...Done by:- Ahmed gamal Ezz el-Din G: group 4 S: Managerial economics The degree to which a demand or supply curve reacts to a change in price is the curve's elasticity. Elasticity varies among products because some products may be more essential to the consumer. Products that are necessities are more insensitive to price changes because consumers would continue buying these products despite price increases. Conversely, a price increase of a good or service that is considered less of a necessity will deter more consumers because the opportunity cost of buying the product will become too high. A good or service is considered to be highly elastic if a slight change in price leads to a sharp change in the quantity demanded or supplied. Usually these kinds of products are readily available in the market and a person may not necessarily need them in his or her daily life. On the other hand, an inelastic good or service is one in which changes in price witness only modest changes in the quantity demanded or supplied, if any at all. These goods tend to be things that are more of a necessity to the consumer in his or her daily life. To determine the elasticity of the supply or demand curves, we can use this simple equation: Elasticity = (% change in quantity / % change in price) If elasticity is greater than or equal to one, the curve is considered to be >>>>> Elastic If it is less than one, the curve is called >>>>>...
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...INFLATION Inflation is best defined as a sustained increase in the general price level leading to a fall in the purchasing power or value of money MAIN CAUSES OF INFLATION * Demand-pull inflation: Demand-pull inflation is likely when there is full employment of resources and aggregate demand is increasing at a time when SRAS is inelastic. * Cost-push inflation: Cost-push inflation occurs when firms respond to rising costs, by increasing prices to protect their profit margins. There are many reasons why costs might rise: 1. Component cost- This might be because of a rise in world commodity prices such as oil, copper and agricultural products used in food processing 2. Rising labor costs-caused by wage increases, which are greater than improvements in productivity. Wage 3. Higher indirect taxes imposed by the government –A rise in the specific duty on alcohol and cigarettes, an increase in fuel duties or a rise in the standard rate of Value Added Tax. In the case of food rice demand and cost both are playing role. Inflation is an inevitable part of any economy. It is not always a bad thing though and it is necessary in a healthy economy. All in all, inflation keeps our economy going and the world turning, even if portrayed as a villain. HOW INCREASE IN FOOD PRICE IMPACT ON INFLATION The food price hike has accelerated the general inflation rate in the country. If the food price level rises at an existing rate of 1.31 percent per month and if adequate anti inflationary...
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...is equal to the demand in the market, price and equilibrium quantity. Because demand and supply in the market is interdependent and are constantly changing or shifting, they play a critical role in altering market equilibrium price points and quantity available. Demand shifts of more or less of a product results in a shift of both price and quantity. An increase in demand will shift price up and quantity to the right and a decrease in demand will shift price down and quantity to the left on the demand curve. Supply shifts of more or less of a product affects the equilibrium point by shifting the supply curve to the right, indicating that more availability of a product. This results in a lower price and a higher demand for a product. A shift in the supply curve to the left, indicating there is less availability of a product, which results in a higher price and a decrease in demand of a product. Supply and Demand Curves Microeconomics places emphasis on demand and supply in the marketplace, which normally determines the change of levels in price and factors of individual choices while macroeconomics is focused on economic development and changes in general income. Each change in shift affects equilibrium of price, quantity, and consuming behaviors. Concepts of microeconomics and macroeconomics help to determine factors that affect these shifts in supply and demand, and the result gives a better understanding of the change in price, quantity and consuming behaviors. The...
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...Gas prices need to stay low and remain constant over the course of a year. Whenever gas prices rise so does everything else from groceries to goods. As prices rises families are left with smaller budgets for everything else they require for everyday living. The local economy can be altered by an increase in gas price as well resulting in a slower economy flow. Gas should remain at an average reasonable price based on the local community and average wage. Whenever gas prices rise I notice it the most in common grocery stores. Milk can fluctuate from a dollar to almost 3 times that price. Why are groceries affected by something like gas? Well stores stock goods from all around the country. In order to do that though they have to be transported on big rig trucks. Some one has to pay for the gas used to move a product from say California all the way out here to Arizona for example. The store owners have to find a way to cover the cost of that expense. The usual solution they come to is a rise in prices across the board on products they sell. These price changes are not a flat fixed increase across the board neither. They change on a near daily basis. Certain products from this state may rise in price more so than the products being imported from another state. Now common grocery stores are essential to everyday families. They rely on them for food and a small selection of miscellaneous goods like toilet paper. As the prices here at the storefront rise the pockets of families will...
