Economics: Short and Long Run Demand for Oil, Price Ceiling and Floor, GDP Components, Labor Force and Unemployment

This paper discusses the short and long run demand for oil, price ceiling and floor, GDP components, labor force and unemployment in economics. It covers topics such as micro and macro economics, binding price ceiling and floor, GDP components, labor force, and unemployment rate.

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COURSE NAME
MASTER OF PROFESSIONAL ACCOUNTING
UNIT CODE
MA503
UNIT TITLE
ECONOMICS

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Table of contents
1.0 Introduction..........................................................................................................................3
2.0 Q 1........................................................................................................................................3
3.0 Q 2........................................................................................................................................4
4.0 Q 3........................................................................................................................................4
5.0 Q 4........................................................................................................................................5
6.0 Q 5........................................................................................................................................5
7.0 Q 6........................................................................................................................................6
Reference....................................................................................................................................7

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1.0 Introduction
Economics has two different parts which involves micro economics and the macro
economics. While the micro economics deals with the micro level economics such as the
buyer, seller, market and many more, the macro economics deals with the economics as a
whole. This paper answers few of the questions of economics.
2.0 Q 1
Although, the short run demand for oil is inelastic, the demand in the long run becomes very
elastic. In the short run, the consumers of the market do not have any other choice but to by
oil from the OPEC countries (Bober, 2016). Compared to that, in the long run, other oil
explorers have the opportunity to increase the supply of oil. Apart from that, in the short run
the consumers of the market also have the chance to change their buying pattern. They can
start conserving oil or use oil efficient cars in order to reduce the consumption in the long
run.
Figure 1: The Short run and long run demand for the oil
(Source: Emanuel et al. 2016)
Thus, the demand curve for oil in the short run is steeper than that of long run. Therefore,
when the member of OPEC reduces supply in the short run in order to increase the price, it
increases hugely increasing the overall revenue of the countries. However, in the long run,
the price increases by small margin and due to the elastic nature of demand for oil, the

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revenue for countries go down. Hence, OPEC cannot maintain a high price for oil in the
market.
3.0 Q 2
Price ceiling is a tool used by the government in order to control the price of a product or
service. Binding price ceiling is when the government put the price ceiling below the
equilibrium price of the market. This is binding due to the fact that, at that price, there exists
an excess demand in the market; however, the seller cannot increase the price above the
ceiling (Smith, 2016). For example if the equilibrium price of a cell phone market is $10 and
the government imposes a ceiling of $8, The sellers would not be able to increase the price
more than $8 despite excess demand in the cell phone market.
On the other hand, price floor is a tool used by the government to ensure a minimum price for
the sellers of the market. It is binding when the price floor is imposed above the equilibrium
price of the market (Schmidt, 2017). At that point there will be a shortage of demand;
however, the condition would bind the sellers to reduce the price of the products. For
example, if the equilibrium price of potato is $6 and the government fix the price at $8 this
becomes a binding price floor where the price will not drop more than $8.
4.0 Q 3
Quantity of
soap per hour
total
cost
Fixed
cost
Variabl
e cost
Average
fixed cost
Avergae
variable cost
Average
total cost
margina
l cost
0 2 2 0 #DIV/0! #DIV/0! #DIV/0! 0
1 2.3 2 0.3 2 0.3 2.3 0.3
2 2.5 2 0.5 1 0.25 1.25 0.2
3 3.8 2 1.8
0.6666666
67 0.6
1.2666666
67 1.3
4 4 2 2 0.5 0.5 1 0.2
5 4.2 2 2.2 0.4 0.44 0.84 0.2
6 4.6 2 2.6
0.3333333
33 0.433333333
0.7666666
67 0.4
7 5 2 3
0.2857142
86 0.428571429
0.7142857
14 0.4
8 5.3 2 3.2 0.25 0.4 0.6625 0.3
9 5.6 2 3.6
0.2222222
22 0.4
0.6222222
22 0.3
10 6 2 4 0.2 0.4 0.6 0.4

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Figure 2: The different cost
(Source: Developed by the learner)
5.0 Q 4
a) When the demand for money is high the customers use the money to buy goods and
services from the economy and the demand goes up increasing the price level. On the other
hand, if the supply of money in the economy is lowered less transaction will take place,
demand for the products and services will go down leading to a decrease in price level
(Olsen, 2017).
b) With the increase in money supply, the economy will experience more transaction in the
economy. Demand for the goods and the services will increase and hence the price level will
also increase leading to inflation in the economy.
6.0 Q 5
The Gross Domestic Product (GDP) is the final value of all the products and the services
produced in a fixed geographical are for a definite time period. The GDP is one of the most
important economic indicators related to the performance of an economy. There are four
different component of GDP that gets added up in order to provide the final value of the
goods and the services. First component is the consumption of all goods and services within
the economy. Investment is the second component that takes into account all the investment
expenditure of the customers of the economy for a given period of time (Komlos, 2016).
Third component is the government expenditure which accounts for the entire fund that

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government spends for the economy. Lastly, net export is the total export minus import for a
given period of time.
7.0 Q 6
Labour force
The labour force is the total number of population of the country who are capable to provide
their effort as an input to production of goods or services.
Unemployment rate
Unemployment rate is the ratio between the total numbers of people unemployed in a given
time point to the overall size of the labour force of the economy.
Labour force participation ratio
The labour force participation ratio is the ratio of the total adult population of the economy to
the size of the labour force.
The labour force in this case would be employed + unemployed population of the economy
That means 11.67+ 0.7= 11.74 million.
The unemployment rate in this case would be (Unemployed / Total size of the labour force)
That means 0.7/11.74= 0.059 or 5 percent.
And the labour force participation ratio is the total labour/ total adult population of the
economy
That means 11.74/18.94
= 0.61.

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Reference
Bober, S., (2016). Alternative principles of economics. Routledge.
Emanuel, E. J., Ubel, P. A., Kessler, J. B., Meyer, G., Muller, R. W., Navathe, A. S., ... &
Sen, A. P. (2016). Using behavioral economics to design physician incentives that deliver
high-value care. Annals of internal medicine, 164(2), 114-119.
Komlos, J., (2016). Principles of economics for a post-meltdown world. Springer.
Olsen, J.A., (2017). Principles in health economics and policy. Oxford University Press.
Schmidt, S. (2017). A proposal for more sophisticated normative principles in introductory
economics. The Journal of Economic Education, 48(1), 3-14.
Smith, H.M., (2016). Understanding economics. Routledge.