Solving The Problem How To Produce Economics Essay

Solving The Problem How To Produce Economics Essay Introduction Economic is the study of how people satisfy their material needs and wants with the available resources. The primary focuses of economics are distinguished between needs wants, fundamental economic problems. Needs means something we have to have, ex foods, water, clothes. Wants are something we like to have. To produce these things society will face various problems. What to produce, how much to produce, how to produce, for whom to produce, when to produce. Basic economic problems are simply because wants are unlimited resources are limited. Resources can be mainly divided into two, natural economic. So we have to make choices to select wants needs. Its means unlimited wants limited resources force us to make choices. Evaluation of the total (life cycle) costs of alternative solutions to the problem of meeting the requirements of a particular client and choice of the best solution. ANSWERS Q1 Q1.1.Market Economy An economic system in which economic decisions and the pricing of goods and services  are guided solely by the aggregate interactions of a countrys citizens and businesses and there is little government intervention or central planning. This is the opposite of a centrally planned economy,  in which  government decisions  drive most aspects of a countrys economic activity.   The main co- coordinating device is the price decided in the market place through the interaction between demand and supply. Hence this also called free market system because the price is the main device that solves all basic economic problems. This is called price system. It is said that in a market economy, there is an invisible hand operating due to (a) economy is operated by the price system, (b) buyers and sellers respond to price system and accordingly both parties get coordinated, (c) basic economic problems are solved using the price system. In a market economy the basic economic problems are solved and resources are allocated in the following manner. Solving the problem what to produce in which quantity In a market economy this problem is addressed by the private sector entrepreneurs through the decisions made by them. Since they always have the profit motive the commodity and factor prices are considered in decision making. Consumers will create demand in the market by revealing their choice by purchasing goods. Suppliers create the supply force having considered the commodity price, cost and profit. Accordingly they will allocate more resources to produce more of goods with higher profits. Solving the problem how to produce This problem is concerned with the selection of production method by referring to the factor market. Since the private sector is concerned with profits they will select the most cost effective production method. Hence the factor with the lowest price will be applied more in the production in order to minimize the production cost. Solving the problem whom to produce This problem stresses how the economys total output gets distributed among people. This is decided by the distribution of income among people. Income distribution is determined by 2 factors which are (a) how much of factors are owned by the household units, (b) the price of such factors. In the market economies individuals can own resources without being subjected to any limitations. The resource ownership is decided by factors such as merits, skills, inheritance and entrepreneurship. Factor price is decided by the demand and supply of the factors. Therefore this problem is solved by the operation of the factor market. Command economy In command or planned economies, questions on resource allocation are decided by a central authority often the government or a state controlled council. However since centralized decisions require plans set in advance for the desired outcome, these economies are called centrally planned economies. In these economies, economic activities such as what to produce and how much to produce take place as per the commands of the central planners. E.g.: Cuba, North Korea In command economies the basic economic problems are solved and resource allocation is done based on a preset plan. This plan is a descriptive statement that illustrates resources, operation of production activities, and distribution of income among households etc. with a view of achieving a set of selected objectives. Solving the problem what to produce in which quantity It is the central planning authority that decides the resource allocation between consumer and investment goods. Solving the problem of how to produce It is the central planning authority that decides the production method and they set the plan to match inputs. Solving the problem for whom to produce This is concerned with the distribution of income among household units. The only factor that is owned by households is labour. The only means of income available to the household units is salaries and wages. A disparity in income distribution arises to a certain extent due to the differences in quality of labour. Further the quantity of goods and services the households get does not depend solely on their income because government also supplies goods and services at subsidized prices or free of charge. Q.1.2. (a) Market equilibrium price : Rs.51 (b) Market equilibrium quantity : 490 units Q.1.3. Effect of taxes The government imposes taxes on production or sale of commodities which are called indirect taxes. The indirect tax can be either a unit tax or an advoleram tax. If the government imposes an indirect tax on a commodity, it will shift the supply curve leftward by the amount of tax (i.e: if it is a unit tax, the supply curve will shift leftward by the amount of unit tax as supplier