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...Market Equilibrium is a very important topic people face daily in economy. Understanding how market equilibrium is maintained is essential for business managers. This paper will explain the market equilibrating process. It will include the law of demand and determinants of demand; law of supply and determinants of supply. It will also include examples to better present the topic of surplus and shortage. The market of a certain product is in equilibrium when the amount offered of that product aligns with the amount needed. When demand is higher than what is being offered, businesses increase the offered quantities of their product as well the prices resulting in a decrease on demand. When the offer is higher than demand, businesses promote clearance to reduce inventory. Both scenarios show how companies tend to equilibrate price and quantities in the market. Competition among buyers and among sellers drives the price to the equilibrium price; once there, it remains unless it is subsequently disturbed by changes in demand or supply (McConnell, 2009). The law of demand implies that consumers will buy more of a product at a low price than at a high price. So, other things equal, the relationship between price and quantity demanded is negative or inverse and is graphed as a down-sloping curve. Some determinants of demand include: consumer tastes, the number of buyers in the market, consumer incomes, the prices of related goods, and consumer expectations. The determinants...
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...Crisis Tortillas are an essential or basic nourishment of the Mexican food. In late 2006, the corn cereal with which tortillas are made has soared to their highest levels in 10 years, creating a strong social discontent. By 2007, the price of kilo of tortillas, wafer made from white corn, it came to be located above the 10 pesos ( about 90 cents) after registering an increase of about 11% in 2006 and 70% in the last six years (Reyes Guzman, 2007). The price of tortillas reached by 25 % increase in the City of Mexico, where workers eat one kilogram of this food daily, rich in carbohydrates. In response to the tensions generated by the increase of the tortilla, Mexico's president at the time, Felipe Calderon signed an agreement with producers and traders to try to stabilize its price. So the main question that many people asked is why were these prices soaring? This is just a traditional example of what happens to equilibrium prices when supply falls. As explained before, Tortillas are made from corn, and most of this corn from Mexico is imported from the US. The prices for corn in the US were rising very quickly due to surging demand in the market for ethanol. The Energy Policy Act of 2005 resulted in the Ethanol’s big break which led to an increased use of ethanol. People who produce Ethanol build new facilities and rapidly began to buy lots of corn. The result of this was a rightward shift of the demand curve for corn (Graph 1.1). A rise in the price of corn led to a fall in...
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...Management Department Assignment Cyclical Effects of Inflation in the Economy of Bangladesh Course Name:- Micro Economics Course Number:- 1208 Submitted To Mr. Shah Redwan Chowdhury Assistant Professor Management Studies Jagannath University Submitted By Amity (Group-07) (114922-114940) 6th Batch, Sec:-B Management Studies Jagannath University Sl/No | Name | Roll | Status | 01 | Abul Hasan Emon | 114922 | Absent | 02 | Ashif Manowar Oli | 114924 | Present | 03 | Fatema Tuz Zohora | 114926 | Present | 04 | Tanvin Haque Mitara | 114928 | Present | 05 | Md. Rafiqul Islam | 114930 | Present | 06 | Khandaker Arif Hossain | 114932 | Absent | 07 | Touhidur Rahman Al-Baky | 114934 | Present | 08 | Rajib Sarker | 114936 | Absent | 09 | Bidyut Dey | 114938 | Present | 10 | Md. Farhad Hossain | 114940 | Present | Acknowledgement:- We have taken efforts in this assignment. However, it would not have been possible without the kind support and help of many individuals. We would like to extend our sincere thanks to all of them. We are highly indebted to Mr. Shah Redwan Chowdhury Sir for his guidance and constant supervision as well as for providing necessary information regarding the assignment & also for his support in completing the project. We would...
