TOPIC 2: The economic and business environment

Start up!
Student: ………………………………………………………… Class: …….……………. Due date: …….……………

1. How might the economy of the country affect you taking an overseas holiday?

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2. Why do you think the economy is so important to us as Australian consumers and

citizens?
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3. How important is the media in keeping Australians up to date about the health of the
economy?
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4. Why do you think we refer to the ‘health’ of the economy when discussing it?
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 Start up!

5. From the glossary terms, find:

(a) a word that means the variety of plant and animal life in the world or in a
particular habitat _______________
(b) a three-syllable word also associated with balloons _______________
(c) a term that means loan interest rates calculated after adding fees and charges
to a lender’s advertised rate _______________ _______________
(d) a term that means the difference between the value of Australia’s imports and
exports _______________ _______________ _______________
(e) a term that means loans which are given to people with poor credit ratings
_______________
(f) a word referring to the purchase of new plant and equipment as well as
property _______________

6. List the following words in alphabetical order:

macroeconomics; inflation; depression; comparison rate; subprime loans; real
income; appreciation; recession
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7. What ethical issues might be raised in discussing the global economic environment?
Make a list of ethical situations or conflicts that might occur in the global market.
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 TOPIC 2: The economic and business environment
Worksheet 2.2: Economic links — the circular flow of
income
model
Student: ………………………………………………………… Class: …….……………. Due date: …….……………

The circular flow of income model (at right)

shows the continuous movement of goods and
services, resources and money between sectors
of the economy. A sector is a collection of
people who engage in a similar type of activity
and make their own particular type of
economic decisions.

1. Suggest reasons why this model is called measured by gross domestic product,
the ‘circular flow of income’. increases. The opposite conditions result in
a recession. Obviously, the government
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_______________ tries to influence decisions by sectors to
change movements of money in the
_ economy.’
2. Read the following explanation of the (a) Find out the meanings of the terms in
circular flow of income model. italics.
‘Savings (S), taxation (T) and imports (M)
(b) Explain in your own words what the
are referred to as leakages (money leaving)
circular flow of income model
from the circular flow model. Investment
represents
(I), government expenditure (G) and
exports (X) are the injections (money
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entering) into the model. The diagram
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shows the relationships that exist in most
3. The following table lists types of changes
economies. It explains the major functions
in leakage and injection. Complete the
of each sector and how each sector is table using the word ‘rise’ or ‘fall’ as
dependent on others through money flows. appropriate.
In other words, it shows the
interdependence of the sectors within
economies. It is also important to realise
that the money leaving the circular flow
diagram (S, T and M) hardly ever equals
the money entering the flow (I, G and X).
This is why economies experience periods
of uneven economic growth; fluctuating
between economic booms and recessions.
For example, when more money is entering
the economy than is leaving it — that is,
when injections are greater than leakages
— the level of economic activity, as

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 Start up!

Change in leakage or Effect on the

change in injection level of
economic
activity
(a) Increased savings
(b) Lower taxes
(c) Lower government

spending
(d) Increased import
purchases
(e) Increased export
sales

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 TOPIC 2: The economic and business environment
Worksheet 2.3: The ‘ups’ and ‘downs’ of economic growth
Student: ………………………………………………………… Class: …….……………. Due date: …….……………

The level of economic growth fluctuates over time. The unevenness in our economic growth
is the result of the business cycle, which is a series of changes in economic activity.
Following a period of prosperity, economic activity gradually slows down until a recession or
depression is reached. Eventually economic activity picks up again until prosperity is
restored. This completes the cycle.

Instructions
Examine the diagram and then answer the questions.

1. (a) Label the axes on the graph at (i) and (ii).

(b) Label the four phases of the business cycle at (iii)–(vi).

2. Explain what you understand by the term ‘business cycle’.

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 Worksheet 2.3

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3 Choosing from the letters A = Recession; B = Expansion; C = Boom; D = Contraction,

place the appropriate letter alongside each statement below to identify the phase of the
business cycle described. The first one has been done for you.

(a) Unemployment is at its highest A (g) Interest rates are falling.

level.
(b) Wages and salaries start to (h) High level of inflation.
decrease.
(c) Increasing consumer and (i) Consumer spending and business
business spending. investment are at their lowest
levels.
(d) Sales and profit levels are (j) Rate of inflation slows and may
falling. fall.
(e) Interest rates are high. (k) Unemployment is at its lowest
level.
(f) Business expectations are (l) Employment opportunities are
optimistic and consumer increasing.
confidence is rising.

