Short Term Benefits
1. Microeconomics and macroeconomics both utilize different scales for managing the economy. Microeconomics deals with how everyday companies and families interact with the market to set a balance between the demand and supply price. Macro economics on the other hand deals with the bigger picture of economic activities. It includes the components of taxes, unemployment, economic growth and inflation. Macroeconomics deals with laying policies in which the micro system functions. The areas of concern in this branch include management of the numerous individual economic units which can be very complicated and contradictory considering the varied interest of each microeconomic firm. The government often controls the macroeconomic component which makes it a challenge considering that the people may not be in agreement about various policies. While the macro-economy is concerned with national growth, it can sometimes crush the efforts of the individual company growth.
The microeconomic branch relies on a strong and business supportive role of the macro-economy. Hence, if the technology, infrastructure and political environment are not suitable, the individual firms become susceptible to failure. The micro-economy heavily relies on investment and free flow of information to be successful; these resources can often be a barrier.
2.a. Oil is a very important physical factor of production. Due to oil being a nonrenewable source of energy and its much needed demand, it keeps the oil prices high. We rely on oil heavily for our transportation system, making products to maintain equipment, and for cosmetic needs.
b. The wants and the needs of oil can get confusing when it comes to our use of oil. It all came with the want; we wanted a way to move around faster, we wanted to an easier way to move ourselves and other materials around. But as time went along, and everyone began to switch to more conventional means of transportation, oil production increased, and it became a need for many societies. Food, shelter and clothing are well established needs that cannot exist without oil. As such oil becomes so important it is essentially a need that ensures that all basic needs are met. Many 1st world economies will crumble without oil to help them manufacture the material to build houses, make materials for clothing and food and their transportation to move these necessities into every household.
c. Now that we know how important is to our economy, what would happen if oil runs out. As a non renewable resource, there are already very limited quantities of it. Currently demand is very high and the supply is limited, which keeps the costs of oil high. However if the oil runs out there will be a frantic attempt to secure as much oil as they can by the consumer which will be met by an attempt to limit supply further, keeping prices higher and higher for maximum profits. The human population will again have to rely on less conventional means to run their lives; that is until we have a more reliable way to run our economies. Research and development will be more invested around this time as governments and industries scramble for a more successful and plentiful fuel.
3. $20, 000 in the lottery!!!!!! My options are to travel overseas to Europe with my friends, take business courses or pay off my credit card. I would need to think critically about what I really need to do and what I want to do. I have never been to Europe and that has always been my dream vacation. With this option I would have to choose who to take and where to go given the time of a summer vacation preferably right before college. I could pay off my credit card and be debt free. Taking the business classes would be great preparation right before college and I could even graduate earlier or have time to do internships because I would have already taken some of the courses. I could also do a combination of everything depending on the cost.
b. In considering the above options I would have to think of a more lasting value for the money. I would have to consult with family and listen to their input on what they think is best. I would also think of how I can best help out the family and still have enough money to do what I want to do. I think that the things that will not have a stronger impact might have to be forgone, even though each one of the choices is really appealing.
C. the opportunity cost of opening up a coffee shop is the money that I could have used to go on a vacation, the time I would have spent hanging out with friends instead of marketing and running the shop. It also includes the good night’s sleep I would have had if I didn’t have to worry about making profits at my new company. Coffee has the means to be a profitable company, but only if you have something special to bring to the market, large and plentiful companies such as Starbucks and already ruling the industry, and others such as McDonalds are catching up, it would be tough to compete.
Long term benefits
- Vacation in Europe
- Having an opportunity of a lifetime with my friends
- Visiting various cities in Europe and have a great time.
- Much needed vacation time from home, school and anything familiar.
- Long lasting memories and friendships.
- Making new friends and business connection in another continent
- Taking a business course
- Paying off the costs of an education without having to jungle a full course load a job
- Not having to work the holidays to get enough money to pay for school
- Fulfill a lifelong dream and open a business of my choice.
- Not having to owe back any student loans.
- Pay off credit card
- Get rid of the monthly payments and calls from people wanting to collect their money
- Long term financial security knowing that I do not own anybody money.
- Having the opportunity to use the money I would have spent paying back the credit card on something I need/want like a car.
4. Chinese Dam
a. The factors of production used in the dam include land, labor and capital goods.
b. The needs that are being met by the dam are new homes for the 1.2 million people.
The wants are being met with creating electricity, stopping of the massive floods, which is a threat to the human lives, employment opportunities for the dam workers, reducing coal usage and reduction of environmental pollutants from the bi-products of coal.
c. The impacts of creating the electricity are both positive and negative. In generating the hydro electricity by creating a dam the pluses include reduced flooding, increased supply of electricity and reduction on the reliance of coal for energy. It also includes the generation of jobs for the workers. The downside to producing electricity is that the coal miners and coal factory workers will become unemployed as jobs are moved to the hydro plant. The other downside is that people have to be displaced from their places of origin robbing them of their heritage and history in that place.
d. The opportunity costs of shifting to hydroelectricity is the capital that is spent building the dam, buying generators, moving people and employing people for the project; The man power that could have been used to provide physical resource to other projects.
e. According to the Austalian Embassy in China, the bilateral relationship fosters economic growth and independence. If China’s economy is strengthened then the effect will be positive to Australia as they trade. A newspaper cites that this dam is causing much controversy by displacing millions of people; a move that the Australian government is cautious of.
