...Question Compare & contrast a market economy and a planned economy in terms of the following; provision of public goods, production and consumption of merit and demerit goods, consumer sovereignty and equity in income distribution. (30marks). A market economy is an economic system where the factors of production, are privately owned, consumers and producers are motivated by self interest, the level of competition in the markets is very high and resources are allocated through the price mechanism. The definition is supported by Lipsey (1992) who also state that decisions about resources allocation are made without any central direction but instead as a result of innumerable independent decision taken by individual producers & consumers hence in the market economy the individuals or market makes the ultimate decision in allocation of resources. Whereas the planned economy is one in which the coordination of economic activity so essential to the viability and functioning of a complex social economy is undertaken through administrative means commands, directives, targets and regulations rather than by market mechanism. The dictionary.com defined this economic system as a socialist economic system in which production and distribution of goods and services are controlled by the government and industry is mostly publicly owned. Provision of public goods These are goods that are non rivalry in consumption and non excludability as alluded by Stanlake (2000) He also added...
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...Assignment #4 Private Consumption 2008 – 2009 Vickie Goodman June 9, 2011 Dr. Hermann Bayer ECO 550 Managerial Economics and Globalization Introduciton Private consumption is defined as the value of the consumption goods and services acquired and consumed by households. Due to shifts in the economy, economic conditions have brought about many structural changes in employment, consumption of durable and non-durable goods, and consumer confidence. The automobile industry has also been affected by changes in the economy. After reviewing the analysis for each category stated above this paper will provide a brief overview of what happened to the total amount of goods consumed and economic growth during 2007, 2008, and 2009. Employment We will begin first by discussing what happened to employment. During 2008 and 2009 employment decreased. For the current recession, employment growth first dipped below zero in early 2007. To accurately measure employment rates analysts should begin by looking at second quarter data from 2007 to current data. Growth of employment and hours worked provide important information about the current and likely future pace of overall economic growth. Trends in average hourly earnings provide information about supply and demand conditions in labor markets, which may provide signals about the overall level of resource utilization in the economy. Managers need to be aware of the level of unemployment along with changes in price levels because changes...
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...Consumption and Saving * Intertemporal decision concerns the problem of allocating resources across time. For example, deciding how much to consume today can have implications for how much will be available to consume tomorrow * Model economy consists of a representative household that lives for two periods (the entire duration of the economy). Each household has preferences defined over time-dated output (in the form of consumer goods and services). Let (c1, c2) denote an individual’s lifetime consumption profile, where c1 =‘current’ consumption and c2 = ‘future’ consumption. * Each household is endowed with an exogenous output profile (y1, y2), which constitutes a point in the commodity space. Since output is exogenous, the model constitutes an example of what is called an endowment economy, output (per capita GDP) is not produced; it is simply endowed to households by Nature. Output is also non-storable. * Robinson Crusoe: a representative household has preference for consumption today and tomorrow, goods are non-storable – those not used today will spoil. Nature endow household such that will receive y1 coconuts today and (is expected to yield) y2 coconuts tomorrow. Mathematically: * Choose (c1, c2) to maximize u(c1, c2) subject to: c1 ≤ y1 and c2 ≤ y2. Choose cD1 = y1 and cD2 = y2. Therefore consume entire income in one period, this is assuming it is a closed economy, therefore must live by period-to-period basis, consumption can’t exceed income...
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...Research Work Group Sustainable Consumption & the Sharing Economy Summary of Research Findings and Gap Analysis Topic: How state and local governments are promoting sustainable consumption and engagement in the sharing economy RESEARCH QUESTION(S) • What is the state of knowledge about sustainable consumption? How is this defined or framed? What are the emerging trends? What potential roles can municipal and state governments play? • What barriers have been identified and how might these be overcome? • What strategies, techniques and policies are effective at promoting sustainable consumption through reusing, renting, repairing, and sharing products and materials? • What GHG reduction benefits can be achieved through these activities? • What strategies, techniques, policies and innovative approaches have not yet been tried but have been proposed that are considered to have greatest potential? Note: This research summary builds on the findings of a previous literature review “Changing Consumer Behavior” presented at the 2012 annual Forum meeting. Many of the issues and key findings related to sustainable consumption are addressed there. Sustainable consumption is a rich and nuanced topic for which extensive literature exists. While not the primary focus of this review, the concepts around sustainable consumption provide a context for exploring specific activities of individual consumers such as renting, repairing, reusing...
