The document outlines a specification for teaching personal finance concepts. It covers understanding the personal lifecycle and how needs and wants change throughout different stages of life. Students will learn to make financial decisions by weighing costs and benefits and considering opportunity costs. They will also explore concepts related to spending, saving, borrowing money, and managing personal finances. The specification also addresses topics related to work, including rewards, labor markets, unemployment, and the impact of globalization. Finally, it covers understanding international trade, exchange rates, and the influence of consumers on national and global economies.

1. Specification
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.
Specification Amplification
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
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2. 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 services can
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.
Specification Amplification
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,
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3. 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 Unemployment
● 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.
Specification Amplification
3.1 Understanding International Trade
● UK’s exports and imports
● advantages and disadvantages of global trade.
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.
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4. 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 advantages and
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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5.
Stages within the life cycle ­​ 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.
Needs and Wants ­ ​Candidates should be aware of the difference between needs
and wants and how these change over the personal lifecycle.
➔ Throughout a person’s life, their incomes will change significantly
➔ Needs ​are those things people need to survive and​ wants ​are things that make life
more enjoyable.
➔ There is a ‘scarce resource’ ­ needs are limited but wants are unlimited.
Milestones in a person’s life cycle:
➔ Leaving school
◆ Either further education or into a job
◆ Gaining higher qualifications is expensive ​but can help a person get a job.
➔ Gaining employment
◆ Have a wider choice of jobs if they have more qualifications
◆ Higher level of qualification, more likely to get a better paid job
◆ Choose between ­ job that is high­pay, or job that is satisfying.
➔ Promotion
◆ Working hard and responsible, might be promoted or a better paid job.
◆ Promotion gives people an opportunity to develop skills and greater
financial commitments ­ buy more goods and services.
➔ Unemployment
◆ Someone loses a job for some reason, they lose their job
◆ Get compensation from government.
➔ Retirement
◆ Age 60+ can receive state pension + additional pension from employer
◆ lower income ­ difficult adjustments to lifestyles.
Things government does to the personal life cycle:
➔ Education maintenance Allowance
◆ Government pays £10­£30 per week for children to continue education
◆ Government can subsidise student loans
➔ Tax Credits
◆ Increase take­home income for low­paid workers
◆ Better off working than claiming benefits
➔ Jobcentre Plus offices
◆ Provides benefits and services to help people find work.
➔ Pensions
◆ Help old people if they have paid substantial National Insurance.
◆ Benefits such as winter fuel payments.
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6. ➔ Tax allowance
◆ UK citizen can earn £6035 without paying tax, up to £9180 for a pensioner
75 and over.
Definitions
Income​: Total Money received from a person’s wages/salary, interest and dividends.
Basic economic problem​: Resources are limited but needs and wants are infinite
Opportunity cost​: Something given up when we make a choice
Demand​: The quantity of a good or service that consumers are willing and able to
purchase at a particular price
Supply​: The quantity of a good or service that businesses will offer for sale at a particular
price
Bank/building society account​: an account for which the main objective is to gain
interest and keep money safe.
ISA​: individual savings account
Interest Rates​: an annual rate which is charged to borrowers or paid savers
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7.
Choices and opportunity cost ­​ Candidates should understand that as income is
a scarce resource and wants are unlimited, choices need to be made.
Costs and Benefits ­​ Candidates should understand the importance of weighing
up costs and benefits and considering opportunity costs when making decisions.
Definitions
Basic economic problem​: Resources are limited but needs and wants are infinite
Opportunity cost​: Something given up when we make a choice
Demand​: The quantity of a good or service that consumers are willing and able to
purchase at a particular price
Supply​: The quantity of a good or service that businesses will offer for sale at a particular
price
Costs: ​The expense and drawbacks of a particular choice.
Interest Rates​: The advantages of a particular choice.
Opportunity costs ​are something that is given up when we make a choice
How demand changes over Personal Life Cycle
Initially ­ basic household goods
Family ­ goods and services for children
After children leave home ­ meals out, more expensive holidays
Retirement ­ Income falls so people cut back on expenditure.
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8.
Demand and the Personal Lifecycle ­​ 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.
Markets and Prices ­​ Candidates should have a basic understanding of how
markets for goods operate and understand the reasons why prices change.
Effects of Competition ­​ Candidates should understand how businesses
compete and the advantages and disadvantages of competition for consumers.
Demand and the factors that affect spending.
As the price ​increases​ for a good, the quantity demanded will ​decrease​, and vice versa
● Income level ­ the most important factor
● Advertising and branding influence desire and loyalty for a product
● Prices of substitutes (similar goods) and complements (fuel is a complement of
cars)
● Fashion
The ‘supply’ from businesses
The amount they offer for sale is called ‘supply’ ­ the more they supply, the higher the
price.
● Cost of Raw Materials
● Wage Rates ­ overtime may need to be paid for higher output
● Productivity of the workers
Why wage prices change
➔ Buyers and sellers come together → market is formed.
➔ Market price is determined by the amount buyers are willing to pay and the price
that businesses need to be paid to cover their costs.
➔ Goods don’t sell well → supplier lowers price
➔ Price will settle at a point where supply = demand, this is known as market price.
Competition
There is more than one supplier for each good → businesses face competition
➔ Advertising and branding
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9. ➔ improving quality
➔ changing design and features ​(eg. phone updates)
➔ lowering the price by improving production methods
C​ONSUMER ​B​ENEFIT
➔ Lower prices (eg. price wars between supermarkets)
➔ Greater variety (eg. more branded versions of same good in supermarkets)
