Principles of Economics - Assignment Example

Economics Name Date Course Part 1 Section a The production possibility frontier is a curve that shows the production trade off in an economy or organization where the resources are fixed. This is common when an organization is producing two different types of products. The curve plays an important role in terms of indicating the maximal output that can be produced using fixed resources when dealing with two different types of products (Taussig, 2013). The production possibility curve below indicates that the production of mobile phones and camera that the business intends to produce. Production possibility curve The curve can also be used for the purposes of indicating the efficient as well as the inefficient points of production. According to the curve, the efficient point has been marked A and B. At point A, 8 mobile phones and 10 cameras can be produced. At point B 7 mobile phones and 20 cameras can be produced. The points are efficient since the increase in production of one good leads to the decrease in the production of the other. In a production possibility curve, any point that lies on the production possibility curve is considered efficient (Laibson & List, 2015). However an inefficient point lies in the left and the existing resources allows for the production of more or at least one product without scarifying the other. Increasing the production of the cameras leads to a decrease in the production of the mobile phones. This means that the resources for the production if the mobile phones will have to be sacrificed in order to increase on the production of the cameras. Scarifying the production of the mobile phones in order to produce more cameras is the opportunity cost. This can be highlighted at point C where only 3 mobile phones have to be produced in order to ensure that 30 cameras are produced. In economics, opportunity cost is considered the foregone cist in order to produce another product (Marshall, 2013). The marginal analysis in economics is considered as the process of making the economic decision to produce. According to the marginal analysis, it is better to produce more cameras as compared to the mobile phones. This can be attributed to the ease of production as well as the cost involved in the production process. The possibility of the cameras to be sold within a short period of time and contributing to a higher profitability is also much higher as compared to that of the mobile phone. Section b In economics, equilibrium is considered as the point in which the forces of supply and demand are balanced (Colander, 2016). The equilibrium prices of the camera will be considered as the point in which the supply and demand curve meets. At this point, the supply of the product is not more than the demand. As a result of this, the company will therefore be in a position to makes profits. The supply demand curve below indicates the equilibrium prices of the product. Supply demand curve The demand curve plays an important role in terms of highlighting the relationship between a product and its price (Cosgrove & Olitsky, 2015). This is important to an organization as it may end up affecting the demand of the product. However, the demand curve can be affected by various market forces. The demand curve for the product can be affected by factors which includes complimentary products, market size and customer preference. Changes in demand curve The supply curve on indicates the quantity of goods that the producer can supply to the market (Baumol & Blinder, 2015). The supply curve therefore shows the relationship between the supply of the products in the market and the prices. The market forces can also influence the manufacturing process and hence leading to the changes in the supply curve. The changes in the supply curve can be influence by various factors including cost of production, taxation and the government policies such as the introduction of subsidies. Changes in supply curve Part 2 Section a Table of economic growth in Australia Financial year Economic growth (%) 1986–87 2.6 1987-88 5.8 1988-89 3.9 1989-90 3.5 1990-91 -0.4 1991-92 0.4 1992-93 4.1 1993-94 4.0 1994-95 3.9 1995-96 3.9 1997-98 3.9 1998-99 4.4 1999-2000 5.0 2000-01 3.9 2001-02 1.9 2002-03 3.9 2003-04 3.1 2004-05 4.1 Source, Line graph of economic growth in Australia Table of unemployment rate Year financial year Unemployment rate (%) 1986–87 8.3 1987-88 7.8 1988-89 6.6 1989-90 6.2 1990-91 8.4 1991-92 10.3 1992-93 10.9 1993-94 10.5 1994-95 8.9 1995-96 8.4 1997-98 8.0 1998-99 7.3 1999-2000 6.6 2000-01 6.4 2001-02 6.7 2002-03 6.1 2003-04 5.6 2004-05 5.2 Source, Line graph of unemployment rate in Australia Table of inflation rate in Australia Year Inflation rate (%) 1986 9.05 1987 8.533 1988 7.216 1989 7.534 1990 7.333 1991 3.177 1992 1.012 1993 1.754 1994 1.97 1995 4.628 1997 0.225 1998 0.86 1999 1.483 2000 4.457 2001 4.407 2002 2.982 2003 2.733 2004 2.343 2005 2.692 Source, . Line graph Section b The data collected indicates