is supposed to pay the tax to the government). The effect of taxation will be that it increases the net cost of supplying a particular commodity. Therefore every quantity will be supplied at a higher price than earlier or in other words the quantity supplied at each price will be lesser than earlier. Figure 2 depicts the incidence of an indirect tax. Price S2 S1 C A C P2 B E P1 Qty D P0 0 Q2 Q1 Incidence of tax on the buyers Figure 2 Incidence of a tax on the sellers The division of the tax burden between the buyers and sellers depends on the elasticity of supply and demand. Given the demand conditions, the greater the elasticity of supply, and the greater the incidence of tax resting on the buyers of a commodity. On the other hand the greater the elasticity of demand, and greater the incidence of tax resting on the sellers of a commodity. Figure 2 represents the case of a commodity with relatively elastic supply. When the tax levied on this commodity, the supply curve shifts leftward from S1 to S2, the prices rise from P1 to P2 and the equilibrium quantity reduces from Q1 to Q2. P2 to P0 represents the unit tax. The price increase from P1 to P2 will be the incidence of tax on the buyers. P1 to P0 represents the burden of taxation (per unit) on the sellers. It should be noticed that in this case of elastic supply curve, the incidence of tax on the buyers is greater than that on the sellers. Imposing a tax on commodity typically increase the price paid by the demanders and decrease the price received by the suppliers. This certainly represents a cost to demanders and suppliers, but from the real cost of the tax is the output that has been reduced. The lost output is the social cost of tax. As per Figure 2, the concepts of consumer and producer surplus can be used to value the social cost of tax. The loss in consumers surplus is given by areas C+A and areas E+B represent the loss in producer surplus. Thus the total loss to the consumers and producers of the commodity is the areas C+A+E+B from which C+E is gained by the government as the tax revenue. The rest of the area A+B is known as the Dead Weight Loss of the tax or the excess burden of the tax. Basically, it is the lost value to the consumers and producers due to the reduction in sales of the commodity. Therefore the government does not get any revenue on the reduction in sales of the commodity. From the view point of society, it is a pure loss dead weight loss. Effect of Subsidies Subsidies on production will shift the supply curve to the right until the vertical distance between the two supply curves is equal to the per unit subsidy. When other factors remain constant, this will decrease the price paid by the consumers and increase the price received by the producers. A subsidy will reduce the net cost of supplying a commodity. Therefore every quantity will be supplied at a lower price than earlier or in other words the quantity supplied at each price will be higher than earlier. Figure 3 depicts the effect of subsidies. Figure 3 (b) FV= $100000 r = 12% n = 5 PV= ? PV = FV (1+r)-n = 100000(1+0.12)-5 = $56742.69 (c)FVA= Rs. 500000 n= 15 r= 7% PMT =? ] *Payment 500000= [(1+0.07)15-1)/ 0.07]* Payment Payment = Rs.19897.31 per annum Q2 Q2.1 Imagine that the monopolist produced one more unit than Qm. The consumer surplus from that unit would be the difference between the demand curve and the price for that unit. Now imagine that the monopolist produced all of the additional units it would take to make the efficient quantity. The area of the blue triangle represents the additional surplus that consumers would get if the market were efficient. In other words, the area of the triangle is the loss in consumer surplus that results from the monopolists under-production. It is the true dead weight loss to the society. Therefore it is evident that monopoly is not good from the view point of the society as a whole. A monopoly will be appropriate in a situation where there is a limited supply of a particular commodity which can be considered as a necessity good where it is required to be offered to the public at a reasonable price. In such situations the government will establish a monopoly. This will ensure that the particular product or service meets the required standards. E.g. Railway in Sri Lanka Q.2.3. (a) Labour per day Output per day Marginal Product Variable cost Average Cost Marginal Cost 0 0 0 0 1 5 5 50 10 10 2 12 7 100 8.33 7.14 3 20 8 150 7.5 6.25 4 31 11 200 6.45 4.54 5 40 9 250 6.25 5.56 6 46 6 300 6.52 8.33 7 50 4 350 7 12.5 8 52 2 400 7.69 25 (b) (c ) Q.3.1 Summarizing There are various types of economic systems practiced in the world. Such as Market economy, centrally planed (Controlled) economy, Mixed economy. Each system has various types of advantages disadvantages. Demand supply both determine the price of a good. Demand means willingness capacity to pay. Supply is the quantity of goods that businesses willing to produce or sell. In demand supply analysis the concept of equilibrium plays a major role. This is a concept which opposing dynamic forces cancel each other out. When it comes to theory of the firm economic cost can be divided as, explicit, implicit, fixed variable costs. Explicit costs are the monitory payments it makes to those who supply labor services, material, fuel, transport service etc. Firms implicit costs are the opportunity costs of using its employed resources. Fixed costs are not related directly to production rents, rates etc. they can change but not related to output. Variable costs that do change when we produce more more. There are 4 major types of market structures available. Each market consists of different features. The market means any organization where buyers, sellers, particular good are kept enclosed with each other.

