...inflation and type of unemployment are decided upon. Table of Contents 1. Introduction 5 2. The perfectly competitive firm 6 2.1 Market equilibrium 6 2.2 Time periods in Economics 7 2.2.1 Short run 7 2.2.2 Long run 7 2.3 Theory of Costs 8 2.3.1 Fixed cost (FC) 8 2.3.2 Variable cost (VC) 9 2.4 Shut-down decision 9 2.4.1 Short run 9 2.4.2 Long run 10 3. Monopoly market 10 3.1 Output and price level comparison of perfectly competitive and monopoly market 11 3.2 Monopolies in the economy 11 4 Inflation 11 4.1 Calculation of inflation 11 4.2 Inflation types 12 4.2.1 Type of inflation in T&T 13 5. Unemployment 13 5.1 Types of unemployment 13 5.1.1 Cyclical Unemployment 13 5.1.2 Frictional Unemployment 13 5.1.3 Structural Unemployment 14 5.1.4 Classical Unemployment 14 6 Unemployment costs to an economy 14 6.1 Costs to the individual 14 6.2 Costs to society 14 6.3 Costs to country 15 7. Conclusion 15 References 16 Appendices 17 1. Introduction Economics exists in all aspects of society and is defined in many ways. Contemporary economics textbooks have definitions including economics is the study of; the economy; the coordination process; the effects of scarcity; of human behaviour and the science of choice. These concise definitions of economics are seen to be inadequate as Economists are not generally guided by formal definitions but rather by logical or methodological views, resulting from...
Words: 2598 - Pages: 11
...Business Economics II Group Nº in Moodle: Surnames and names: Homework 3 (Due on April 26) Exercise 1: Analyze the specific investment case between the firms Alcoa and Essex. You can find information in the article in Moodle. The extra information found in other sources will be valued (cite the bibliography or source used). In particular, answer the following questions: a. Describe the initial relationship between the two firms and justify it in an economic sense. b. Describe the problematic (time line and more relevant facts) c. Describe the outcome of the case, consider other possible alternatives and analyze them in economic terms. Exercise 2: Soft drink industry case (Using the article in Moodle) Briefly answer: a) What is the prevailing contract in the 80s-90s between CSD and the bottlers? b) According to transaction cost theory…Why did they pass from one contract to another? Did asset specificity increase? b) What is the "fountain channel" distribution? Were there differences between Pepsi and Coke? Why? Exercise 3: A wheel manufacturer is considering to install a production plant adjacent to the car assembly factory of SEAT. The required investment is 240 million Euros and it will allow the wheel manufacturer to produce a total of 10 million wheels over the entire useful life of the production plant. The variable costs of producing each wheel are 66 Euros. The maximum price SEAT is willing to pay is 100 Euros. a) Calculate the rents of...
Words: 377 - Pages: 2
...Student Full Name : Fikreselassie Betelie Geressu Student Number : R1405D135465 Course Code : MBA-608 Course Name : Business Economics Assignment : Assignment I Submission Date : 01-November-2014 Question 1: Since the recent Great Recession of 2007-2009, there has been increasing disillusionment with the free market system. Critically analyze the view that the free market system is the best and only realistic alternative for determining the allocation of resources in an economy. Solution 1: A general slowdown in economic activity, a downturn in the business cycle, a reduction in the amount of goods and services produced and sold—these are all characteristics of a recession. The recent Great Recession which officially lasted from December 2007 to June 2009 has many factors of which the main root problem is the bursting of a huge trillion dollars housing bubbles and loss of confidence by investors and the public in the strength of key financial institutions and markets. One example of this is the housing crisis morphed into a financial crisis since banks held mortgage backed securities and other assets. Irrespective of such seasonal situations, the market should be free for competition and regulate itself only based on the fair and free competition, which sets the best price for the goods and services a buyer pays for depending only on the market supply and demand. Free market system is the best and realistic, which can give the efficient and optimal resource...