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...Foundation. [2] The causes of this rise can be traced to many policy reasons that include-increasing role of third party insurers which pay the bills, and the increasing role and scope of government intervention in policy and finances of health care. [3] Experts point out that the main problem is that the final user does not pay the cost anymore and this distorts the market and pricing mechanism of health care. Also, the demographic status of USA is such that the older people are rising in numbers, and they need more care-which raises medical care for the economy. Thus, a combination of wrong policies, and demographic factors, along with the current recession conditions have lead to a galloping of medical care bills for the entire economy. The share of medical care costs in GDP is rising consistently. Indifference Curve Analysis The effects of rising medical care costs are widespread and need a general equilibrium, economy wide modelling. In brief we can understand the impact on an individual using the concepts of microeconomics. We use the tool of indifference curves to show that a rise in medical bills causes ➢ a decline in expenditure on other goods, ➢ a fall in the quantity of medical care sought and ➢ Possible decline in the overall well being of the individual. This analysis assumes away the real life scenario where the...
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...------------------------------------------------- FAIRMODEL Group Project Question #1: The Big One The U.S. Economy is impacted by many factors. Debates have been waged over various causes or potential results of macroeconomic changes in the components of the economy. Using the Fairmodel tool, we can use a comprehensive computer model to predict the impact of a “shock” to the economy. We can analyze the impact of this “shock” on overall Real GDP (Aggregate Expenditure) as well as the impact upon the individual components that make up GDP (i.e. other macroeconomic components and indicators such as bond rates, money supply, etc.) For this analysis, we have created two models of the U.S. economy and will look specifically at the short run case (the first 5 - 8 quarters spanning 2012-2013). First, we created a “baseline” model which assumed that no change in aggregate expenditures occurred. Next, we created a model with a shock to the economy starting in the first quarter of 2012 by reducing state and local government purchases (COS) by $20 billion per quarter. By comparing the resulting data sets for these two scenarios across several variables, we can predict the impact that the “shock” to government spending would have on both the overall economy and the specific components of GDP. The reduction in state and local government spending was spurred by an overall reduction in tax collections. The government decided to reduce spending as a result. What is not initially...
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...Economics Paper Deborah Robinson University of Phoenix ECO365 Brad Bennett March 2, 2009 Introduction The following paper will define economics, microeconomics, and the law of supply and demand. The paper will identify the factors leading to a change in supply and a change in demand, and will also analyze the basis for the trends in consumption patterns discussed in the article “As US Shoppers Retreat, Can World Thrive?” The author of the paper will analyze the article by considering the utility derived from the products mentioned in the mentioned article, and will describe what has occurred to change the demand for, or the supply of, the good or service. The paper will then conclude with the market prices of the products or services. Define Economics Economics is the research and study of income, production, land, investments, taxes, government spending and labor. Economics is a study of how people choose to earn and spend their resources. The choice needs to be made individually by people and countries about what goods and services they can purchase and which ones they need to delay. Resources are scarce and are pushing people and countries to make choices. Economics is studied from two perspectives. The first being governments of nations seek to maximize the production of countries. This perspective is referred to as macroeconomics. The second perspective is of individuals and firms; this perspective is known as microeconomics. Define Microeconomics ...
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...and the three months to the December quarter is 0.7. Australia has a greater GDP growth rate for the year to the December quarter 2011 but a lower growth rate in the fourth quarter. （b）Australia: Final consumption expenditure, the general government increased 1.0 percent and contributed the least of 0.2 to growth. The households increased 0.5 and contribute 0.3 to growth. Thus the final consumption expenditure increased 1.5 and contributed 0.5 to growth. Gross fixed capital formation, the total private decreased 17.4 percent and contributed negative 0.3 to the growth. The total public increased by 0.6 percent and had no contributions to the rate of growth in GDP. Therefore, the gross fixed capital formation decreased by 16.8 and contributed 0.3 to growth in GDP. The exports increased by 2.2 percent and contributed 0.4 to GDP growth. The imports increased by 0.7 percent and contributed negative 0.2 to GDP growth. (Australian, 2012) For Australia, the exports grew at the highest rate while the gross fixed capital formation grew at the lowest rate and the final consumption expenditure contributed the most to growth whereas the import had contribution of 0.2 percent which the least. The United States: Personal consumption expenditure grew 2.1 at the fourth quarter of 2011 and contributed 1.52 to the GDP growth. Gross private domestic investment grew 20.6 and contributed 2.42 to growth. Exports of goods and services increased...