that Australia has been undergoing a steady economic growth since 1986. The economic growth of the country was only affected between 1990-1992. This can be attributed to the prevailing economic and political factors that were facing the country at the time. The steady growth of the economy in Australia can be attributed to the growth and development of different sectors including the mining sector as well as the agricultural sector (Marshall, 2013). Tourism has also been undergoing a lot of growth and development in the country. On the other hand, the political situation in the country is also unstable. The conditions of doing business are also favorable which has contributed to the growth and development of the economy. Although the economy of the country is growing at a steady rate, it has not been able to achieve double digits economic growth. The country has however been faced with inflation which is varying from one year to the other. The inflation rate is generally low and it has seen below 3% since 2002. The country has also been able to maintain the unemployment rates below 10% which is common in most of the developed countries. The macro economic reasons influence the economic growth, unemployment rates as well as inflation. The country is rich in mineral such as coal and steel which are of a high demand. The increase in the production of the minerals as well as the export trade to other parts of the world such as China has contributed to the growth and development of the economy. This has also led to improved employment opportunities. The use of technology in Australia has also been on the increase. The use technology makes it easy for the business to carry out their transactions. The ease of doing business has also impacted positively on the growth and development of the economy. However, the inflation rate has been high in some years. This can be attributed to the strengthening of the US dollars. The US dollars are used in the international market and its strengthening leads to the weakening of the other currencies and hence resulting to inflation (Taussig, 2013). The country has undergone several political changes which has also affected the macroeconomic factors. However, most of the positive changes in the country including the strengthening of ties with other countries have impacted positively on trade. Section c The overall movement of the economy has a direct impact on the growth and development of businesses. A positive economic growth has positive impacts on the businesses. Economic growth lifts people out of poverty. This therefore enables more people to have purchasing powers. The purchasing powers of the customers in turn are useful in enabling them to purchase the products of the business. It is also important to note that business may be require to import some of the raw material required for manufacturing. The importation process may be cheap if the economy of the country is performing well. The currency of the country can be strengthened in the presence of economic growth (Baumol & Blinder, 2015). This therefore impacts positively on the process of importing raw materials. The business will benefit from the growth and development of the economy. This may lead to the faster growth of the business and it may also lead to expansion. The growth and expansion of the business will generate more profits and hence influencing its ability to compete in the market. Section d The unemployment rate in the country is below 10% which is generally low. This may affect the business in terms of obtaining the required labour to carry out the production process. The low supply of labour in the market increases its demand (Baumol & Blinder, 2015). This in turn leads to an increase in the wages. The business may therefore end up spending more on wages and salaries as highlighted in the graph below. The low levels of inflation have positive impacts on the business. Low levels of inflation leads to low cost of product as the prices of raw materials go down (Baumol & Blinder, 2015). This has a positive impact on the growth and development of the business. The effects of inflation are represented in the graph below. Taussig, F. W., 2013. Principles of economics (Vol. 2). Cosimo, Inc. Laibson, D. and List, J.A., 2015. Principles of (behavioral) economics. American Economic Review, 105(5), pp.385-90. Marshall, A., 2013. Industrial organization, continued. The concentration of specialized industries in particular localities. In Principles of economics (pp. 222-231). Palgrave Macmillan UK. Colander, D., 2016. Tools, Not Rules: Are We Teaching the Wrong Principles of Economics in the Introductory Course & quest. Eastern Economic Journal, 42(2), pp.163-168. Cosgrove, S.B. and Olitsky, N.H., 2015. Knowledge retention, student learning, and blended course work: Evidence from principles of economics courses. Southern Economic Journal, 82(2), pp.556-579. Baumol, W. and Blinder, A., 2015. Microeconomics: Principles and policy. Cengage Learning. Read More