Words: 2777 - Pages: 12
...Week 6 You Decide: My Recommendation to the President Business Economics Professor Gary Smith April 10, 2013 Al Quarles III Dear Mr. President, After carefully reviewing the information from my fellow colleagues, I have come up with the following recommendations after listening to each person. Kathy Lee believes that raising taxes and reducing government spending is the way to go but all that will do is discourage businesses, lower motivation of individual workers and overall increase government control. Patricia Lopez thinks the Feds should leave interest rates alone, but strongly sell bonds and raise the bank reserve requirement. Although it is an interesting idea, raising the reserve requirements forces banks to withhold a larger portion of their funds, thereby reducing the money supply. It will ultimately restrict the bankers’ ability to make more loans, and those banks that were already operating just barely above the old reserve requirement will be forced to re-work their existing loans to meet the new restrictions which will lead to eventually raising interest rates. Allison Tanney believes that you should focus on increasing government spending and lower taxes and have the Feds work on buying bonds, raising interest rates and if only necessary, raising the reserve requirement. Increasing government spending can become a problem down the line because the government becomes larger than what it already is. Raymond Burke recommended that you should lower...
Words: 295 - Pages: 2
...Business Economics ABC Complete Kitchens, Inc. will look at the economic factors that may influence the plant’s operations and legal considerations. The organization will focus on the economic considerations before making any long term financial decision or any decision regarding the acquisition of capital. ABC Complete Kitchens Inc. will have a clearer picture as to how this can impact the operations of the new plant. ABC Complete Kitchens’ Inc. will examine two areas within economics, Macroeconomics’ and Microeconomics’ and some of their factors with a section on legal considerations. Macroeconomics The study of total effects of choices that individuals, businesses and governments make on the domestic and global economy . Macroeconomics is one of the most important elements of national policy and used as the foundation if any decision regarding taxation or monetary policy concerns. Decisions regarding the balance of payments and interest rates are related to the overall macroeconomics situation of the country. There are many factors used to described macroeconomics and here are a few; Gross Domestic Product, Unemployment Rates and Price Index. Gross Domestic Product (GDP) The GDP is the market value that recognizes the goods and services produced within a period of time, usually this is over a one year period. The GDP is used as an indicator within macroeconomics to show the country’s standard of living. If a country is showing increased improvement and growth...
Words: 1311 - Pages: 6
...Question 1 Part A: (i): (ii)(iii)(iv): (iii): If the price for the orange set at 6, the market will provide 110 oranges per day while the demand for that will be just 60,so it means that we have surplus of 50 oranges per day. Because the equilibrium price is 5, so when the price increase the market provide larger amount of oranges to make more profit while the number of costumer decrease in order to the price. (it is in the previous diagram) (iv): In this case if the price set at 3, the market will provide just 80 oranges per day but the demand for orange will be 180 because the price is cheap so costumer want to buy more of it, On the other hand sellers don't want to sell orange because if the price will be low, the amount of profit would be low for them. (it is in the previous diagram) (v):In the case of increasing in demand it will affected on price and also quantity of supply, here demand increase by 40 cases so it means that we have shortage of 40 and equilibrium rise to the approximately 108 and price increase to about 5.80. The reason for this action would be several factors, for example increases in population, so number of buyers will be increase or market export this goods to the new country Another reason is change in tastes, for instance some product would be popular for period of time as a result of advertising or fashion and so forth, so it may increase the demand (vi): if government give subsidy the supply curve shift...
Words: 4371 - Pages: 18
...of oil mainly because of two main factors; one being the role played by the country and impact of oil in the world economy are both experiencing a decline. The development of OPEC back in 1960, however, changed the scene of the oil industry to an oligopoly oil industry characterized by cartels. This is an institution characterized by few productive members who control the product price. When it comes to OPEC, the treaty between the groups controls how much oil each company is allowed to produce. Despite the increase in oil prices experienced back in 1970, the price of oil has not shifted much in later years (Yizraeli 4). The demand and the supply of oil in the long run and the short run due to this model would differ depending on some economic factors.  2. Hypothesize the basic short-run and long-run behaviors of the model in the...