Causes Of The Great Depression Essay -- American History

Between the late 1890’s, after the panic of 1893, and the late 1920’s, the American people led good lives in which most prospered. In the 1920’s the problems that led to the Great Depression were dispersed over a time of maldistribution of wealth, and what was called a bull market. A bull market is a stock market that is based on speculation. Speculation was a system of borrowing money to buy stocks and selling for a profit. Speculation only worked if the stock market was on the rise though. To this day people who have not been properly educated about the Great Depression believe that President Hoover was the cause. The idea that President Herbert Hoover caused the Depression could have arisen from the fact that he was the President at the time the Depression began. However, the people who do not believe that President Hoover was the cause deem the crash of the stock market in 1929 as the real culprit. The truth behind the stock market crash is that it was the ev ent that caused the already unstable economy to go over the limit.   Ã‚  Ã‚  Ã‚  Ã‚  If the president and the stock market crash did not cause the Great Depression, then what did? According to research done on the Great Depression, the causes rest on of different factors, but can be put under two main categories. The responsibility for the Great Depression falls not only on the Stock Market Crash, but also on the maldistribution of wealth, an unstable economy and the wild stock market practices of the 1920’s.   Ã‚  Ã‚  Ã‚  Ã‚  The largest reason for the growing gap between the rich and the working-class people was the sudden increase in manufacturing during the 1920’s. The people of the working class were significantly increasing their output, but their wages only increased slightly. For example, the average worker out put from 1923-1929 increased about 32%, but the average income of the worker only increased about 8% (Gusmorino, Main Causes of the Great Depression). Therefore one may conclude that wages only increased one-fourth the amount production increased. Another amazing feat of the manufacturing increase was that prices for goods stayed the same, therefore the executives in the companies were keeping the mass amounts of profit that were now coming into the company. In fact, one can see that top executives in a certain company increased significantly because their salaries from 1923-1929 rose 64% (Gusmorino, Main Cau... ...cantly, and investors began selling quickly. On the following Tuesday and Wednesday the prices began to stabilize. Then on Thursday, October 24, stock prices fell hard and even the biggest investors gave up on the market and sold their stocks. On the following Tuesday the stock market fell and the market was not able to get back up. This day is forever known as â€Å"Black Tuesday,† and the official start of the Great Depression. The speculation and the resulting stock market crash acted as the trigger for the already unstable United States economy. Due to the maldistribution of wealth and the unstable economy of the 1920’s, the nation headed into a decade of trouble. In response to its economic difficulties, the United States set up even higher trade barriers with other nations, causing more trouble within the nation. Many of the working class lost their jobs, and since these people did not have savings, they were in big trouble. Unemployment grew to 13 million by 1932 as the country quickly spiraled into a catastrophe. The Great Depression had begun due to the maldistribution of wealth, a bad economy based on over confidence, and the irresponsible erratic of the â€Å"bull† stock market.

