Topic 7: How People's Economic Choices Affect Society

What You Need to Learn

Understand how consumer choices affect business behaviour and ethics
Explain the advantages and disadvantages of globalisation
Describe how consumer choices have affected local communities and high streets
Understand the impact of out-of-town shopping, online shopping, and shop closures
Explain how enterprise and employment choices affect society
Describe changing work contracts: part-time, zero-hours, and temporary contracts
Understand the impact of employment choices on government tax revenues

7.1 How Consumer Choices Affect Society

Every time you buy something, you are effectively casting a vote. If millions of people choose to buy the same product, businesses take notice. The collective effect of all our individual purchasing decisions determines which goods and services businesses choose to focus on producing.

Key idea: Consumers have enormous power. If enough people refuse to buy from a company with a poor ethical record, that company will be forced to change or go out of business. Equally, if consumers only care about price, ethical businesses may struggle to survive.

7.1.1 Consumer Choices and Business Ethics

Behaving ethically — treating workers fairly, sourcing materials responsibly, protecting the environment — increases costs for businesses. If consumers only buy the cheapest products, businesses that behave ethically will lose sales to cheaper, less ethical competitors.

The Shift in Awareness

In recent years, there has been a significant shift in consumer attitudes:

Pressure groups have campaigned to raise awareness of unethical business practices
Media spotlight has exposed companies using sweatshop labour or damaging the environment
More consumers now consider a company's ethical reputation when making purchasing decisions

Fairtrade

Fairtrade is a system that ensures producers in developing countries receive a fair price for their goods. It guarantees minimum prices, better working conditions, and community development funds. Examples include:

Starbucks — committed to ethically sourced coffee through Fairtrade partnerships
Cadbury — Dairy Milk chocolate carries the Fairtrade mark, ensuring cocoa farmers receive a fair deal

However... Not all consumers make ethical choices. The market for counterfeit goods (fake designer products), illegal downloads of music and films, and demand for cheap sweatshop-produced clothes shows that many consumers still prioritise low prices over ethical considerations.

7.1.2 Consumer Choices and Globalisation

Globalisation is the process by which businesses operate on a worldwide scale, producing and selling goods and services across international borders. It has been driven by improvements in technology, transport, and communication.

Table 7.1: Advantages vs Disadvantages of Globalisation

Advantages	Disadvantages
Lower costs of production lead to lower prices for consumers	Workers in developing countries may receive low wages
Wider choice of goods and services available	Poor working conditions in factories (sweatshops)
Jobs created in developing countries where factories are built	Profits sent back to the company's home country (HQ), not reinvested locally
Economic growth and development in poorer nations	Unemployment in developed countries as jobs move overseas

Remember: Fairtrade is seen as a response to the negative effects of globalisation. It attempts to ensure that producers in developing countries are not exploited and receive a fair share of the profits.

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Card Sort: Effects of Globalisation

Sort these effects into the correct category:

7.1.3 Consumer Choices and Local Communities

Historically, people did their shopping at small local businesses — the grocer, the butcher, the baker, the post office. These shops were the heart of local communities, where people met, chatted, and built relationships.

Today, many of those shops have closed. The phrase "Ghost Town UK" describes the decline in high street shopping, with boarded-up shops and empty town centres becoming an increasingly common sight across the country.

7.1.3.1 Out-of-Town Shopping

The growth of out-of-town shopping centres, retail parks, and large supermarkets has drawn customers away from high streets. This was made possible by the huge increase in car ownership:

Key statistic: Car ownership in the UK grew from 14% of households in 1951 to 78% of households in 2018. This made it easy for people to drive to large out-of-town stores with free parking and a wide choice of products.

However, out-of-town shopping has several problems:

Elderly, disabled, and low-income people who do not have cars may struggle to access out-of-town shops
Loss of community spirit — high streets were places where people met and socialised; out-of-town malls do not provide the same sense of community
Environmental effects — more car journeys mean more carbon emissions and air pollution

7.1.3.2 Online Shopping

Online shopping has transformed the retail landscape. It went from being virtually non-existent in 2000 to accounting for 37% of all retail sales in January 2021.

Case Study: Richard Baker — Online Pottery Business

Richard Baker sells hand-made pottery online. By operating on the internet rather than from a shop, he benefits from:

Unlimited market — he can sell to customers anywhere in the world, not just local people
Low costs — no shop rent, no business rates, no shop staff needed
Lower prices — savings on overheads can be passed on to customers

7.1.3.3 Vacant Shops and Lost Jobs

The combined effect of out-of-town and online shopping has been devastating for high streets:

Key statistics:

In 2019, 16 shops closed per day across the UK
In 2020, 54 companies failed, affecting 5,214 stores, with a further 109,407 stores at risk

The Knock-On Effect

When one shop closes, it does not just affect that business. There is a chain reaction:

Step	What Happens
1	Shop A closes — perhaps a department store or large retailer
2	Fewer people visit the high street, so Business B loses sales (e.g., a nearby cafe)
3	If Business B loses enough sales, Business B may also close
4	Even fewer people visit, causing more businesses to struggle — a downward spiral

7.2 How Enterprise and Employment Choices Affect Society

7.2.1 Changing Attitudes to Work

The world of work has changed dramatically. After the financial crisis, many people were made redundant and found it difficult to find new employment. This led many to consider "going it alone" — starting their own business rather than relying on an employer.

