Difference between Structural and Cyclical Unemployment (Doc)
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Added on 2020-01-21
Difference between Structural and Cyclical Unemployment (Doc)
Added on 2020-01-21
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Question 3a) Explain the difference between accounting and economic profitAccounting profit is defined as the difference between a firm’s total monetary revenue and its total explicit costs. Revenue is what a firm receives after selling its products and services. Explicit costs are thecosts that involve direct monetary payment. This includes wages paid to workers, rent paid to landowner and material costs. Accounting profit is limited to time scope and only considers the costs and revenues at a single period. It is used for income tax and financial performance determination.Economic profit is the difference between the total monetary revenue and total costs.Economic profit is lower than the accounting profit ,for it is associated with the opportunity cost. The life span of the economic profit is longer. It is used to determine market entry, stay or exit by the particular firm.An isocost line is a line that shows the combination of factors of production which can be given a total cost.In the short run expenditure, one factor is fixed therefore its price does not change as the quantity increases .in this the fixed cost is paid regardless of the amount of good produced.for the variable factor the cost will increase as the quantity produced is increased.Economic losses from businesses have the opposite of the profits. Continued economic losses result to bankruptcy. However, this avoided by a firm selling the business to a competitor or securing additional financing to remain operational. Companies facing financial loss may reduce the functional output such as laying off employees and selling their equipment.ElasticityIt refers to the percentage quantity demanded compared to the percentage change in price. It indicates how the amount of demand changes when there is a unit change of price.Unitary It is a point where the value of change of quantity demanded is equal to the value of price.it is where the price elasticity has a value exactly equal to one.InelasticityIt occurs where the value of quantity demanded is less than the price change.e) Explain the law of diminishing marginal returns. Give an example
Law of diminishing demands states that as one input factor is increased in a production process, and holding all other factors constant. With time, the output will start to decrease.An example is a wheat farmer with three acres of land; he also has a quantity of seeds, fertilizer, water, and labor. If the farmer has already decided how much seed, fertilizer, and labor he will be using but he has not decided on how much water to use. As he increases the amount of water, the output of wheat will arise. With increased the production begins to decrease since too much water can hazardous.
Question 5a) Explain the difference between structural and cyclical unemployment and discuss their relation to the current high levels of unemployment currently experienced by a number of European Union member statesStructural unemployment is unemployment caused by shifts in the economy, advancement in technology and lack of the required skills. It mainly occurs due when a labor market is unable to provide jobs to everyone seeking the employment.Cyclical unemployment is unemployment that occurs as result of aggregate demand of the employment being too high that not everyone seeking the employment gets. Cyclical unemployment is caused by decreased demand of a product in the market.Structural and cyclical unemployment highly relates. Structural unemployment is as a result of a long time cyclical unemployment which has continually persisted. This happens in that when economy experiences long time unemployment individuals tend to become frustrated and their skills become obsolete. Also individuals are not willing to obtain skills of producing a product when its demand its low and this brings lack of skilled individuals when the demand of the product rises. When a product demand is high individuals froze the sector with everyone obtaining the skills which cause a cyclical unemployment.b)By utilizing the WS-PS relations explain the impact of an increase in unemployment benefits on the equilibrium level of unemployment in the economy.Unemployment benefits are benefits given by government or union to unemployed person. An increase in unemployment benefits leads to an increase in the rate of unemployment. The equilibrium level of unemployment in the economy is the unemployment rate such that the
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