Words: 1950 - Pages: 8
...Case Study Business Economics Jimmie C. Tolbert Professor Melton 20 August 2012 Responds to Mr. Burke: As the senior economic advisor to the president, I would have to say that your recommendation of lowering interest rates could potentially have positive effects under the economical principle of short-run. Lowering the interest rates would mean that the money supply in the economic will increase, thereby, giving consumers the opportunity to spend more which, will help to stimulate the demand for goods and services. This will, in turn, signal businesses to increase production of goods and services. In addition, higher production means that more units must be supplied to meet increasing demand. At this point, employers must increase their workforce by at least hiring temporary workers to match output demands, which essentially reduces unemployment rate for the short-run. However, lowering the interest rate could negatively impact those people who depend on saving investments to survive. When the interest rates are low, this also affects the return on investments for CDs, investments such as stocks and, other saving accounts. Furthermore, when interest rates are low, people will not be willing to invest with banks because of low or little ROI. This can further damage the deposit reserve by limited the amount of money the banks can loan at any given period. Respond to Ms. Lee: Maintaining the right amount of taxation is a very...
Words: 510 - Pages: 3
...Chapter 15, Question 14 According to the Bureau of Economic Analysis, one of the major limitations of national income accounts is that it ignores the importance of nonmarket production in the household, for example, meal preparation, cleaning, laundry, and childcare. Therefore, when these activities are ignored in the market, the value of production is overstated due to the decline in nonmarket production. Another limitation is the gray market and illegal activities, such as production and distribution of marijuana or gambling, which can be significant sources of support in economies but are not included. Government services that are not subject to a market test will be worth less than they cost, even though cost is used as a measure of value. Another misleading image of the representative resident’s well being is the unequal distribution of per capita income. In order to provide a better image of the economy, the NIPA has to adjust its account for various environmental considerations to keep our economies on a sustainable development path, replace conventional macroeconomic indicators with measures of welfare, and guarantee that a wide range of environmental and social impacts will be taken into accounts as we make decisions about economic growth or development towards consideration of other forms of well being. Chapter 25, Question 7 Free trade between countries does not exist; however it does exist among the 50 states of the United States because the U.S. Constitution...
Words: 763 - Pages: 4
...Chapter 2-2 Savannah Bodge I. Gross Domestic Product 1. Refers to the steady increase in production of goods and services 2. Compare input and output to find out how well and economy is doing 3. GDP is the total dollar value of all final good and services produces in a country during 1 year A. Components of GDP 1. Consumer spending a. Food b. Clothing c. Housing 2. Business spending d. Buildings e. Equipment f. Inventory 3. Government Spending g. Pay employees h. Buy supplies + other goods and services 4. Exports minus imports into a country B. Comparing of GDP 1. Dollar value of GDP a. Amount of goods and services produces 2. GDP per capita (output per person) i. Divide GDP by the total population is the GDP per capita j. Increase in GDP per capita means the economy is growing k. Decrease in GDP per capita means the economy is struggling II. Labor Activities A. Employment 1. Unemployment rate a. Portion of people in the labor force not working b. Unemployed- looking for work but not working 2. Cause of unemployment c. Reduced demand for goods and services provided by workers B. Productivity 1. Production output relating to unit of input a. Improving capital resources, worker training , and management techniques results in greater output/worker 2. Wages ...
Words: 807 - Pages: 4
...|The Business Environment | | | |Karron Lay | |February 2, 2013 | BUSINESS IN THE ECONOMY To understand how a business affects the economy we must first understand the meaning of what a business is by definition. A business is “an organization or enterprising entity engaged in commercial, industrial or professional activities”. (Investopedia, 2013) A business or firm produces the products or services that consumers need, want, or desire. Most businesses or firms operate for profits, which is “the financial reward that comes from starting and running a business”. (Kelly & McGowen, 2012) When a business is not making a profit they are operating at a loss. This could be due to the amount of funds that a business or firm must cover such as their expenses to produce products or services. If the business or firms expenses are more than the profits, then business or firm is operating at a loss. If a business is running at a loss it could be due to key...
