Unit 11 - Personal Economics
Quick revise
This unit aims to equip candidates with the basic tools of the economist to help them understand their place in and contribution to the local, national and global economy as consumers, workers and citizens. They will be encouraged to investigate a range of contemporary issues, analysing the evidence from different perspectives so as to make reasoned judgements and informed decisions.
1. Money
In this section, candidates use the personal lifecycle as a framework to consider their needs and wants, how these are likely to change over time and how they can manage their personal finances more effectively. Candidates will be introduced to basic economic concepts to help them make informed judgements, by weighing up costs and benefits. Candidates are encouraged to explore the moral and ethical dilemmas that arise when making decisions to do with spending, saving, investing or borrowing money.
1.1 Understanding the Personal Lifecycle
• stages within the lifecycle
• needs and wants.
Candidates should understand the idea of a personal lifecycle and the different stages within the cycle. Candidates should appreciate how at each stage, individuals will experience changes in their income, expenditure, savings and debt.
Candidates should be aware of the difference between needs and wants and how these change over the personal lifecycle.
1.2 Making Decisions
• choices and opportunity cost
• costs and benefits.
Candidates should understand that as income is a scarce resource and wants are unlimited, choices need to be made.
Candidates should understand the importance of weighing up costs and benefits and considering opportunity costs when making decisions.
1.3 Choosing to Spend
• demand and the personal lifecycle
• markets and prices
• effects of competition.
Candidates should understand the meaning of demand and the factors that affect spending. Candidates should appreciate how moving to different stages in the personal lifecycle result in changes in demand for different types of goods and services.
Candidates should have a basic understanding of how markets for goods operate and understand the reasons why prices change.
Candidates should understand how businesses compete and the advantages and disadvantages of competition for consumers.
1.4 Choosing to Save
• reasons for saving
• methods of saving
• choosing where to save.
Candidates should understand why people save and be aware of the main methods available, eg using banks, building societies and National Savings. Candidates are only required to have a basic understanding of shares and unit trusts and the working of the stock market.
Candidates should be able to recommend suitable methods of saving and other financial products for different situations and justify their recommendations, appreciating the risks and rewards of each method.
Candidates should know the difference between net and gross interest and understand the meaning of the Annual Equivalent Rate (AER).
1.5 Choosing to Borrow Money
• reasons for borrowing money
• methods of borrowing money
• choosing where to borrow money
• impact of changing interest rates.
Candidates should understand why people borrow money and be aware of the main methods of borrowing, eg mortgages, credit/store cards, personal loans, hire purchase and overdrafts.
Candidates should be able to select suitable methods of borrowing for different situations and justify their recommendations. They should take into account the degree of risk involved and the importance of the Annual Percentage Rate (APR).
Candidates should be aware of the effects of changes in interest rates on borrowers and savers.
1.6 Managing your Money
• benefits of financial planning and budgeting
• planning for uncertainty
• moral and ethical issues
• influence of government on personal finances.
Candidates should understand the benefits of financial planning and budgeting, including debt management. The timings of such planning should be linked to changes in the personal lifecycle.
Candidates should be aware of how factors such as redundancy, unemployment and sickness/disability, changes in interest rates and prices affect a person’s budget and how financial planning can make some allowance for these uncertainties.
Candidates should explore some of the moral and ethical dilemmas that arise when making spending, saving and borrowing decisions, eg buying shares in companies making armaments or buying products from companies that exploit workers in developing countries.
Candidates should understand how taxation and government expenditure on benefits and servicescan affect an individual’s income, saving and expenditure during the personal lifecycle.
2. Work
In this section candidates consider the world of work. Candidates will consider the rewards an individual can receive both in monetary and non monetary terms. Candidates will also be introduced to the market for labour and how this determines the reward for work.
2.1 Understanding the Purpose and Nature
of Work
• the meaning of work
• specialisation and interdependence
• impact of ICT on work.
Candidates should understand what is meant by work and the reasons why people work or do not work. Candidates should understand how work is a key part of economic activity in which goods and services are produced to satisfy needs and wants.
Candidates should be aware of the specialised nature of work and understand the advantages and disadvantages of specialisation to the worker.
Candidates should be aware of how developments in Information Communication Technology (ICT) have led to the decline of some industries and the growth of others as well as affecting the nature of work, such as the development of home working.
2.2 Understanding the Reward for Work
• how people are paid
• how labour markets determine pay
• reasons for differences in pay
• the influence of government on pay and
working conditions.
Candidates should understand the main methods by which people are paid and the different items that appear on a pay slip including: deductions made for income tax, national insurance and pension contributions.
Candidates should understand the difference between gross and net pay. Candidates should understand how the supply of labour is affected by a person’s decision to work or not to work, and that this is influenced by both monetary and non monetary considerations, eg incentives, location, gender and race, taxation, state benefits etc.
Candidates should understand that demand for labour is derived from the demand for the good or service produced, and that the supply and demand for labour will affect the amount that people are paid.
Candidates should understand what can happen to wages when there are surpluses or shortages of labour and the benefits and limitations of the labour market.
Candidates should be aware of the role of government in protecting workers, eg minimum wage, maximum working hours, health and safety and their effect on workers.
2.3 Understanding the Consequences of
• impact of unemployment on individuals and society
• impact of government on unemployment.
Candidates should understand the monetary and non monetary costs of unemployment to the individual and to society.
Candidates should understand the reasons why the duration of unemployment might vary between individuals.
Candidates should understand why government is concerned about unemployment and the benefits available to those who are unemployed, linking these to the personal life cycle.
Candidates should have a basic understanding of how policies relating to education, training and the provision of tax allowances and state benefits are used to help those who are unemployed.
3. The National and Global Economy
In this section candidates consider their role as a citizen in the national and global economy.
3.1 Understanding International Trade
• UK’s exports and imports
• advantages and disadvantages of global
Candidates should be aware of the main types of exports from, and imports to, the UK economy. They should appreciate the importance of trade to the UK economy.
Candidates should appreciate the advantages resulting from global trade such as lower prices, increased availability and choice of goods for consumers, but also the disadvantages in terms of unstable commodity prices and the adverse effects on producers in the UK, as well as the wider social and environmental impact.
3.2 Exchange Rates
• effect on imports and exports
• effect on individual consumer.
Candidates should understand the impact of exchange rates on the importing and exporting of goods and services.
Candidates should be aware of other factors that affect the sales of imports to, and exports from, the UK.
Candidates should understand the effect that exchange rates have on the individual consumer, eg how this will affect the cost of travelling abroad and goods purchased in the UK.
3.3 The Power of the Consumer.
Candidates should understand how the actions of consumers can impact upon the national and global economy through activities such as: boycotting the products of ‘sweat shop labour’, purchasing fair trade or locally sourced products produced in a sustainable, ethical and environmentally sensitive manner. They should appreciate the role played by government, eg in campaigning for reductions in World poverty.
3.4 Understanding the Impact of the Global
Economy on Work
• effect of globalisation on the UK labour market
• mobility of labour
• impact of migration.
Candidates should be aware of the advantagesand disadvantages of firms operating overseas including the difference in labour costs.
Candidates should understand the positive and negative effects that globalisation has on the UK labour market, eg causing unemployment in some sectors and regions, but creating job opportunities in others. They should be aware of the role played by government in regulating the migration of labour.
Candidates should be aware of the nature of migration, including regional, European and global aspects. They should understand why migration occurs, the barriers to working abroad and how
both emigration and immigration can affect, and has affected, the UK labour market.

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