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 TOPIC 2: The economic and business environment

Worksheet 2.4: Current economic conditions

1. Complete the table below by researching the definitions for the terms.

Term Definition

Imports

Exports

Economic activity

Business cycle

Currency

Consumer
confidence

Investment

2. Read the following statement and decide on the state of the economy that is described.
Consider the facts and incorporate these into the reasons you present for the state of the
economy.
‘From year 1 to year 2, this economy has experienced a slight drop in the level of
inflation, unemployment rates have increased, imports have fallen along with official
interest rates and the level of consumer confidence has eased.’

State of
economy:__________________________________________________________________
Reasons for
decision:__________________________________________________________________
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 TOPIC 2: The economic and business environment
Worksheet 2.5: The price mechanism and the interaction of
demand and supply
Student: ………………………………………………………… Class: …….……………. Due date: …….……………

The price of goods and services are always changing. One reason for this are the forces of
demand and supply. Demand is the amount of a product people want to purchase and supply
is amount of a product that producers are willing to sell.
When the demand and supply of a product are drawn on a graph, it shows the equilibrium
price and quantity. This is where the demand and supply curve intersect.

1. Define the law of demand.

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2. Define the law of supply.

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3. Define the price mechanism.

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4. The following demand and supply schedules show the market for bananas.
Demand schedule for bananas
Price $2 $4 $6 $8 $10
Quantit 2000 1600 1200 800 400
y
Supply schedule for bananas
Price $2 $4 $6 $8 $10
Quantity 400 800 1200 1600 2000

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 Worksheet 2.5

(a) Plot the demand for bananas on the Market for bananas
diagram provided.

(b) Plot the supply of bananas on the

diagram.

(c) Calculate the market price.

(d) Calculate the market quantity.

5. The price of goods and services are always changing due to changes in demand and
supply.
Changes in Demand

a. Draw on the diagram two lines Market for bananas

showing the equilibrium price and
quantity.
b. Draw a new demand curve
showing an increase in demand.
Label this diagram D2.
c. Draw on the diagram the new
equilibrium price and quantity.
d. Explain what has happened to the
equilibrium price and quantity due
to the increase in demand.

e. Explain ONE reason that could

cause an increase in demand for
bananas.

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 Worksheet 2.5

Changes in Supply

(a) Draw on the diagram two lines showing the equilibrium Market for bananas
price and quantity.
(b) Draw a new supply curve showing a decrease in supply.
Label this diagram S2.
(c) Draw on the diagram the new equilibrium price and
quantity
(d) Explain what has happened to the equilibrium price and
quantity due to the decrease in supply.

(e) Explain ONE reason that could cause a decrease in supply

of bananas.

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 TOPIC 2: The economic and business environment

Worksheet 2.6: Markets

Student: ………………………………………………………… Class: …….……………. Due date: …….……………

1. Complete the table below by explaining the following markets in your own words.

Market Definition

Retail markets

Labour markets

Financial markets

Stock markets

2. If you were looking for a part-time job for weekend and holiday work while you are at
school, how would you go about finding one? Make a list of all of the ways you might

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 Worksheet 2.6

be able to find or apply for work.

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3. From which of the four retailer types listed below would you choose to buy the
following goods or services? Give reasons for your choice.

Retailer types:
 CBD shopping areas
 suburban shopping mall
 local shopping centre closest to your house
 online retailer

i. food and groceries for the week

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ii. a new pair of shoes

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iii. a houseplant as a gift for an elderly neighbour

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 Worksheet 2.6

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iv. a new phone

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4. Based on your answer to question 3, write a paragraph explaining how one of these
choices might change if you lived in a different place in Australia. For example, if
you live in a city with lots of
retail options, how might your choice of where to buy your weekly groceries be
different if you lived on a remote property in the far west of the state?

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 TOPIC 2: The economic and business environment

Worksheet 2.7: Government interventions

Student: ………………………………………………………… Class: …….……………. Due date: …….……………

1. Make a list of the natural resources in your local area.

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2. Which of these resources do you think are the most important to protect? Explain
why.