La Shampoo

La Shampoo is a high quality and more expensive product that has the same marketing strategy over years. From 1989, the line start to slowly decline its sales. The ad agency tried to develop new look campaign, but this solution did nothing for La Shampoo sales and customers didn’t even noticed the change. Caroline, the brand manager wanted a new marketing plan to improve the sales and increase the market share, not to just keep the product remain on retailer’s shelves.She made a marketing meeting with Eric, her product sales manager, and Beth, the representative of the advertisement agency that held La Shampoo account, to discuss their recommendation. 1. Compete on Price : Eric’s solution is to reduce prices permanently as long as long term plan to save major accounts that in danger. Eric argued that the brand will died if we didn’t act very quickly and he saw his solution as a rescuer. Reduce prices is very helpful solution in supporting sales reps and in crease sales volume at least for short time ,but it is not good in building the brand and increasing the brand market share for many reasons .First of all, competing in the price could be very dangerous if other brands lower their prices too specially if they are offering benefits La Shampoo can’t provide, like â€Å"beautiful hair from natural sources†. Secondly , price- driven consumers are not loyal ,so they will go with another brand that is cheaper. 2. Strong Brand Campaign : Beth’s solution is to create new advertisement campaign. This solution seemed better to improve sales ,but there is still no specific changes Beth suggested to repositioning La Shampoo on the customers’ minds.This solution is good if the marketing researches found out the causes of the sales’ decline. Then the new advertisement’s campaign should focus in repairing La Shampoo image and correcting the mistakes that happened in the previous years. So to obtain this so lution marketing researches should be done deeply to better understanding customers . Facts About the Brand: * Brand that has been used mostly between its competitors in the category for two decades must have strong brand equity. * La Shampoo has boor brand management ,because they went from the problem to the solution without auses diagnosis. * Restaging the brand will require a lot of resources. * The alternative proposed by Marni Shin are likely to be too late , the competitor already filled the shelves with such a product . My Recommendations: After doing all researches and surveys needed on the target segment which I think is better to be women between ages of 15 to 50, I suggest two marketing strategies. The first one is for the existing customer base who still buy the product and doesn’t like changes.The other one is for attracting new customer by introducing some values La Shampoo can produce to them. These two plans should consider the following: * * In doing the res earches , should make sure about asking the right question to know the attitude for loyal and former users. * Today’s customers are very sensitive about the values they will get for each dollar they pay. So the advertising campaign must focus on the benefits consumer will have by using the brand such as healthy hair and easy style getting. La Shampoo slogan â€Å"For the Look and Feel of France † is meaningless for the current environment, the people now don’t want to look French. * Some new trails and usages must be found for the brand to communicate them in the new ad campaign. * Keep some product lines without any change for whom already use the product and to keep the base customers. * The new advertisements should support La Shampoo in tapping new customers and protect the current users.

The Boundary Conditions For A Case Study - 779 Words

This paper’s theme is to illustrate the boundary conditions for a case study. The setup of the study provides for a comparison of Nixon administration leadership and current global private industry leadership to discover if similarities exist. Additionally, the study will examine if private-industry leadership would improve governmental leadership or if the opposite is the case. Because the Nixon administration contained judicial judgments for many of the staffers, these will not be examined in the study. Defining the Boundaries of a Case Bounding a research case involves defining the breadth of the subject to study and report (Merriam, 2009). A physical parallel to bounding a problem is property fencing, which defines real estate extents (Merriam, 2009). Therefore, explaining the structure of a star may not require writing about the entire universe (Merriam, 2009). â€Å"A case study is an in-depth description and analysis of a bounded system† (Merriam, 2009, p. 40). According to Merriam, (2009), â€Å"single most defining characteristic of case study research lies in delimiting the object of study, the case† (p. 40). The presidential resignation of Richard Nixon on August 8, 1974, was a first for the United States (Wilson, 1976) and has the leadership potential for categorization as particularistic case study (Merriam, 2009). Therefore, the particularistic means that the â€Å"case study’s focus is on a particular situation, event, program, or phenomenon† (Merriam, 2009,Show MoreRelatedSimulate ABL Wind Characteristics1573 Words   |  7 PagesIn this study, in order to simulate ABL wind characteristics, including mean wind velocity profile, turbulence intensity and the appropriate turbulence spectrum contents, first an empty domain without the low-rise building was modelled. 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