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...Consumer Confidence and Economic Growth Introduction: Consumer confidence is a key driver of economic growth. It is widely considered an economic indicator of household consumption expenditure. Consumers tend to increase consumption when they feel confident about the current and future economic situation of the country and their own financial situation. In economies such as India and the US where personal consumption represents 66% and 71% of GDP respectively, consumer confidence has a particularly significant impact on the economy and can provide critical insight into its growth prospects. In simple terms, increased consumer confidence indicates economic growth in which consumers are spending money, indicating higher consumption. Decreasing consumer confidence implies slowing economic growth, and so consumers are likely to decrease their spending. The idea is that the more confident people feel about the economy and their jobs and incomes, the more likely they are to make purchases. Declining consumer confidence is a sign of slowing economic growth and may indicate that the economy is headed into trouble. This study examined the causal link between consumer confidence and economic growth in United States. Some economists, such as Langer (1991), are of the view that consumer confidence can reliably predict future consumer spending and thus, economic growth, while others are more skeptical arguing that “consumers cannot spend confidence” Lieberman (1991). Consumer confidence...
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...Consumerism is the theory that a country that consumed goods and services in large quantities will be better off economically. Consumerism can also be known as the theory that an increasing consumption of goods is economically desirable this means that preoccupation with and an inclination toward the buying of consumer goods. Consumerism can be referred to as a policy that promotes greediness in consumers. Consumerism is also sourced as a movement towards consumer protection that promotes improvement in safety standards and truthful packaging and advertisement. Consumerism has a massive effect on the environment. Because of consumerism countries now days misuse land and resources for personal use, this misuse of land and resources is very bad because the countries take more than they can replace. This is therefore detrimental in the long run because not only the environment but also the people are affected by this. Another effect that consumerism has on the environment is pollution. Pollution is definitely related to consumption or increased consumption. That is, the consumption itself, plus the production and waste of products used in consumption. Automobiles are a major examples of where increased consumption causes pollution. Because automobiles are in demand every single day and because other technological advancements in automobile production has increased, there is a vast amount of resources needed to build or assemble the automobiles, minerals like metal need to be...
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...Blogs on Consumer Behavior By Name Course Toutor University Department Date Consumer Debt Consumer debt gives reference to what consumers owe with regard to services consumed or goods bought on credit this .Business or governments debt cannot be said to fall under consumer debt. This Is debt for the sole purpose of utilization or spending rather than putting it where it will grow. It also comprises goods acquired for utilization apart from that which has been acquired in the form of property that appreciates as time lapses (Fisanick, 2010). Consumer debt is viewed as a way to help boost domestic supply of goods and services. This is based on the rationale that if consumers acquire debt so as to satisfy their immediate demand then there will be pressure for suppliers of goods to avail more of these goods to the consumers. It is speculated that consumers will tend to acquire debt in order to balance out their current income level to their years. This is to say that consumers will acquire much debt earlier on in life while income is a bit low and pay it slowly later on in life while income is assumed or expected to have stabilized. Examples of economies where an increase in consumer debt has resulted in a proportionate increase in the domestic production or growth of the economy are; South Korea where consumer debt has greatly spurred the economy by great leaps (Worsnop, 1996). Common types of consumer debt include; payday loans credit...