➔ Better Quality (eg. Improving quality to get dominance)
C​ONSUMER ​D​RAWBACK
➔ Quality can be lowered as businesses try to cut costs
➔ After­sales service can suffer if too many resources are put into sales.
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10.
Reasons for saving ­ ​Candidates should understand why people save and be
aware of the main methods available, eg using banks, building societies and
National Savings.
Methods of saving ­​ Candidates are only required to have a basic understanding
of shares and unit trusts and the working of the stock market.
Choosing where to save ­ ​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).
Why people save?
❏ Decide not to spend all their income now → uncertainty about future events in their
life cycle. Plan emergencies and planned purchases
❏ Something special like ­ a car, a wedding celebration or a house.
❏ Emergencies like ­ replacing fridge, tv or even medical.
❏ To save for retirement
Definitions
Annual equivalent rate (AER): ​a figure quoted in savings advertisements to help people
compare on savings products with another
Risks​: the chance that something may not succeed and its consequence
Reward​: the return received for taking risks
Shares​: certificate representing a unit of ownership in a company
Unit trust​: a pooled investment fund usually shares­based investments
Government role on saving
● The government encourages people to save
● ISAs, you can save ​£15,000 (£15,240 from April 2015) taxfree.
Gross interest​ ​is the interest rate before tax has been deducted.
Net interest​ ​is the rate you receive after tax has been taken off.
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11. Methods of saving
Account Reward Risk Short,
medium or
long­term
Ease of
withdrawing
money
Savings
account
Low ­ Medium Low Short – Long Easy – unless
notice of
withdrawal is
required
ISA accounts Low ­ Medium Low Medium – Long Easy
National
savings and
investments
account
Low Very Low Medium – Long Often requires
written notice of
withdrawal
Unit Trusts Medium ­ High High Long Obtaining your
money may take
some time
The Annual Equivalent Rate (AER)
A​E​R ­ ​E​arn → From savings
➔ It is given to the interest rates of different savings so it is easy to be compared.
➔ Since some savings are compounded annually and others monthly, annually
➔ Way to compare different savings account.
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12.
Reasons for borrowing money ­​ 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.
Methods of borrowing money
Choosing where to borrow money ­​ 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).
Impact of changing interest rates ­ ​Candidates should be aware of the effects of
changes in interest rates on borrowers and savers.
Why people borrow?
❏ To make large purchases when they don’t have enough money.
❏ Something special like ­ a car, a wedding celebration or a house.
❏ Emergencies like ­ replacing fridge, tv or even medical.
Definitions
Mortgage – ​a loan​ ​to finance the purchase of real estate (e.g. a house). A Mortgage is
secured on the house, which remains to be the property of the bank until the loan is paid
off.
Credit card​ – cards that may be used repeatedly to buy products and services on credit or
to borrow money up to a pre arranged amount limit. Each month, you must pay back the
minimum repayment required (usually around 3­5%) of the outstanding balance. You can
pay more if you want, and this will reduce the interest you pay; credit card interest rates
are high.
Store card​ – cards that may be used to buy products and services on credit from the shop
that issued the card, up to a pre arranged limit. Repayment terms are similar to credit
cards.
Personal loan​ – a loan given for a personal household (e.g. to buy items such as
furniture)
Hire purchase – instalment plan whereby the loan company owns the item, but it becomes
yours when the debt if fully paid off.
Overdraft ​– borrowing up to an agreed limit on a current account. Overdrafts must be paid
back on demand.
Borrowing/debt/credit​: getting money from a lender that must be repaid in the future (e.g.
a mortgage)
Loan​: amount of money borrowed
Term of a loan​: the length of time over which a loan can be repaid
Annual percentage rate (APR):​ the interest rate published on loans to help compare their
true costs
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13. Type of Loan Interest Rate Is security
needed?
Flexibility of
payments
Mortgages Low Yes – The house. Very little – the
amount changes
when there are
changes in the base
rate.
Credit and store
cards
High No High – you can pay
the minimum, or
more if you wish
Personal loans Medium No None
Hire purchase Medium Yes – the purchase
acts as security
None
Overdraft High No High – but make
sure that you do not
go over the agreed
limit.
The Annual Percentage Rate (APR)
A​P​R ­ ​P​ay → To loans
➔ It is the interest rate quoted on loan and credit card advertisements
➔ Helps compare the cost of different loans
➔ Takes into account the interest rate and any additional costs.
➔ Higher the APR, the higher the monthly installments
➔ Credit cards are more expensive because there is no security.
➔ Each loan is made up of two parts ­ the interest and the capital.
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14.
Benefits of financial planning and budgeting ­​ 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.
Planning for uncertainty ­ ​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.
Moral and ethical issues ­ ​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.
influence of government on personal finances ­ ​Candidates should understand how
taxation and government expenditure on benefits and services can affect an individual’s
income, saving and expenditure during the personal lifecycle.
Financial Planning:
❖ A process of ensuring that financial goals are met
❖ Financial planning is needed to make sure that people meet these needs and
wants
❖ Staying clear of financial problems ​­ budgeting is key
❖ Changes in income/expensive, the figures need to be adjusted.
❖ Financial advisor can help you with
➢ buying expensive items ­ designer clothes, new phone, furniture
➢ university ­ fees, cost of living
➢ buying or renting a house
➢ redundancy, sickness or disability
➢ retirement
❖ Unpredictable events means that people need to save to have something in
reserve.
❖ Those who do not make financial budgets
➢ easy to spend on credit cards, it is harder to pay back loans you owe,
interest charge will build up
➢ can cause serious debt problems → seeing an expert who will draw debt
management plan
❖ Ethical issues to do with saving
➢ Deciding to save can be a social, moral or ethical dilemma.
➢ Body Shop and Cooperative Bank have high ethical standards ­ pay their
workers properly.
➢ Other companies have child labour, poor working conditions, etc. and this
isn’t ethical
❖ Ethical issues to do with borrowing
➢ Should people borrow if they might not be able to repay the money.
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15.
The meaning of 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.
Specialisation and Interdependence ­​ Candidates should be aware of the
specialised nature of work and understand the advantages and disadvantages of