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...(USA)United States. The world's 2nd largest economically rich country china, is a distant fourth. With oil's stature as a highly demand global product comes the possibility that various and major changes in cost of goods have a very significant impact on the economic of the country. The two basic factors that affect the cost of oil. (December 4, 2014) (Blitzer, December 4, 2014) * demand and supply * market condition Demand of oil The concept of supply and demand is not complicated.as supply falls (or demand rises) the price should go high.as demand falls (or supply rises) the prices reduces.an oil future contract is a agreement that gives the authority to buy oil in barrels at a predetermined price on a predetermined date in the coming future. (al-Naimi, April 20, 2015) Oil scarcity Oil scarcity can be caused by various factors,including technical limitations etc.this resources of oil is scarce when the supply exceeds demand.increasing demand rises pressures on supply of oil and creates scarcity in the market.the world ‘s supply of oil is not unlimited to existing demand and the ability linked to oil scarcity because there are always many factors involved,but they certainly play a role.One issue is a permanent supply shock.a best example might be a earthquake that destroys oil...
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...primarily an agrarian economy. 66% of in Bangladesh people are work in agriculture sector. Nowadays price hike is one of the main concerns of Bangladeshi people. Though their income is not increase as much as need but their expenses are increases day by day. As a result people consume more than their income. And poor people are getting poorer day by day. Government has taken some short-term policies but those are not paying off. In this report we try to understand that why price hike in Bangladesh, what is the reason behind it an, what consequent are arises among Bangladesh people for these unsustainable price hike in consumption goods and what are the initiative measures government can take to at least make the price level sustainable. What is Inflation? Inflation is the rise in general level of prices of goods and services. It can be said in other ways that inflation is the decrease in value of money. It means that • Each dollar can purchase fewer amounts of goods and service then previous. • It reduces the purchasing power of the currency. Inflation does not mean that all prices are increasing, even during period of rapid inflation; some prices may be relatively constant while others are falling. The troublesome aspect of inflation is that prices rise unevenly, some raises sharply, some slowly and some don’t rise at all. The main measure of inflation is the consumer price index. Classification of Inflation [theoretical view]: Economists distinguish between two types...
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...can see from the graph, the price movements in oil from 2002 to 2011 were constantly increased from 2002 to mid of 2006 and it slightly decreased until 2007. Unfortunately, the oil price have a major increased from $55 per barrel to $145, the highest peak price among all these years in 2007 to July 2008, however, it doesn’t last any longer, in 2008 to 2009, the oil price dropped from $145 per barrel to $39 per barrel and this is also a major changes in price among these years. Then, the price of oil started to increase steadily after its major changes in price for the last one year. Demand, in economic terms, shows how much of a product consumers are willing to purchase, at different price points, during a certain time period. After all, we all have limited resources, and we all have to decide what we're willing and able to purchase, and at what price. As an example, let's look at a simple model of the demand for a good – let's say gasoline. If the price of gas is $2.00 per litre, people may be willing and able to purchase 50 litres per week, on average. If the price drops to $1.75 per litre, they may be able to buy 60 litres. At $1.50 per litre, they may be prepared to purchase 75 litres. Note that while some gas usage is essential – driving to work, for example – some use is optional. Therefore, as gas prices drop, people may choose to make more optional trips during weekends, and so on. This figure above illustrates the law of demand: as price falls, the corresponding quantity...
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...When a consumer comes to realizing a need that has to be satisfied finding ways to resolve these desires by purchasing solutions becomes a factor. From the inception of recognition of a problem to the actual purchase decision; the search process, evaluation of alternatives, and information of suppliers/producers make better decision making strategic and engaging. In economics these principles are vital in making purchase decisions benefitting both supplier and consumer. While it is vital for the consumer to purchase, it is equally essential for the supplier to generate goods/services that benefit both parties. When this ‘equilibrium’ can be achieved, impulsive decisions, complications, and negative feedback can be avoided. To create a parallel analogy for the example presented below, Americans have a daily decision to think on: whether to purchase and consume fast food, or to cook a meal at home. While it may be economically encouraging to spend money at a fast food restaurant it is also imperative to take health status into account. Despite both options containing sets of trade-offs, one has to become more appealing to the consumer. The final decision is completely subjective to the consumer’s wants/needs at the moment In the example presented below, a community has to decide between two plowing companies (Kaplan and Berg) for the upcoming winter season. While both companies have positives and incentives in their proposals, one has to take into account the qualitative value...