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...interest s payments, rents and other forms of earning received in a given period of time. B. Consumption. Consumption means the expenditures made by households on goods and services. Example, consumer durable products like washing machines are consumed immediately after purchase. C. Multiplier Concept. The process of generating income through the circular flow exchanges between the households and firms. Example, We focus on current consumption on such goods as food and household items like washing machines and oven toaster. this is in contract to expenditures on capital goods such as housing which service as prepayments of long-run consumption. D. Savings, the portion of disposable income not spend on consumption of consumer goods but accumulated or invested directly in capital equipment or in paying off a home mortgage, or indirectly through purchase of securities. E. Taste and preferences. Taste and preferences depend on how products satisfy one's desires. A chance in collective attitude can change aggregate taste and preference, and in turn change the consumption level and marginal propensity to consume. Example, a family residing in Ilocos may consume less of every peso of income than a family of the same income level in living in an urbanized area like Makati City or Cebu City. F. Population. Population size also determines consumption needs, and therefore affects consumption expenditures with a given income. example, a decrease in household size with income and other...
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...Journal of International Business Ethics Vol.1 No.1 2008 ESSAY: CONSUMER RIGHTS: A PART OF HUMAN RIGHTS Shaoping Gan Center for Applied Ethics, Chinese Academy of Social Sciences, Beijing, China Abstract: For many ordinary Chinese, assuming obligation and responsibility means almost the same as having ethics and morality. Therefore, when talking about consumer ethics, people first think about consumers’ obligation to strive for the virtue of frugality. However, in today’s world, especially after the opening up and reform of China’s economy, consumers have more courage to safeguard their rights as a result of rising consumer awareness. Consumers’ newfound courage showcases the change of people’s values. During a discussion of consumer ethics, we naturally take the protection of consumer interests as the starting point. The shift in research from the examination of frugality to consumer interests reflects the transformation of the Chinese moral mentality from obligation-orientation to right-orientation. Keywords: consumer rights, human rights, consumer ethics SAFEGUARDING CONSUMER RIGHTS, THE FIRST PRIORITY OF CONSUMER ETHICS For many conventional Chinese, assuming obligation and responsibility means almost the same as having ethics and morality. Possessing ethics and morality depends on people’s self-cultivation as they seek to develop virtues, find cause first in their own persons, and strengthen their characters. Such a mentality has a profound impact on the Chinese...
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...the Recent Economic Downturn In 2007, strong growth in the third quarter lead most to believe that a recession had been avoided, however, this proved not to be the case. A decline in GDP growth is the cause of recessions. Typically, there will be a “goldilocks” economy or an irrational exuberance prior to a recession, followed by a market crash. Prior to the 2007 – 2009 recession, the housing market was going up. Everyone “knew” house values could only go up and behaved accordingly; banks lent too much money to consumers bought too much house. Once the market crashed, the stage was set for a recession. Many factors affecting the aggregate demand curve had declines. As mentioned, home equity declined, as well as the stock market. This decrease in wealth decreased consumption and consumer confidence leading to lower spending. As consumers cut back on spending, business confidence also fell with additional decreases in consumption and also investments. Additionally, foreign GDPs were also declining leading to a decrease in exports. The changes in these variables all caused a shift back in the aggregate demand curve, lowering the GDP. Attempting to counteract the recession, the Federal Reserve pumped money into the economy, increasing the nominal money supply. As the value of the dollar decreased, interest rates were kept low, allowing the exchange rate to remain favorable for exports. Additionally the government increased spending by way of stimulus packages for banks, automakers...
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...produced Depends on size of labor force, number of structures and amount of equipment in the economy, and state of technology Policy goal is managing aggregate expenditure to keep economy close to potential output without starting inflation Managers tend to focus on short-run R eal vs. N ominal Terms R eal terms : m easuring expenditures and income with price level held c onstant N ominal terms : m easuring expenditures and income with price level a llowed to vary C omponents o f Aggregate E xpenditure A . A ggregate expenditure: s um of personal consumption, investment, g overnment, and net export expenditures on total amount of real output p roduced B . P ersonal consumption expenditure: s um of durable goods, nondurable g oods, and services Personal Consumption Expenditure and Income A. Keynesian consumption function: assumes that as disposable income increases, consumption spending increases by smaller amount . This concept was introduced by John Maynard Keynes, the father of modern economics in h is book “The General Theory of Employment, Interest, and Money” in 1936. o Marginal propensity to consume (MPC) – is the additional consumption spending generated by an additional amount of real income, assumed to take a value less than 1 Equation: ΔC/ΔYd or ΔC/Δ(Y-TP) is less than 1 Where: C = personal consumption expenditure Y = personal income Yd = disposable income TP = personal taxes o Marginal propensity...
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