5.b. The opportunity cost of the first 2000 cars produced is the 9000 tonnes of beef that could have been produced.
c. The opportunity per thousand cars is greatest at B
d. The opportunity cost per thousand tonnes of beef is greatest at D
2. B. The F point is inefficient because you could maximize resources by producing more tonnes of beef and thousands of motor cars given the amount of resources. They can produce more of one good without cutting down the production of another.
d. The G point outside the frontier is not possible because it falls outside the productivity curve; there is no relationship between the productions of goods. In order to be able to produce at this level, one will need more resources.
e. A to E are all efficient points because it shows maximum efficiency and management of resources available. That is the most given limited resources that the company can produce motor cars and beef.
6. 1. The Impact of Chemist Warehouse supply on the Australian pharmacy market has made it the largest supplier of its products. Due to increased mass of production, they are able to offer the goods at a lower price that their competitors; as such driving them out. Warehouse is the largest share market owner and therefore other firms have to compete for increased quality and lower pricing than them.
A. In this graph we see that as demand for Chemist warehouse products increases the supply size of the products increases.
B. The shift to the right of the supply curve results in an increase in quantity supplied at each price. This can come about because Warehouse was able to acquire more capital and resources for production, making them more efficient. With efficiencies and mass production, the company is able to offer more at the same price. This may also come about because there are more sellers on the market for the same product. Prices of the other products in the economy may also be up.
In this graph we see Warehouses competitors supply curve shift to the right. In order to supply the same product quantity, they must do so at a higher price. This is a result of their increased cost of production since they are much smaller than their competitor. This can be a result of decreased expectations in the supply of products by other companies, increased cost of the resources that are needed to produce the medications and finally because prices of other commodities have gone up.
D. Quantity Price
Here we see the demand for Warehouses products shift to the right. This shift might happen because of several reasons such as increased household income that they can spend on the product, consumers prefer their product, there are more people in Australia and therefore demand increases and an increase in the price of goods related to pharmacy products have increased.
An increase in income tax that reduces after income tax reduces the expendable income of the consumer. As a result they have to cut down on the amount of goods and services they used to buy, this shifts the demand curve to the left.
d. The sales of unhealthy white bread however will see a decrease in preference which shifts the demand curve in the opposite direction to left.
E. A drought that causes a decrease supply of wheat to all bakeries because it is an input for making wholegrain bread. At this point the demand for the healthy wheat bread is high but with a low wheat yield, the supply shifts to the left as seen below.
e. A local bakery that sells cakes and coffee is a competition to the existing bakery. With more suppliers of a substitute good the cakes and complementary good coffee causes the supply curve to shift to shift to the right. As people’s preferences become split between the two businesses (decreased demand for the bread), the local might have to reduce price to be able to sell its surplus products. Therefore demand would shift to the left with and shift of supply to the right.
8. The government can handle the large emissions of aluminum by products into the air by:
A. Charging a higher fee for environmental emissions into the air. This will deter companies from neglecting external costs because they would lose profits if they have to pay large sums.
b. The government can give tax break incentives for companies that perform safe emissions of by products. Companies will be motivated to invest in technology that promotes a cleaner air.
9. a. Buying more rice to sell, reducing the price of rice since the costs of acquiring it will be decreased will be a very good decision to consider.
B. Importing from Asia is supported by the fact there is a high elasticity in demand for rice. If more rice from outside can be outsourced, increasing profit margins, then more rice can be sold at a lower price. This will mean that consumers will but more of it since the demand is highly elastic. This will further increase the company’s margins.
10. The advice to increase prices assumes that there is a low elasticity of demand. In this scenario increasing the price will not have an impact on the demand for the product; meaning the store can make up for loses by the increased price. On the other hand, the friend that suggested decreasing prices assumes the demand for the grocery stores products is highly elastic. In this case, decreasing the price leads to an increased demand for the products, meaning the store can sell more unit products and make profits.
Australia-China Relationship Overview. (2011). Retrieved August 20, 2011, from Australian Embassy, China : http://www.china.embassy.gov.au/bjng/relations1.html
Elasticity. (2011). Retrieved August 20, 2011, from SparkNotes: http://www.sparknotes.com/economics/micro/elasticity/section1.html
Osborne, M. (2011, June 29). Mekong dam plans threatening the natural order . Retrieved August 19, 2011, from The Australian : http://www.theaustralian.com.au/news/world/mekong-dam-plans-threatening-the-natural-order/story-e6frg6ux-1226083709322
The Supply Curve. (2010). Retrieved August 20, 2011, from NetMBA Website: http://www.netmba.com/econ/micro/supply/curve/
Webb, M. (2009, September 19). The simple economics of oil . Retrieved August 20, 2011, from Money Week: http://www.moneyweek.com/investments/commodities/the-simple-economics-of-oil