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...THE ENERGY CRISIS IN PAKISTAN Submitted By GROUP 7 1. Abdul-Rehman (3702) 2. Rehan Hussain (3777) 3. Ubaid-ur-Rehman (3778) 4. Junaid Ghayoor Hussain (3780) 5. Muhammad Ansaar (3824) 6. Abdul Sami khan (3825) ABSTRACT Electricity Crisis in Pakistan is one of the severe challenges the country is facing today. Electricity is essential part of our daily life and its outage has severely affected the economy and overall living of ours. Thousands have lost their jobs, businesses; our daily life has become miserable. Pakistan is currently facing upto 18 hours of electricity outage a day, is expected to face more if not dealt with in time. The purpose of this study is to analyze the nature of this crisis and to propose some short-term as well as long-term solutions to this problem. This study is exploratory in nature. We have done our best to conclude and sketch up some recommendations in the light of identified hurdles in the way of implementing the appropriate solution to our problem. Our study finds some major wholes in our system if they are covered up we can not only overcome the deficiency of electricity in our systems but also we can be able to export it to our neighboring countries. The basic flaws that our study identified are related to circular debt, and the inadequate capacity of our electricity production and distribution systems. Also we emphasized on some prospective alternatives to...
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...The deadly consequences behind Globalization Globalization refers to world marketing for production of goods and services. It could simply be defined as trading around the world. Globalization is considered as the path for economics growth. However people in third world countries are not benefit from globalization and they are the victims of foreign corporations. Globalization does more bad then good because it causes serious issues such as poverty and inequality. People in third world countries are suffering of the huge debts and the enforcement of SAP’s. Children’s health is affected by the removal of food subsidies and food scarcity due to the promotion of exporting goods. Globalization caused third world countries to become heavily in debt. The article, Debt: The New Colonialism states that third world countries have borrowed $2.5 trillion of loans from Northern countries and the World Bank for development. They hope to become modernized and industrialized therefore they spent most of the money on large scale projects and military spending. However these loans did not make their countries better off. People in third world countries received no benefits from the loans because unfortunately, they are the one paying the debts. A UNICEF report states, “Hundreds of thousands of the developing world’s children have given their lives to pay their countries’ debt, and many millions more are still paying the interest with their malnourished minds and bodies”. Third world...
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...of demand to the changes in its determinants. The degree of responsiveness of demand to the change in its determinants is called elasticity of demand. The concept of elasticity of demand plays a crucial role in business-decisions regarding maneuvering of prices with a view to making larger profits. Almost most businessmen are intuitively aware of the elasticity of demand of the goods they make, however, the use of precise estimates of elasticity of demand will add precision to their business decisions. In this paper we will discuss * The various kinds of elasticity of demand * The nature of change and how it affects the decision taking. * How demand decisions in response to price changes vary for different types of goods? * Factors influencing the elasticity of demand INTRODUCTION Governments, business firms, supermarkets, consumers, and law courts need a way to measure how responsive demand is to price changes—for example, will a 10 percent cut in the price of commodity X increase quantity of X demanded a little or a lot? Economists measure the responsiveness of quantity demanded to price changes via a concept called elasticity. Marketers sometimes use estimates of elasticity to decide how to price their products...
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...Management is the property management firm that handles seven apartment complexes in the city of Atlantis. They have over 2,000 two-bedroom apartments and only a 28% vacancy rate, it’s very essential to use the supply and demand curve to determine the equilibrium in the market. It is also important to understand movements along the shift of the demand and the supply curves to determine how the equilibrium is established after the shift in curves. Supply and Demand are the most used words in the world of economics today, according to Colander , D. (2010). Supply and demand is a critical part of microeconomic and macroeconomics and it assist in determining the economy. This is an excellent, clear intro – good level setting and use of reference As for the principles of microeconomic shown in the simulation is supply and demand. In the simulation they wanted to lower the cost of rent in order to lower the percentage of vacant apartments to 15%. This would raise the revenue for the management firm, at one point the employment rate, population and housing demand had increased. Within the simulation macroeconomics included that the government was forced get involved and create a cap of $1550 a month for rent for the two bedroom apartments affordable for the middle class families. The price cap was created only for the purpose of allowing the families the opportunity to have affordable housing in order to live in the city where they work. The housing...
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