specialisation to the worker.
Impact of ICT on work ­ ​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.
Refers to paid work ­ where people perform jobs in exchange for money and other
benefits
Why people work Why people may not work
Pay Remaining in education
Job satisfaction (Social aspect an
achievement)
Child care and Retirement
Social Status Stay at home parents
To enjoy/achievement Physically unstable
Pass­time/relieve boredom Are financially stable/affluent
Specialisation ​occurs when an individual, firm or economy focusses on a task at which it
has an advantage.
➔ This simplifies the task of each worker. Some tasks can be mechanised
➔ Mechanised means you replace workers with machines
A​DVANTAGES ​O​F ​S​PECIALISATION
➔ Take advantage of different skills ­ can become more skilled in one task rather than
be involved in whole production
➔ No wasted movement
➔ Effective use of capital items
➔ Saves time
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16. ➔ Businesses can produce more output at lower costs, saving might be shared with
workers
D​ISADVANTAGES ​O​F ​S​PECIALISATION
➔ Production will become interdependent
➔ Jobs become boring if workers are only involved in a repeated, small part process
➔ Loss of certain skills
➔ Lack of variety
➔ Loss of transferable skills
I​nformation ​C​ommunication ​T​echnology (ICT)
The internet
❖ Changed how businesses operate
❖ Removed the need for people to be employed in shops and other outlets
E­mail
❖ How we communicate at work ­ faster and easier with large numbers
❖ Reduces need for telephone calls and letters
Home working
❖ People have ‘flexible working’ as it helps manage both work and looking after
family
❖ Helps businesses reduce costs as they may not have to provide facilities
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17.
How people are paid ­​ 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.
How labour markets determine 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.
Reasons for differences in pay ­ ​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.
The Influence of government on pay and working conditions ­​ 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.
How people are paid:
Salaries ­ ​stated as annual earnings but are paid monthly. Mainly applies to full time
workers, but can apply to part time workers. Jobs paying salaries are more likely to be
skilled – non manual occupations.​ Pay stated as a yearly total
Wage​ – wages are calculated as an hourly rate multiplied b the number of hours worked.
Wages are normally paid weekly. More likely to apply to lower skilled jobs, and for part
time or temporary work. ​ Pay calculated on an hourly rate multiplied b the number of
worked hours
Commission​ – workers paid by commission receive payments for achieving certain
targets – often connected with sales. A worker who adds to the firms sales receives a
percentage of the sales value as a reward. Commission encourages workers to achieve
more sales. Workers can be paid partly or fully on commission. ​Payment made to
workers for achieving certain targets
Overtime payment ​– Businesses sometimes need workers to work longer hours. This is
especially true when production needs to be higher than usual but this will be temporary.
Rather than having to employ more workers, companies will encourage its workforce to
work longer hours. These extra hours are paid at a higher rate and are known as overtime
payments. ​Workers are paid a higher amount for hours worked outside of their
normal working hours.
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18. Shift work payment ​– some workers will not work traditional hours but will work in shifts.
This often occurs when a business needs to be kept open for longer than the working day.
Work patterns which do not follow the standard working hours
BACS​ – stands for the bankers automated clearing services and is a system used within
the UK for allowing the electronic transfer of money between banks. This means that it
avoids the need for paper based documents when making payments. The payments can
take up to three days to move from one bank to another.​ Automatic transfer of funds
between bank accounts.
Fringe benefits​ – When worker are paid in ways other than money, For example, fringe
benefits of a job could include a company car, private health care or schooling fees. They
are often paid for highly skilled and highly paid jobs.
Gross Pay​ ​–Is a worker’s pay ​before​ any deductions are made. Useful to compare
different jobs.
Net pay​ – refers to the pay ​after​ all deductions have been made. E.g. tax, national
insurance and pension contributions.
Not comparable, depends on level of income and type of pension.
D​EDUCTIONS
Income Tax​: tax on money paid to the worker, although not all income is taxed, the
income tax will be paid as a percentage of earnings. People only pay income tax on
earnings above a tax free allowance, and the percentage of tax paid depends on the
amount of income – indicated by a tax code. ​A tax calculated as a percentage of the
workers income.
Income tax in the UK is paid in two main ways
● PAYE – pay as you earn, tax is deducted by the employer before the income is
paid to the worker
● SA – self assessment, for workers who are self employed. Tax is paid by the
worker.
National Insurance (NIC)​: are paid by employees on incomes to build up an entitlement
to certain benefits and the state pension. Like income tax, national insurance is paid as a
percentage of income earned. The rates it is paid are different to those of income tax.​ A
tax paid by workers which entitles them to qualify for benefits when necessary
Pension contributions: ​some workers will pay fewer NICS because they make payments
to either a private or a company pension scheme. Workers pay a percentage of their
income, which will then be invested. The worker will receive the pension when reaching
retirement.​ A deduction from a worker’s pay, which is meant as a contribution for
their future retirements.
Other deductions: ​trade union subscriptions, staff association membership fees and
repayment of student loans
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19.
Impact of unemployment on individuals and society ­​ Candidates should
understand the monetary and non­monetary costs of unemployment to the
individual and to society. Candidates should understand the reasons why the
duration of unemployment might vary between individuals.
Impact of government on unemployment ­​ 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.
● Monetary factors, gender, ethnic origin, taxation and state benefits are
contributions as to why people ​may not​ work.
Types of unemployment
Seasonal
➔ Seasonal changes in employment due to demand
◆ Tourism (high demand during holiday times)
◆ Construction
Frictional
➔ When people are looking for work after a job or a long gap ­ includes returning
entrants to labour market
Structural
➔ When a person’s qualifications mismatch job opportunities as the pattern of labour
demand in the economy changes
➔ Often involves long­term unemployment
➔ In regions of long­term decline.
◆ mining
◆ Textiles
Cyclical
➔ Caused by a fall in total demand leading to a loss of real national output and
employment.
19 ­ Kaushik Srinivasan

