnings increases
If supply of labor decreases the earnings increases

Differences in earnings
Male/female
Skilled/unskilled
Private/public
Agricultural/manufacturing/services

Male/female earnings
The reasons male earn more than female are:
Male devote more working hours
Males are always part of labor force, so they have more experience
Males are better at negotiating salaries
Discrimination

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Skilled/Unskilled earnings
Skilled workers earn more than unskilled workers because:
Skilled workers have greater productivity
Their supply is low
They have special skills to perform a particular job
Their job requires a qualification

Private/Public earnings
Private sector employees get higher wages than public sector employees
Reasons:
Main aim of private sector is profit
So they can give money to motivate
Public sector employees get other benefits
Public sector workers may also get higher wages by the help of trade unions

Agricultural/manufacturing/services earnings
In the third world countries the agricultural workers are paid less than
manufacturing worker because the supply of agricultural workers in third
world countries is high.
Workers belonging to the services industry earn more than the workers in
manufacturing industry

Trade unions
An organization of people who represent and protect the rights and interests
of it members
Trade unions demand:
Higher wages
Better working conditions
If demands are not met they may take an industrial action (strike)

Role of trade unions

Protect the rights
Negotiate with the management on behalf of the members (collective
bargaining)
Improve pay and working conditions
Act as a pressure group
Call a strike if demands are not met

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Advantages of specialisation for an individual

Productivity increases
Increased experience
Less wastage of time
Efficiency increases

Disadvantages of specialisation for an individual

Job dissatisfaction
Risk of unemployment
No flexibility

Motive for spending

To survive
To buy the things they want
To maintain a standard of living
Fulfill their desires

Motive for saving

Save for the bad times
Save for retirement
Save money to fulfill a particular purpose
Eg. Save money to buy a house
People save money to buy shares so that they can get Capital gains

Motive for borrowing

To fulfill immediate need or demand
Pay of expenses
Maintain standard of living in bad time

How different income groups have different expenditure patterns

The rich spend more than the poor
The marginal propensity to consume is proportion of income which people
spend
The poor have greater marginal propensity to consume because poor spend
the entire money because it is less whereas rich save it.

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Why different income groups have different expenditure patterns

Poor have less money so they spend the entire money on their necessities
Rich are able to save money after fulfilling their needs and wants
Rich may spend more than poor but the poor spend a higher proportion than
the rich

What is retained profit?

Profit reinvested into the business for further growth

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