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3. Make a list of at least three businesses that might want to use the most important
natural resource in your area.

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4. Imagine one of those businesses has applied for an exemption to local environmental
protection laws so they can open new operations in your area. Write a list of pros and
cons for the business being granted permissions to start their operations.
Pros Cons

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 Worksheet 2.7

5. Would you be in favour of the business starting operations in your area, or would you
want the government to intervene? Give reasons for your decision.

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 TOPIC 2: The economic and business environment

Worksheet 2.8: Types of businesses

Student: ………………………………………………………… Class: …….……………. Due date: …….……………

1. Categorise the following businesses according to their type. You might need to
research some of the companies online. (Hint: some businesses might fall into more
than one category.)

Business Online On- Large SME TNC

only demand
KFC
A local accounting firm
with nine employees
Myer
Uber
ASOS
Hello Fresh
Ikea

2. Using the table below, make a list of ten businesses that you or your family and
friends regularly purchase goods and services from.

(a) Categorise them according to whether they are micro, small, medium or large
businesses.

Business Micro Small Medium Large

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 Worksheet 2.8

(b) What size of business do you buy from the most?

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(c) Explain at least three possible reasons there might be for this trend in your
purchasing.

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 TOPIC 2: The economic and business environment

Worksheet 2.9: Corporate social responsibility

Student: ………………………………………………………… Class: …….……………. Due date: …….……………

1. Write a definition for the term ‘corporate social responsibility’

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2. Think about the last piece of clothing you bought. Make a list of questions you might
ask the CEO of the manufacturer to determine whether they are socially responsible.

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3. Research that company online to find answers to your questions.

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 Worksheet 2.9

4. Considering what you now know about the company, would you buy that product
again? Explain your reasons.

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 TOPIC 2: The economic and business environment
Worksheet 2.10: Wrap up!
Student: ………………………………………………………… Class: …….……………. Due date: …….……………

Revise your knowledge

1. Revise what you have learned from topic 2 by writing down at least five points that you
can associate with each of the following words or terms.
a. Supply and demand

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b. Market

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c. Trade

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 Worksheet 2.10

2. Write a short summary of what and how Aboriginal and Torres Strait Islander peoples
traded (both between themselves and with other cultures) before English colonisation of
Australia.
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3. Make a list of the ways that Aboriginal and Torres Strait Islander peoples are using
their traditional cultural knowledge to participate in contemporary Australian markets.
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4. When do you think that the government should intervene in a market or sector of a
market? Give specific examples that relate to at least two different markets that exist
within the Australian economy and when you think the government should intervene
and how.

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 Worksheet 2.10

Reflect on what you have learned

The tasks you have completed in Topic 2 will have helped you to build your understanding of
the economy and business world. Consider what you have learned and what you enjoyed
about this topic.

1. Which parts of this topic did you enjoy most? Why?

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2. Which parts of this topic did you enjoy least? Why?

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3. For each of these statements, tick the box that you think is correct for you.

Statements about my Strongly Strongly

Agree Disagree
learning in this topic agree disagree

I enjoyed learning through group discussions.

I enjoyed learning through completing

activities.

I used my learning time effectively, finishing all set

tasks.

I co-operated and contributed in group tasks.

Pictures and diagrams helped my learning

throughout this topic.

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 Worksheet 2.10

4. What ideas and information in this topic were a surprise to you?

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5. What would you like to learn more about?

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 TOPIC 3: Employment and work futures
Match up
Student: ………………………………………………………… Class: …….……………. Due date: …….……………

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 TOPIC 2: The economic and business environment
Glossary quiz
Student: ………………………………………………………… Class: …….……………. Due date: …….……………

1. Which of the following is the best definition of the term ‘globalisation’?

(a) the reliance of consumers, workers, businesses and governments on each other
(b) the process that sees people, goods, money and ideas moving around the world
faster and more cheaply than before
(c) seeking out the cheapest materials and supplies across national borders as if
there were only one large market
(d) all activities undertaken for the purpose of production, distribution and
consumption of goods and services in a region or country

2. Which of the following would not be a factor to consider if you were assessing a
company’s corporate social responsibility?
(a) Listing on the ASX
(b) Environmental policies
(c) Employee pay rates and conditions
(d) Interests of stakeholders

3. Which is the best explanation of the law of demand?

(a) The law of demand states that the quantity of a good or service demanded
varies inversely to price.
(b) The law of demand states that the quantity of a good or service supplied varies
directly with price.
(c) The law of demand states a general rise in prices across all sectors of the
economy, causing money to lose its value.
(d) The law of demand states the price that must be paid in order to use someone
else’s money is always too high.

