Importance of Economics in Evaluating the Growth of a Nation

This report discusses the importance of economics in evaluating the growth of a nation and formulating strategies for growth. It covers topics such as consumer behavior, elasticity, and inflation.

ECONOMICS
ALTERNATIVE

Table of Contents
INTRODUCTION...........................................................................................................................3
MICROECONOMICS.....................................................................................................................3
Differentiate between the equilibrium position of the ordinalist and the cardinalist approaches
in the theory of consumer behaviour...........................................................................................3
Critically evaluate the usefulness of the concept of elasticities..................................................4
MACROECONOMICS...................................................................................................................6
Define inflation from at least three sources and cite your sources.............................................6
Critically evaluate the costs of inflation......................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
This report revolves around the importance of economics in evaluating the growth of the
nation and helps in formulating and implementing the strategy for the growth of the nation and
growth of it's people. Economics is term which helps in understanding about the production,
consumption and utilisation of goods and services and how it is affecting the growth of nation
and how the utilisation of resources can be made effective and efficient. Economics is further
divided into two parts which is macroeconomics and microeconomics. Macroeconomics helps in
understanding the nature of the economy as a whole and how it can be made better through the
better consumption, production of the goods and services. Microeconomic helps in
understanding the standard of life of the people and the growth of the businesses in the economy
because the business makes a direct impact on the economy as healthy economy helps in
growing the businesses profits and their productivity (Brennan and et. al., 2017). Economy of the
nation helps in providing the better quality of life and it also affects the employment rate,
poverty rate, inflation rate etc. This report helps in understanding the topic such as inflation and
it's impact and the concept of elasticity and the equilibrium position of ordinalist and cardinalist
approaches in the consumer behaviour theory.
MICROECONOMICS
Differentiate between the equilibrium position of the ordinalist and the cardinalist approaches in
the theory of consumer behaviour.
Economic equilibrium helps in understanding the position in which economic forces are
balanced. Economic equilibrium depends on the variables which includes such as price and
quantity which affects the variables which is considered as normal variables such as supply and
demand. The ordinal approach in the consumer equilibrium is explained as the state or at a point
where the consumer has attained or gained the equilibrium by maximizing the satisfaction level
according to the utility of consumer and it is achieved when the consumer has satisfied according
to the income and the prices of the goods and services satisfied according to the consumers. The
ordinal approach for consumer equilibrium has two parts under it which are first order condition
and second order condition (Coscieme and et. al., 2019.). There are some term which helps in
understanding the consumer reaching to the equilibrium such as indifference curve which is
explained as the point at which consumer feels indifference when there are tow kind of products

same in nature and giving the same level of satisfaction to the consumers and how it affects the
behaviour of the consumers towards the consumption of the goods which are same in nature. The
next term in this approach includes indifference map which is explained as the map which is
shown by indifference curve which show the combinations of the different goods for the
consumers. This term helps in understanding that the different products can be utilised by the
consumers according to the need as it would give the same level of satisfaction to consumers.
The next term in this approach is marginal rate of substitution as it helps in substitution the
product without affecting the satisfaction of the consumer. Cardinal approach of the consumer
equilibrium is explained as when the consumer has reach it's maximum satisfaction by utilizing
the money and other expenditures and derives the maximum satisfaction by it. The concept of the
consumer reaching it's equilibrium is differentiated in two ways such as one commodity model in
which the equilibrium is attained by consumer achieves the maximum satisfaction by using the
one commodity and two commodity model is explained when the equilibrium is attained when
the maximum satisfaction is achieved by consumer by using one or more commodity (DeAngelo,
Ferrell and McCannon, 2017). Difference between both cardinal and ordinal is that the cardinal
helps in understanding the satisfaction level of the consumer after using the commodity and it is
countable in number and in ordinal utility satisfaction of the consumer cannot be countable in
numbers. In the cardinal utility it is being measured based on the utils and the ordinal utility is
measured in the terms of the consumer satisfaction. Cardinal utility is considered as less practical
in nature whereas the ordinal utility is considered as the more practical in nature.
Critically evaluate the usefulness of the concept of elasticities
Elasticity in the economics is explained as the concept where the behaviour of the sellers
and buyers in the market is analysed during the market change or any due to any fluctuations in
the market. Elasticity helps in determining the response of the sellers and buyers in the market
and how their response is going to affect the supply and demand of the commodities in the
market. There are different points in the concept of elasticity as there are products which is
considered as inelastic when the consumers are ready to buy the products despite the change in
it's prices in the market (Dumas, 2019). Elasticity of the product very much depends on the
competition among the competitors as the products which are offered by the organisation have to
face the change in the prices of their products due to the market competition. The commodity
when reaches to it's point of elasticity then the sellers and buyers adjust their needs and demands

