Title: Effects of Unemployment | ROM Economics
Headings: Effects of Unemployment
Effects of Unemployment
What is unemployment?
What are its effects?
Key terms

Content: Therefore spending on most goods and services will fall. As a result, firms will experience lower sales revenue and will likely see a fall in profits. Increase in demand for inferior goods – There are some goods in an economy that people buy more off when their incomes are lower – these are known as inferior goods. When unemployment increases in an economy more people start buying inferior goods because they have lower incomes. As a result, sellers of inferior goods will see an increase in sales revenue and potentially an increase in profits. Higher training costs – As we have seen, many firms will benefit from lower wage costs as a result of unemployment. However, many firms may also have to spend more resources on training new employees because they have been out of work for so long. Training new employees uses up a firm’s time and resources and as a result most firms will see an increase in employment costs. On people: Lower standard of living – The people who are unemployed will suffer a loss of income and will either have to survive on private savings or on benefits.