Economics Assignment | Economic Application
Added on - 28 May 2020
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Running head: ECONOMIC APPLICATIONEconomic applicationName of the studentName of the universityAuthor note
1ECONOMIC APPLICATIONQuestion: 1A)i.Managerial economics refers to the uses of the economics theories and concepts for theformulation of the managerial decision making process. Application of the managerialeconomics helps in aligning the economic theories and concepts with that of the practicalsituation of the managers1. Thus, it helps the managers in effectively implementing theeconomic theories and concepts in their organizations.ii.Micro and macro economics are different in terms of the covered fields. This is due tothe reason that, micro economics covers the aspects of an individual and considers all thefactors from the view of the individuals. On the other hand, macro economics refers tothe national and global economical factors. Micro economics include supply and demandof products, business regulations and the determining factors of the pricing strategy2. Onthe other hand, macroeconomics refers to the national economy growth, GDP of thecountries and the impact of the international business including import and export.iii.Elasticity and inelasticity are the key factors that are being considered during theinitiation of the pricing strategies. Elasticity refers to the change in the percentage of thequantity demanded or supplied with the change in the price of the product3. On the otherhand, inelasticity refers to the phenomenon where the percentage change in the quantitydemanded or supplied is less compared to the percentage of change of the price. Themore will be the change in the quantity demanded or supplied of the products in themarket with the change in their products, the more will be the elasticity and vice versa.1Gurgul, Henryk, and Robert Syrek. "The structure of contemporaneous price-volume relationships in financialmarkets."Managerial Economics(2013).2Borio, Claudio. "The financial cycle and macroeconomics: What have we learnt?."Journal of Banking &Finance45 (2014): 182-198.3Gordon, Brett R., Avi Goldfarb, and Yang Li. "Does price elasticity vary with economic growth? A cross-categoryanalysis."Journal of Marketing Research50.1 (2013): 4-23.
2ECONOMIC APPLICATIONiv.One of the potential risks being identified is the stoppage of the earning for thestudent. This is due to the reason that, the student was earning money from his job, whichwill not be available when he will be in school. Thus, the income will get stopped forhim. On the other hand, one of the key benefits to be gained by the student from thedecision will be the enhancement of his skill and qualification4. In addition, the addedskills and qualification that will be gained by him in the school will help to fetch moreearning in the future.B)i.In a market economy, government has no role in the allocation of the resources; rather,the resources are being allocated according to the purchasing power of the consumers.Thus, in the market economy, the product to be produced, the process of production andwhom to offer the products are being determined according to the consumer portfolio.ii.In the case of the congested cities, social cost of using car is more than the private cost.This is due to the reason that, private costs of using car including fuel and maintenancecosts will be similar in every city5. However, the social costs will be more due to thereason that, air pollution, congestion and visual pollution will be more in the congestedcities. Thus, customers in the congested will face more social costs in driving carcompared to the private costs.iii.According to the principle of demand, the more will be the quantity demand for theproduct with the reduction in the price and vice versa. Thus, if the extra tax is beinglevied on the cost of petrol, the price of petrol will get increased, which will in turnreduce the demand for petrol in the market. On the other hand, if the rate of tax on petrolis being reduced, then the cost of petrol will also get reduced and it will increase the4Kurzban, Robert, et al. "An opportunity cost model of subjective effort and task performance."Behavioral andBrain Sciences36.6 (2013): 661-679.5Greenstone, Michael, Elizabeth Kopits, and Ann Wolverton. "Developing a social cost of carbon for US regulatoryanalysis: A methodology and interpretation."Review of Environmental Economics and Policy7.1 (2013): 23-46.