20. Reasons for difference in wages
Training and skills – ​Jobs which require more training and higher skills are likely to be
paid more, because the supply of people with these skills is not a lot. Businesses need to
pay more so that they can attract these workers.
Gender​ – Women are likely to be paid less than men. This is partly due to the fact that
women are more likely to take a career break to raise children so they would have to miss
out on training and opportunities. Women’s wages are around 85% of men’s.
Age ​– older workers are likely to be paid more than younger workers. This is because they
are likely to have more experience and have the skills needed for higher paid jobs.
Trade unions​ – organizations that workers can decide to join, which offers protection and
negotiate for higher wages for their members. Achieving this by the treat of industrial
action. E.g. strikes.
Government Influence​ ­ the government introduced a minimum wage in the 1990’s, so
now people cannot be paid unfairly low wages. The minimum wage is the legal minimum
hourly rate that can be paid to workers, varying depending on the age of the worker.
Derived Demand​ ­ When the supply of a good/service/job is dependant on the demand
for another good. eg. demand for gold is derived from the demand for gold sovereigns
Reasons why wages rates change
Surpluses of labour – ​where more people want to work in a particular occupation than
the number of jobs available. This is likely to lead to lower wages because the supply of
available people has risen. Also because the business can afford to pay less for a higher
amount of staff.
Shortages of labour – ​If there is a shortage of labour, businesses will need to offer higher
wages. This will encourage more workers to supply their labour for that industry.
Monetary costs of unemployment
● A person will not receive any income
● The government will need to spend money in issuing benefits.
Non monetary costs of unemployment
● Loss of skills
● Health – due to possible family breakdown and stress
20 ­ Kaushik Srinivasan