for the commodity or for the service. Elasticity is considered as one of the vital part of the
economic activities in the market as it is the concept which helps in determining the behaviour of
the sellers and buyers in the market when price of the product or service changes. The concept of
elasticity plays vital role in determining the prices of the commodity and it helps the organisation
in setting the prices of the commodity, as the demand of the commodity or product is of elastic
nature then it will help organisation in setting the prices lower in comparison to the product
which have inelastic demand as it would help organisation helps in setting the high prices.
Concept of elasticity also helps in organisation setting the prices when it comes to the elasticity
of demand and the elasticity of demand is considered during the pricing of the goods. It helps
government in imposing and fixing the taxes on the products which is done by keeping the eye
on the elasticity of the demand. The change in the prices of the commodity makes the impact on
the demand of the commodity and that's why organisation considers the elasticity of demand
before fixing the price of the product (Eenmaa-Dimitrieva and Schmidt-Kessen, 2019). The
elasticity of demand plays a vital role in setting the prices of the commodity as it would directly
affects the profits of the organisation and it can make a impact on the production cost of the
organisation. Elasticity of demand sometimes ignored by the organisation during setting the
prices of the commodity which affects the overall performance of the organisation. Concept of
elasticity is also important when it comes to the international trade as it would helps the
government of the countries to decide the changes in the prices during the import and export or
to devalue their country currency. The concept of elasticity is also important in formulating and
implementing the fiscal policies. The concept of elasticity of demand affects the revenues of the
country and also affects the tax implied on the different commodities of the organisation in the
market. The concept of elasticity also helps in determining the wages for the workers as it helps
in determining the wages needed by the worker because it is very important for the organisation
to determine the wages of the workers as it would help them in producing the products
effectively and efficiently (Fernández-Villaverde and Valencia, 2018). The concept of elasticity
is also considered as the tool or the framework in order to tackle the issues and solve the
economic problems. It plays a crucial role in the price determination of the commodity,
proposing the policies for the country etc. It helps in determining the prices under the perfect and
imperfect competition and the monopoly of the market. Concept of elasticity helps organisation
in determining the prices of the commodity and how it can make the positive impact on the

environment of the business and can help the organisation in achieving it's goals and objectives
effectively and efficiently.
MACROECONOMICS
Define inflation from at least three sources and cite your sources.
Inflation is defined as the rise of the products and services in the economy and also
increase in the cost of the living of the people of nation. Inflation rate helps in analysing the
change in the prices over the annual time in the percentage level. Inflation rate gives wide
description about the price changes in the economy and how it is going to affect the overall
performance of the economy. Inflation is also described as the fall in the value of the money and
it means that the money by which you can buy the product yesterday in the quantity you won't
buy that much today. Inflation is considered as the downfall for the economy and encourages the
government of the nation in order to boost the economy through taking necessary steps. Inflation
is differentiated into two different parts which are mentioned below:
1. Cost-push Inflation
2. Demand-pull Inflation
Cost- push Inflation
It is defined as the situation when the rise in the prices of product is caused due to the rise in the
production cost.
Demand-pull Inflation
It is defined as the situation when the demand of the goods in the market increases due to the
high demand and this results in the increase of the price of product by the organisation.
Inflation in the economy results in the decrease in the purchasing power of the currency which
makes direct impact on the people of the nation or the country. When inflation rate is high,
increase in the cost of living is analysed and the decrease in the economic growth of the country
is analysed and recorded. Inflation is measured by the Wholesale price Index and Consumer
price Index in the most of the countries as the wholesale price index is explained as selling the
goods and services to the wholesalers and retailers who have small businesses and then sold to
the consumers. The consumer price index is explained as the difference between the products
and services which includes the food, medical, education, electronics etc. There are various
factors due to which inflation comes into the play such as the high demand and low supply of the