Words: 1602 - Pages: 7
...availability. In foreign-exchange markets, it is a market where exchange rates are not pegged (by government) and thus rise and fall freely though supply and demand for currency. BREAKING DOWN 'Free Market' In simple terms, a free market is a summary term for an array of exchanges that take place in society. Each exchange is a voluntary agreement between two parties who trade in the form of goods and services. In reality, this is the extent to which a free market exists since there will always be government intervention in the form of taxes, price controlsand restrictions that prevent new competitors from entering a market. Just like supply-side economics, free market is a term used to describe a political or ideological viewpoint on policy and is not a field within economics. DEFINITION of 'Capitalism' A system of economics based on the private ownership of capital and production inputs, and on the production of goods and services for profit. The production of goods and services is based on supply and demand in the general market (market economy), rather than through central planning (planned economy). Capitalism is generally characterized by competition between producers. Other facets, such as the participation of government in production and regulation, vary across models of...
Words: 292 - Pages: 2
...Chapter 15, Question #14 Three main limitation to national income accounting that I would like to discuss are; errors in measurement, subcategories that are misrepresented, and how welfare is not measured (EconPort). The gross domestic product, also known as GDP, is the market value of all final goods and services produced within a country in a given period. Errors in measurement come into play because we are unable to accurately figure out the United States gross domestic product numbers due to the Black Market. Also known as the underground economy but commonly referred to as the Black Market, effects a major part of the United Sates GDP but cannot be accurately accounted for nobody knows the overall numbers that the Black Market brings in. Therefore the so called overall GDP for the United States is only half of the real GDP of the nation. Subcategories are interpreted when it comes to the national income accounting. Government spending plays a huge factor but are sometimes not included all the time. Decisions are always made about what is to be included where, but minor discrepancies will always arise. The gross domestic product seems to only measure the market activity and not welfare as well. Situations such as unemployment could come into effect which could lower the nation's spending and eventually lower the GDP which will look like it is based on market value and not on welfare value. Chapter 16 Question #5 Frictional unemployment is important to have in our economy...
Words: 724 - Pages: 3
...Chapter 15, Question 11 "Which component of GDP is the most stable? Look for the smallest change from the year with the smallest contribution to GDP to the year with the "Which is the most volatile as a percent of GDP?" "Ignoring net exports, which component has grown the fastest as a percent of GDP since 1965?" Chapter 15, Question 14 "What are some of the limitations of the national income accounts in how they represent our standard of living?" Chapter 16, Question 5 "Why is frictional unemployment important to have in any economy?" Chapter 16, Question 6 "Explain why hyperinflation has such a devastating impact on economies. Explain what it takes to stop hyperinflation." Chapter 16, Question 11 "Describe the three types of unemployment. What types of government programs would be most effective in combating each type of unemployment?" Chapter 25, Question 7 "Why is there free trade between states in the United States but not necessar- ily between countries?" Chapter 25, Question 11 "Who are the beneficiaries from a large U.S. tariff on French and German wine? Who are the losers?" Chapter 25, Question 14 "Why might protectionist trade barriers not save American jobs or benefit the economy?" Chapter 26, Question 8 "Describe the difference between fixed and flexible exchange rates." Chapter 26, Question 9 "Trace through the reasoning why monetary policy is enhanced by a flexible exchange rate system." Chapter...
Words: 264 - Pages: 2
...Shikha Neupane ID: 32330 Business economics Economics is a branch of social science which deals with study of how fright merchandises and properties are assigned to please apparently infinite requirements and needs. The fundamental theory in economics is that shortage involves that selections be made. Similarly business economics is the branch of applied economics that deals with the idea of relevance to the contemporary business, in order to improve a complete understanding of the supply distribution matters opposite the business organisation and the environment that it functions in. It uses various economic theory and other quantitative methods to scrutinise a business organisation and the issues that influences the enterprise with the labour and its market. Question 1 Business Economics is a useful toolbox for understanding the business environment and making better decisions. Consider you are the managing director of a manufacturing company based in UK; describe the different aspects of the business that you should be looking at from an economics perspective in order to run the company efficiently. Consider both the microeconomics and macroeconomics perspectives. The entire business organisations around the globe have one similar goal and that is to increase the profit. By scrutinising the demand of the clients, supplying good quality and suitable supply, the profit can be maximised. Conversely there are various microeconomic and macroeconomic factors that...
Words: 2142 - Pages: 9