21. Government strategies to help the unemployed:
Tax allowances​ – ​allowing people to earn up to a certain amount before they have to start
paying income tax. This is designed to ensure that the unemployed who take on jobs will
not be worse off than if they were receiving benefits.
Jobseekers allowance​ – the benefit payments to the unemployed re linked to the person
providing evidence that a person is actively seeking work.
Working tax credits​ – Some people will have family commitments, so the government
ensure they receive benefits through working tax credits. Meaning they don’t lose all the
benefits that they had whilst unemployed.
New deal​ – focuses on providing training for people who have been unemployed for an
extended duration. It particularly concentrates on those ages under 25 because it is
believed that they are the most likely to be unemployed because of lack of skills.
Education ​­ the government is encouraging more students to undertake vocation
qualifications in schools and colleges. To ensure that children who find academic work
difficult do not leave school without decent qualifications.
Apprenticeships​ ­ apprentices work alongside experienced staff and gain job specific
skills. The apprentice will normally receive training with a local training provider such as a
college possibly on a day release scheme e.g. one day a week away from the workplace.
This helps the business, meaning they don’t get the same wage as a normal employee
would. But also helps the apprentice because they gain skills that make them employable.
21 ­ Kaushik Srinivasan

22. National and Global Economy
UK’s exports and imports ­​ 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.
Advantages and disadvantages of global trade ­ ​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.
Exports​ are goods and services that the UK sells to buyers in foreign countries (e.g.
Jaguar Cars)​ (MONEY COMES INTO THE COUNTRY)
Import​ are goods and services that the UK buys from foreign countries (e.g.
Volkswagen Cars)​ ​(MONEY GOES OUT OF THE COUNTRY)
Goods​ ­ that can be physically handled ­ ​‘visibles’ ­ ​television, cameras
Services​ ­ that cannot be physically handled ­ ​‘invisibles’​ ­ ​tourism, insurance
Balance of Payments​ ­ A record of the value of the country’s exports, imports and
financial transactions with the rest of the world over a year ​(or)​ the difference
between the value of all the exports and all the imports.
Importance of Trade
● International trade provides jobs
● Different countries have different specialities ​(raw materials, climates,
cultures).
○ UK can specialise in producing goods that make it better and more
efficient
○ The surplus goods can be sold abroad, ​creating jobs for UK citizens​.
Globalisation​ ­ the process of increasing international trade and economic
interdependence between countries
A​DVANTAGES ​O​F ​T​RADE
➔ Income ­ ​increased production means more workers needed → more jobs
➔ Growth ­ ​growing exports → increasing production → higher economic
growth (GDP will rise)
22 ­ Kaushik Srinivasan

23. ➔ Choice and product differentiation ­​ UK citizens can choose from goods not
otherwise available in the UK
➔ Prices ­​ Goods are imported from China and India → lower labour costs and
good levels of technology → produce more goods cheaply
➔ Competition and Innovation ­ ​work harder to attract customers from
competitors → try to lower prices and develop more attractive and better
quality products
➔ Raw materials ­ ​the UK is relatively poor in raw materials → essential that we
import materials that we need.
D​ISADVANTAGES ​O​F ​T​RADE
➔ Competition ­ ​increased competition means cheaper goods → UK firms find
it difficult to compete → lower labour costs than UK
➔ Economic dependency ­ ​UK imports large variety of foods → interruption
might threaten survival
➔ Unstable commodity prices ­​ prices of raw materials and foodstuff can
change by large amount very quickly → affects production and prices to
consumers → good and bad effects
➔ Power of MNCs ­​ they are becoming powerful → govts. finding it hard to
control MNCs
➔ Social and Environmental Impacts​ ­
◆ Carbon footprint: the total greenhouse gas emissions caused by an
individual, event, organization or product or good traded by the UK.
● direct emission of CO​2​ ­ from activities the organization controls
(eg. using energy for production, running vehicle fleet)
● indirect emissions of CO​2​ ­ the carbon that is emitted in the
preparation and transport of the raw materials used, employee travel
to work, so on.
23 ­ Kaushik Srinivasan

24.
Effect on imports and exports ­ ​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.
Effect on individual consumer ­​ 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.
Exchange Rate ­ ​The rate at which one currency exchanges for the other
SPICED
(​S​trong ​P​ound ​I​mports ​C​heap ​E​xports ​D​ear)
When the value of the pound ​(against the dollar)​ increases ​­ before it was £1:$1 and
now it is £1:$2 ­ ​this means that before, £1 was required to buy $1. Now only £0.5 is
required to buy the same ($1). The purchasing power of the Pound has increased.
Effects on exports
● If the value of the pound ​appreciates​ (against the euro), the Euro has less
purchasing power so they can buy less goods ­ the exports become dearer.
○ Travel to the UK will now be more expensive → less people will take
holidays in the UK.
○ Exports will ​decrease
■ Affects UK exports, jobs, income and growth
● If the value of the pound ​depreciates​ (against the euro), the Euro has more
purchasing power so they can buy more goods ­ the exports become cheaper.
○ Travel to the UK will now be cheaper → more people will take holidays in
the UK. They will also buy goods in UK while here.
○ Farmers can export abroad easier, making their goods cheaper
○ Exports will ​increase
■ Affects UK exports, jobs, income and growth
Effects on imports
● If the value of the pound ​appreciates​ (against the euro), the pound has more
purchasing power so it can buy/import more foreign goods.
○ Imports in UK will ​increase
○ The UK will be more incentivised to travel abroad as their holidays become
cheaper
■ Foreign economies will develop as their exports will increase
24 ­ Kaushik Srinivasan

