Assignment Macroeconomic Analysis
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Added on 2020-04-01
Assignment Macroeconomic Analysis
Added on 2020-04-01
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[MACRO ECONOMIC ANALYSIS]This report analyses two different situations using macro economic analysis. Part A is an analysis of Australian Aviation Industry. Part B is an analysis of the French Macro Economic Policies in the vurrentsituation.[Type the company name]abc
ContentsPart A..........................................................................................................................................................4Q1) Economies of Scale..........................................................................................................................4Q2) Market Structure of Australian Airline Industry in 2002-03.............................................................6Part B...........................................................................................................................................................7Q1) Business Cycle.................................................................................................................................7Q2) Depiction of Growth in the AS- AD Model......................................................................................7Q3) Factors of Growth.............................................................................................................................8Q4) Long Term Infrastructure Investment.............................................................................................10Bibliography...............................................................................................................................................11Diagram 1: A Typical Business Cycle.............................................................................................5Diagram 2 Demand Side Illustration of Recession and Expansion.................................................6Diagram 3: Effect of Increased Spending on Infrastructure and Education....................................9YTable 1 France (Nominal ) GDP Growth Rate.............................................................................................5
Part AQ1) Economies of Scale‘Economies of scale’ or economies of mass production are the benefits of mass production. ‘Economies of scale’ refers to the savings in production costs that are accrued because the size ofplant or the size of operations of a firm is large. Economies of scale explain the down sloping part of the long run Average Total Cost Curve. As the size of a plant increases, a number of considerations will, up to a certain point on the cost curve, result in lower average costs of production.[ CITATION Cha09 \l 1033 ] In the diagram given below, the fall in curve up to point N are due to lower average costs.Diagram 1 Long Run Average Total Cost CurveSource: [ CITATION Cha09 \l 1033 ]Increased Specialization: Increased specialization within operations is possible. For example, if Virgin Blue can specialize on gaining competitiveness on certain routes that are most frequently used by leisure travelers of the number of leisure travelers is
sufficiently high. As the size of operations of a firm increases, it is possible to more factors of production that specialize in a single task . This may increase their proficiency and productivity. [ CITATION Cha09 \l 1033 ]Better Utilization of Resources: Large scale production also allows for better utilizationof resources (up to a certain scale of production). For example, a machine capable of producing 100 units of a product per day, may produce only 75 units a day. This refers to the excess capacity in factors of production which may exist due to the smaller demand that smaller firms face. [ CITATION Cha09 \l 1033 ]Large number of passengers implies thatflights will have fewer empty seats. Better Bargaining Capacity in the Factor Market: The large order sizes that are possible due to the higher scale of production increases the bargaining capacity of a firm, especially in the purchase of raw material. Bulk buying helps reduce the unit cost of production. Better utilization of by products: Firms with large sizes tend to have large amounts of by products and could utilize those by products well.[ CITATION Cha09 \l 1033 ]Economies of scale are most important in the following industry:Oligopoly: In an oligopoly, firms need to have economies of scale because oligopoly markets generally tend to have large capital requirements. Examples of such markets are the cellular industry, aviation industry. In such cases, in order to recover costs, economies of scale are important.[ CITATION Cha09 \l 1033 ]Oligopsony: An Oligopsony exists when there are a few large firms competing for the market share and the number of buyers is also limited. Given the limited number of buyers, gaining economies of scale will help increase the profit margin of the firm, leading to an increase in total profits.[ CITATION Org02 \l 1033 ]Monopoly: In a monopoly, the monopolist can increase production to meet demand.[ CITATION Cha09 \l 1033 ] However, the best production curve is where the costs are minimal in the long run.
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