4. Does Australia import or export the following products?

Import Export
iPhones
Doc Martens boots
H&M t-shirts
IKEA couches

5. In economic terms, which is the closest meaning of ‘consumption’?

(a) Buying things you want and need
(b) Eating expensive food
(c) A lack of available products to buy
(d) Selling goods and services to make a profit

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 Glossary quiz

6. Match each term to its correct definition.

recession the point at which the demand and supply curves intersect
depression the interaction of the forces of demand and supply that determines the
price of a good or service
market a relatively mild contraction in the level of economic activity resulting in
equilibrium reduced spending, rising unemployment and a slow rate of economic
growth
price a severe contraction in the level of economic activity resulting in many
mechanism business failures, high and sustained levels of unemployment and
sometimes falling prices

7. Complete the following sentences using the words in the wordbank below:

barter, business cycle, economy, fiscal policy, innovation, investment, production,

saving

Hint: there might be some words that do not need to be used at all!

Sophia and Evan didn’t like what was in their lunches, so they decided to
__________with their friends.

The __________________ was in a period of contraction, which led to consumers

decreasing their ____________. As inflation began to fall, the government considered
changing their ___________________________.

8. Which is the best definition of a transnational corporation?

(a) a large business that has branches in more than one country
(b) a large business that employs more than 200 people
(c) a large business that operates across the whole of one country
(d) any large business

9. Which of the following is the best example of innovation?

(a) continuing to buy the cheapest materials from overseas
(b) the creation of goods and services in a tradition way
(c) the variety of plant and animal life in the world or in a particular habitat
(d) adding a new product to an existing product line

10. Falling inflation in Australia is not likely to result in

(a) the Australian dollar losing value
(b) prices of imported products rising
(c) lower unemployment
(d) consumers becoming more cautious with their spending

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 Topic 2: The economic and business environment

Multiple choice quiz

Student: ………………………………………………………… Class: …….……………. Due date: …….……………

1. What is a person who demonstrates enterprising behaviours known as?

A. CEO
B. Producer
C. Financial planner
D. Entrepreneur

2. Which sector of the five-sector circular flow model of the economy involves imports
and exports?
A. Consumers
B. Business
C. Government
D. The overseas sector

3. Which of the following is an example of a financial intermediary?

A. A producer
B. A bank
C. An accountant
D. A government organisation

4. Which of the following is a characteristic of the boom stage in the business cycle?
A. Inflation pressures
B. Lack of consumer confidence
C. High levels of unemployment
D. Low levels of building approvals

5. Producers in an economy operate in which sector?

A. Business
B. Government
C. Financial
D. Economic

6. What do financial intermediaries usually do with the money that individuals deposit?
A. The money is left alone.
B. The money is lent to other individuals or businesses.
C. The money is sold to overseas buyers.
D. The money is invested in the stock exchange.
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 Multiple choice quiz

7. Which of the following are examples of leakages from the circular flow model?
A. Expenditure, savings, taxation
B. Exports, taxations, investment
C. Savings, taxation, imports
D. Exports, savings, investment

8. What does the law of demand state?

A. As the price of a product increases, the demand for that product increases.
B. As the price of a product increases, the demand for that product decreases.
C. As the price of a product decreases, the demand for that product decreases.
D. As the price of a product increases, the demand for that product does not change.

9. What can cause changes in demand?

A. Incomes, tastes and fashions, and future expectations about the market
B. Prices of complementary and substitute goods and services
C. Changing population, age and gender distribution and the number of potential
customers
D. All of the above

10. Which system of trade was commonplace for Aboriginal and Torres Strait Islander
people?
A. Bartering
B. Innovating
C. Purchasing
D. Borrowing

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 TOPIC 2: The economic and business environment
Crossword

Student: ………………………………………………………… Class: …….……………. Due date: …….……………

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 TOPIC 2: The economic and business environment
Wordsearch
Student: ………………………………………………………… Class: …….……………. Due date: …….……………

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 Multiple choice quiz

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