25. ● If the value of the pound ​depreciates​ (against the euro), the pound has less
purchasing power so it can buy/import less foreign goods.
○ Imports in UK will ​decrease
○ The UK will be less incentivised to travel abroad as their holidays become
more expensive
■ Foreign economies will not develop as their exports to the UK will
decrease.
Effects on individual consumer
● If the value of the pound ​appreciates​ (against the euro), the pound has more
purchasing power so it can buy/import more foreign goods.
○ UK people will go on holidays abroad as it is ​cheaper
○ People will buy imported cars and goods as it is deemed ​cheaper
○ Imported foods from supermarkets
■ Local farmers will suffer as their goods are more expensive.
○ More likely to withdraw from cash machines abroad.
● If the value of the pound ​depreciates​ (against the euro), the pound has less
purchasing power so it can buy/import less foreign goods.
○ UK people will not go on holidays abroad as it is ​more expensive
○ People will buy less imported cars and goods as it is deemed ​more
expensive
○ Exported foods (locally grown) from supermarkets
■ Local farmers will flourish as their goods are cheaper → can sell
more.
○ Less likely to withdraw from cash machines abroad.
Factors that affect sales of imports and exports
● Style and image
● Quality
● Reliability
BMWs ​from UK​ are bought because of its quality and style
Fine wines and champagne ​from France
Caviar ​from Russia
Oil is something which UK depends ­ prices make little difference to the amount UK
exports.
25 ­ Kaushik Srinivasan

26.
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.
Consumers can wield a large influence over producers.
Boycott ­​ to stop buying or using a product as a protest, to force a company to do or
stop doing, a particular action.
Consumer empowerment ­​ consumers demonstrating their needs, wants and
demands through their purchase decisions in the marketplace.
Consumers demand cheap products → UK manufacturers moved abroad to low
labour­cost countries in order to compete with cheap imports.
Fairtrade products ­​ aims to help poorer producers in developing countries gain
economic self sufficiency by encouraging the payment of pair prices for products
such as coffee, cocoa and fresh fruit.
Shops have adopted to Fairtrade products because consumers
demand them.
● Tesco, ASDA and Sainsbury’s have committed to sourcing foods locally
where possible → greatly cuts down transport needed → pollution is reduced.
The UK Government’s role in reducing World Poverty
● Tackling causes of poverty
○ Settling conflicts
○ Increasing trade
● Aid is also given directly to foreign governments of poor countries.
● Reducing import taxes on these goods
● Making foreign consumers pay fair prices.
26 ­ Kaushik Srinivasan

27.
Effect of globalisation on the UK labour market ­​ Candidates should be aware
of the advantages and disadvantages of firms operating overseas including the
difference in labour costs.
Mobility of labour ­​ 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.
Impact of migration ­​ 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.
A​DVANTAGES ​O​F ​F​IRMS ​O​PERATING ​O​VERSEAS
➔ Lower operation and labour costs
➔ Firms have increased competition ­ ​can drive prices lower
➔ Exchange rates ­ ​if the exchange rate falls it lowers export prices
➔ Firms nearer to markets and raw materials ­ ​reducing transport and
distribution costs
D​ISADVANTAGES ​O​F ​F​IRMS ​O​PERATING ​O​VERSEAS
➔ Jobs lost in the UK
➔ Difficulty in controlling operations
➔ Unfamiliar languages and cultures
➔ Transport costs to home markets
➔ Exchange rate changes ­ ​changes can go against you, making trading more
expensive and reducing profits from overseas factories.
Why foreign firms choose to operate in the UK
➔ High skilled labour force and higher quality production
➔ Tariff­free access to the European Single Market (500 million consumers)
➔ to buy existing UK­owned brands and distribution networks
➔ English is an accepted international language of business, science and
technology
Effects of closing a plant on the UK economy
➔ jobs are lost from the plant itself
➔ jobs are lost from other UK companies who supply to the plant
27 ­ Kaushik Srinivasan

