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individual as producer and earnings

Terms in this set (25)

they are also producers and they have their own factor if production which is labour
they sell their labour to firms in return for monetary rewards
individuals arent just consumers____
quoted weekly for wages
quoted annually for salary.

greater monetary rewards more people will want to work there
wages and salaries
different ways people can be payed, all give incentive to work
wage factors
the quoted and standard rate of pay
basic pay
work beyond contracted hours, more pay per hour usually
encourages more work increasing the firms output and profit
overtime
money gained based on
performance, incentivises better quality work which will benefit the firm
bonus
money gained based on % of what you have sold. encourages selling of more products which will lead to greater profit for firm
commission
monetary reward based on firms profits
profit related pay
why people choose a job not related to pay
non-wage factors
choosing a job because it satisfies you. this means your motivation is intrinsic ( you like your job) opposed to extrinsic which is motivated by reward
motivation
choosing a job as it will develop your skills and experience for a future job or promotion
career prospects and promotion
examples company car, more holiday, free lunches, pension
benefits
for the well being of others
vocation
reward for work
wages defintion
flow of all monetary rewards
earnings defintion
all wages and earning are subject to income tax
- it is illegal to evade, pretend you don't earn as much
-legal to avoid, need an accountant
income tac
earning before deductions and additions
gross earnings
earnings after deduction and addition
net earnings
net earnings = gross earnings - tax income - national insurance + benefits
net earnings equatkon
deductions which cannot be avoided you have to pay them
ie income tax, national insurance
statutory deductions
is equal to net earnings and is used to pay for things which the consumer needs or wants
-goods
-pay of mortgage etc.
disposable income
income tax is charged on earnings above a basic level (£11,500) if below this no need for income tax
what is income tax charged on
20% 40% 45%
3 bands of income tac
as time goes on we gain experience as workers we generate higher income
as we work longer we gain more skills and increased skills attract higher wages
wages tend to increase by at least rate of inflation to keep up with rising prices and maintain purchasing power. if wages stayed the same the real value of their money would fall and their spending would decrease. when people retire their income drops to a fraction of their wage
pattern of lifetime earnings
as earnings increase in steps our spending increases, sometimes spending exceed earning so need to borrow. near end spendings flattens as we begins saving for retirement
spending patterns in lifetime
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