product and services in the market and the increase in the demand of the consumers due to the
heavy expenditure of the money on the products. High inflation rates shows the decrease in the
growth of the economy and the overall growth of the country. The rise in the money supply in
the economy is also considered as the rise in the inflation. Inflation affects the every economy
globally as it decreases the power of the money and also affects the economic growth and
increase the cost of living of the people.
Critically evaluate the costs of inflation
Inflation is defined as the rise in the prices of goods and products and also affects the
purchasing power of the money and inflation rates goes high when the demand in the market
increase and supply of the product is not according to the demand (Łakomy-Znowik, 2017).
There are cost of inflation which is explained as the fall in the level of investment and also the
fall in the economic growth. There are different points under costs of inflation such as
uncertainty or less investment, Decline in competitiveness, fall in value of the savings, fall in
income, menu costs. There are some points of costs of inflation which are explained below:
Uncertainty
This is explained as the situation where people is confused and uncertain about making their
decisions regarding making their investment and on which the investment should be made. This
type of situation affects the economic growth of the economy and for the long- term.
Menu costs
When the inflation rate rises the prices of the products gradually rises and which increases the
cost of production for the organisation (Obeng-Odoom, 2018).
Fall in incomes
In the time of inflation the wages of the workers fall which results in the overall income and the
increase in the inflation rate also affects income of the people of the country which also affects
the cost of the living of the people.

CONCLUSION
This report concludes about importance of the economic growth in the country and how
the economic growth of the nation can be boost. This report helps in understanding the barrier in
the economic growth of the organisation and how the barriers affect the people of the country
and standard of their life. This report also concludes about the consumer equilibrium and how the
ordinalist and cardinalist position in the consumer behaviour affects the consumer buying and
what is the difference between the cardinal and ordinal approach. Elasticity is considered as the
important factor in formulating and implementing fiscal policies for the country and how it helps
government. This report helps in understanding the importance of the elasticity in the economy
and the role of the elasticity in the business. This report focuses on the inflation and helps in
understanding the inflation and how it affects the economic growth of the country and how it
affects the standard of living and the cost f living of the people of the country. This report also
includes the factors of costs of inflation and how it influences the decrease in the economic
growth of the economy. This report overall concludes about the economic issues faced by the
economy of the different countries.

REFERENCES
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Dumas, L. J., 2019. Economics and Alternative Security: Toward a Peacekeeping International
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Eenmaa-Dimitrieva, H. and Schmidt-Kessen, M. J., 2019. Creating markets in no-trust
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Fernández-Villaverde, J. and Valencia, D. Z., 2018. A practical guide to parallelization in
economics (No. w24561). National Bureau of Economic Research.
Łakomy-Znowik, M., 2017. Public-private partnership as an alternative source of financing of
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Obeng-Odoom, F., 2018. Critique of development economics. The Japanese Political
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Ruder, S. L. and Sanniti, S. R., 2019. Transcending the learned ignorance of predatory
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Online
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Inflation how managed and measured {online} ava through
<https://www.thebalance.com/what-is-inflation-how-it-s-measured-and-managed-
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