28. Globalisation and the Mobility of Labour
Mobility of Labour ­ ​the ability of workers to change between jobs.
● Globalisation is ​increasing ​the mobility of UK workers by offering them a growing
variety of jobs abroad.
● UK is a very open economy, so places will high­skilled labour will experience a
growth in employment as new companies dependent on such skills relocate to the
UK.
A​DVANTAGES ​O​F ​G​LOBALISATION (in UK labour market)
➔ Jobs are created in sectors where the UK does well ​(eg. financial services
and highly specialised manufacturing)
➔ New migrant labour skills lower costs and increase competitiveness​ (eg.
Polish plumbers in UK)
➔ There are opportunities to increase exports to new markets
D​ISADVANTAGES ​O​F ​G​LOBALISATION (in UK labour market)
➔ Low­skill jobs are lost, particularly affecting manufacturing regions in
the UK
➔ Increase in immigrant labour lowers wages ­ ​higher supply and they are
willing to work for less
➔ Relocating production overseas can cause unemployment
Immigration on the UK Economy
● Workers migrate to where wages are highest, both within their country and
internationally.
● Easier to work abroad so large amount of migrants
Immigration affects the UK
POSITIVELY
● Bringing new knowledge and skills, filling gaps in the market
● Reducing wage inflation and increasing competitiveness
● Providing more workers to support the UK’s ageing population
● Increasing the number of consumers as well as producers
28 ­ Kaushik Srinivasan

29.
NEGATIVELY
● Lowers wages and can replace low­skilled workers
● Increases strain on social services, education and producers
Emigration affects the UK
● Reducing unemployment in recession
● Losing valuable skills/human capital ­ ‘the brain drain’
BARRIERS TO WORKING ABROAD:
● language and cultural barriers
● visa, work permits and so on
● restrictions by foreign governments
Government action to regulate labour migration
● Points system ­ ​potential immigrants score points according to how well
their skills match those needed by the UK.
● the SAWS ­ ​Seasonal Agricultural Workers Scheme ­ which allows
farmers and growers to bring foreign persons to the UK to do seasonal
and agricultural work.
29 ­ Kaushik Srinivasan

30. Other Notes
Eco Unit 11 revision:
Demand: ​the quantity of a good for service that consumers are willing and able to purchase at a
particular price
Bank/Building society savings account: ​an account for which the main objective is to gain interest
and keep money safe
Unit trusts:​ a pooled investment fund usually in shares­bares investment ­ saving products that spread
risk by investing in a range of shares
Government securities:​ stocks, bonds and bills of exchange issued by a government to raise the funds
Where to save­
­National Savings Account + Investment account ­​ low reward ­ very low risk ­ medium­long term ­
requires written notice for withdrawal
­Savings Account ­​ low­medium reward ­ low risk ­ short­long term ­ easy to withdraw money
­ISA Account ­ ​low­medium reward ­ low risk ­ medium­long term ­ easy to withdraw money
­Unit Trusts ­​ medium­high reward ­ medium high reward ­ long term ­ obtaining money may take
time
Where to borrow­
­Mortgage ­​ low interest rates ­ very little flexibility of repayments ­ security needed (house)
­Hire purchase ­ ​medium interest rates ­ no flexibility of repayments ­ security needed (purchase)
­Personal loans ­​ medium interest rates ­ no flexibility of repayments ­ no security needed
­Overdraft ­ ​high interest rates ­ high flexibility of repayments (but need to be under agreed limit) ­
no security needed
­Credit + Store cards ­​ high interest rates ­ high flexibility of repayments ­ no security needed
Budget: ​a financial plan of future income and spending
Debt management plan:​ a structured repayment plan
————————————————————
Benefits of specialisation (7)
❖ workers become more skilled if the focus on one task,
❖ output produced quicker as workers are more familiar with what they have to do
❖ businesses produce output at lower cost due to faster+higher skilled workers (can still sell for
same amount)
❖ workers get higher earnings
❖ workers can stay more concentrated at task
❖ get training that is more based towards skill
❖ efficiency of workplace and product production increases
Limitations of specialisation (5)
❖ workers and production becomes interdependent as they rely on each other (causes problems if
one area fails­bottle necks)
❖ jobs become boring if they have to focus on one thing repeatedly
❖ moral falls as jobs become repetitive and labour turnover may rise
❖ if worker is absent it is hard to arrange a cover of their specialised section of work as others are
untrained in that
30 ­ Kaushik Srinivasan

31. ❖ workers become less flexible and its harder to find other jobs or adapt if new types of goods
need to be made (keeping options narrow as not able to do other things)
impacts of ICT in workplace ­
❏ job loss
❏ training needs
❏ obsolete skills
❏ lower or higher earnings
❏ flexible work practice
❏ creates new markets for new products
Factors affecting demand for labour:
derived demand, government influence and the demand for labour,
low wage ­​ more people want to work but less jobs available (supply > demand)
high wage ­​ more labour wanted but less people want to work (demand > supply)
Reasons for differences in wages:
Training and skills required
Gender​ (women take career break)
Age​ (older more experienced)
Unionised jobs/ Trade unions​ (set better wages for employees)
Government influence​ (minimum wage, rules for work hours)
How much revenue it generates​ (person and market/job)
How necessary it is​ (the product. e.g. doctors)
Alternatives/ substitutes​ (can be done by technology?)
Scarce supply or not​ (how many)
Government strategies to help unemployed:
Tax allowance ​(allow them to earn up before they pay income tax so they aren't worse off when they
lose their benefits)
Job seekers allowance​ (extra money to help them when looking for jobs so more people want to start
looking),
New deal​ (training for unemployed)
Education and apprenticeships
—————————————————————
GDP:​ the total value of goods and services produced by an economy in one year
Globalisation: ​the process of increasing international trade and economic interdependence between
countries.It has made it easier to buy products produced around the world and for UK producers to sell
in other countries
Advantages of trade:
● Income​ (more production means more workers needed and so more jobs),
● growth ​(higher GDP), choice and product differentiation (choose from products out of UK),
● prices ​(lower labour costs­ made in china, can producer cheaper than UK manufacturers),
● competition and innovation ​(companies work harder to attract more customers as there are
more ­ lower prices and produce hire attractive and better quality products for this)
● raw materials ​(uk has little ­ essential to import materials needed)
31 ­ Kaushik Srinivasan