The idea of a "job for life" — where someone joins a company at 18 and stays until retirement — is no longer common. People now expect to change jobs, careers, and even industries several times during their working lives.

7.2.2 The Dragons' Den Effect

The rise of celebrity entrepreneurs has inspired a new generation of business owners:

Richard Branson (Virgin), Alan Sugar (Amstrad), Steve Jobs (Apple), Mark Zuckerberg (Facebook)
TV shows like Dragons' Den and The Apprentice have made entrepreneurship glamorous and aspirational
Technology has made it easier than ever to set up a business — websites, social media, and online marketplaces mean low start-up costs

The Dragons' Den Effect: TV programmes celebrating entrepreneurship have encouraged more people to take the risk of starting their own business. Combined with technology that lowers barriers to entry, self-employment has become a realistic option for many.

7.2.3 Changing Work Contracts

The nature of employment contracts has changed significantly. Not everyone works a traditional 9-to-5, Monday-to-Friday, permanent job. There are now several different types of work contract:

Part-Time Contracts

A part-time contract typically involves working 16 to 28 hours per week. People who choose part-time work include:

Older people who are winding down towards retirement
Artists and musicians who need income but also time to pursue their passion
Aspiring entrepreneurs who work part-time while building their own business
Parents who need to balance work with childcare responsibilities

However, some people are reluctant part-timers — they would prefer full-time work but cannot find it. For employers, part-time workers offer flexibility and lower wage costs.

Zero-Hours Contracts

A zero-hours contract means the employer is not obliged to provide any minimum number of working hours, and the worker is not obliged to accept any hours offered.

Problems with zero-hours contracts:

Workers cannot plan their finances because they don't know how much they will earn
Difficult to pay bills or make financial commitments (mortgages, loans)
Hard to make personal plans because work schedules are unpredictable
Some employers used exclusive contracts, preventing workers from taking other jobs

Key statistics: In 2021, 3.1% of employed people were on zero-hours contracts, compared with less than 1% in 2012. They are commonly used by restaurants, cinemas (Cineworld had 70% of staff on zero-hours contracts), and hospitality businesses.

Temporary and Fixed-Term Contracts

A temporary or fixed-term contract has a set end date. Workers are hired for a specific period or project. Common examples include:

Students taking summer jobs or working during busy retail periods (e.g., Christmas)
Seasonal workers in agriculture, tourism, or hospitality
Workers hired due to economic pressure — employers reluctant to commit to permanent contracts during uncertain times

Case Study: Sue Baker — Temporary Staff

Sue Baker runs a small retail business. During busy periods (summer and Christmas), she takes on temporary staff — often students looking for work during holidays. This approach means:

She has extra help when she needs it most
She does not have to pay wages during quiet periods
She avoids expensive agency fees by recruiting directly
Students gain valuable work experience

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Match the Contract Types

7.2.4 Impact of Employment Choices on Tax Revenues

Employment choices do not just affect individuals — they have a significant impact on the government's tax revenues. When employment patterns change, the government's finances are affected in several ways.

The Negative Circle

When the economy weakens, a negative circle develops that squeezes government finances from both directions:

Step	What Happens	Effect on Government
1	Employers cut back on staff and make workers redundant	Unemployment increases
2	Fewer people are earning wages	Less income tax and National Insurance collected — government income falls
3	Unemployed people have less money to spend	Less VAT collected on goods and services
4	Unemployed people need financial support from the state	Higher benefit costs (Jobseeker's Allowance, Universal Credit)
5	Government receives less money AND has to spend more	Squeezed from both directions — lower income, higher spending

EXAM ALERT: A common exam question asks you to explain the negative circle or the impact of rising unemployment on government finances. Remember: it is a double hit — tax revenue goes DOWN while benefit spending goes UP. The government is squeezed from both sides.

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True or False: Consumer Choices and Employment

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Flip Cards: Key Terms

Practice Quiz

Summary

Topic	Key Points
Consumer power	Every purchase is a vote; collective choices determine what businesses produce
Business ethics	Ethical behaviour costs more; consumers choosing cheapest options can undermine ethical businesses; Fairtrade helps
Globalisation	Businesses operating worldwide; advantages (lower prices, choice, jobs) vs disadvantages (low wages, poor conditions, unemployment)
Local communities	"Ghost Town UK"; out-of-town shopping, online shopping (37% of sales in 2021), 16 shops closing per day
Enterprise	Financial crisis changed attitudes; Dragons' Den effect; technology lowers barriers; "job for life" no longer common
Work contracts	Part-time (16-28 hrs), zero-hours (3.1% in 2021), temporary/fixed-term contracts
Tax revenues	Negative circle: unemployment rises → less tax → more benefits → government squeezed from both sides

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