Economic Principles Assignment (Solution)
Added on 2020-12-29
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ECONOMIC PRINCIPLES
Table of ContentsINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................1Q.1 Elasticity and inelasticity of demand and supply.................................................................1Q.2 Binding price ceiling and binding price floor......................................................................3Q.3 Various measures of cost by completing the table...............................................................4Q.4 Discussion on employment and different type of unemployment and its causes.................5Q.5 Measurement of GDP and its components...........................................................................7Q.6 Graphical presentation of expansionary monetary policy and contractionary monetarypolicy...........................................................................................................................................8CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10APPENDIX....................................................................................................................................11
INTRODUCTIONEconomic principles are considered as standards to elaborate key dynamics of functionsof economy of country (Kilian and Murphy, 2014). Macro and micro economic factors affect theeconomical condition of an organisation are critically evaluated and criticize in this report.Concept of elasticity and in-elasticity of demand are considered with fluctuation of crude oilprices in Australia. Bidding price, selling price and variations are considered in this report. Typeof costs as fixed, variable and total cost are illustrated with example and maximised profitabilitypresented in graphical form to different profitable areas. Major economical problem asunemployment and its reasons also illustrated in this report. Measurement of GDP and itscomponents are explained briefly. Expansionary monetary policy and contractionary monetarypolicy subject to supplied and the interest rates are communicated with diagrams. MAIN BODYQ.1 Elasticity and inelasticity of demand and supplyCrude oil and its elasticityCrude oil is a mixture of naturally occurring hydrocarbons that is refined to make usefulproducts such as gasoline, diesel, kerosene, jet fuel called petrochemicals. It is extracted throughmining and often called 'black gold'. Elasticity is the degree of change in supply and demand ofcrude oil due to change in price (Elasticity of demand in international market, 2012). TheAustralian Institute of petroleum (AIP) analyse that Australia's regional market is Asia-Pacificmarket where crude oil is traded. Elasticity of SupplySupply of crude oil is influenced by many factors such as rate and cost of production, sizeof crude oil reserve, extreme weather, war, seasonal factors. Demand for crude oil depends onnumber of consumers and rate of consumption. As per the last statistical records the supply ofcrude oil in 2016/2017 in Australia was recorded as 8.97 thousand megaliters. These are affectedby income of individual, taxation incentives, level of economic activity, land use pattern, level ofnetwork connectivity. 1
The above graphs shows the price elasticity of crude in Australian market. A discussionwas made on the price fluctuation of crude oil in international market and its impact upon priceand demand in Australia. A theoretical prediction was presented subject to variation in revenuesform sale of crude oil in domestic market and supply of product in Asia pacific and Australianmarket. Policies and regulation was introduced subject to reform the pricing structure of crudeoil in Australia that provided short term and long term benefits to organisations.In Australia, range for both short-run and long-run prices varies between -.022 to-.038. Itimplies that crude oil prices are inelastic in Australia. Price elasticity generally ranges belowzero or above zero but income elasticity lies between 0.25 to 1.5. signifies that income elasticityhas moved from inelastic to unit elastic and relative elastic. Australia is a large exporter ofenergy resources such as oil, coal and gas. So when prices of crude oil increases, it will bring onrevenue as well as affect domestic consumption. Crude oil and its inelasticity of demand2
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