32. ● Unstable Commodity prices​ (price of raw materials and products can change by large
amounts quickly ­ affects production costs and prices for consumers ­ can have good and bad
effects)
● Get more natural resources which the country doesn’t have
Disadvantages of trade:
● Competition​ (benefits customers ­ lower prices, more variety, better quality. but difficult for
firms to compete ­ other countries have lower labour costs than UK and their workforce is well
trained so they pay less and work better)
● Economic dependency​ (imports large variety of things that the people now need and
depend on ­ interruption may threaten survival)
● Unstable Commodity prices​ (price of raw materials and products can change by large
amounts quickly ­ affects production costs and prices for consumers ­ can have good and bad
effects)
● Power of MNCs ​(becoming very powerful ­ governments finding hard to control them),
● Environment and Sustainability
advantages of firms operating abroad:
● lower operating and labour costs
● firms have more competitiveness, exchange rates (if falls­export prices lowered)
● firms nearer to markets and/or sources of material (reduce transport and distribution costs)
disadvantages of firms operating abroad:
● jobs lost in UK,
● difficulty in controlling operations,
● unfamiliar cultures and languages,
● transport costs to home markets,
● exchange rates (if goes up­ exports price higher­ can go against you making trade expensive
and reducing profit from overseas)
reasons why foreign firms locate in the UK:
● high­skilled labour force and higher quality production,
● tariff­free access to the europen single market,
● to buy existing UK owned brands,
● english language is the accepted internationally
Benefits of globalisation for the labour market:
­Jobs are created in sectors where the UK does well (e.g. financial services)
­There are opportunities to increase exports to new markets
­New migrant labour skills lower costs and increase competitiveness (e.g. skilled plumber emigrating to
UK eased shortage of those skills)
Drawbacks of globalisation for the labour market:
­Low­skill jobs are lost, particularly affecting manufacturing regions of the UK
­Increase in immigrant labour depresses wages
­Relocating production overseas can cause unemployment
Impact of migration ­​ MNCs create new job opportunities across the globe. Workers naturally migrate
to where wages are highest (nationally and internationally)
Immigration affects the UK labour market by:
­Bringing new knowledge and skills and filling gaps in the labour market
­Reducing wage inflation and increasing competitiveness
­Providing more workers to support the UKs ageing population
32 ­ Kaushik Srinivasan

33. ­Increasing the number of consumers as well as producers
BUT
­Depresses wages and can displace low skilled UK workers
­Increases strain on social services, education and hospitals
Emigration affects the UK labour market by:
Reducing unemployment in recessions
Increasing opportunity
BUT
Loses valuable skills/human capital ­ the brain drain
(language and cultural barriers, visa work permits and so on are needed outside EU, restrictions by
foreign governments)
exchange rate = equilibrium price between demand and supply of a currency
Demand ^ = Value ^ = appreciates
Supply ^ = Value v = depreciates
Currency ^ = easier/cheaper to import (can buy more) ­ harder to export
Currency v = easier/cheaper to export (can sell more) ­ harder to import
some countries keep their currency cheap on purpose. ​Cheap currency​ = its products cheap + foreign
products expensive (good for balance of payments as more people will buy local products instead
foreign ones so they need to purchase fewer imports but will be selling more exports
by devaluing their currency­
they can increase exports,jobs, income and growth
it boosts the economies and the income will be more.
you can export more as the currency value falls
imports become more expensive as the currency value falls
it will help local firms as people buy more of their products as foreign ones are more expensive (boost
income and economy for UK)
more expensive for pound holders to buy goods in euros (less attractive)
if the currency appreciates (is stronger) the holders of that currency will be able to:
have cheaper foreign holidays
get more from banks abroad (as it is worth more)
goods in supermarkets
imported goods
direct imports
12 MARKER­
point
justify
advantages + disadvantages
link to person
point 2
justify
advantages + disadvantages
link to person
overall judgement ­ insight on circumstances (RELATE TO CASE STUDY)
33 ­ Kaushik Srinivasan