Elasticities in Economics and Commercial Banks' Money Creation

Economics

Contents
INTRODUCTION...........................................................................................................................................3
MICROECONOMICS.....................................................................................................................................3
QUESTION 1.................................................................................................................................................3
Explain in detail three types of elasticities in economics and how it can be calculated..........................3
(b) Critically evaluate the usefulness of the concept of elasticities.........................................................5
MACROECONOMICS....................................................................................................................................6
QUESTION 3.................................................................................................................................................6
(a) Discuss how commercial banks create money...................................................................................6
Discuss the measures used by the Central Banks to limit this ability......................................................8
CONCLUSION...............................................................................................................................................9
REFERENCES..............................................................................................................................................10

INTRODUCTION
Economics is described as a method or instrument for combining most wants, which are
referred to as a positive, with available budgets, which are referred to as a debit. It's all about
business to maintain a suitable and sustainable balance between the different words. It is one of
the most fundamental economic concepts. Besides that, depending on the circumstance, we have
multiple core concepts of Economics (Anderson, Asche and Garlock, 2019). It has 2 types prior
getting to the principles of economics, Macroeconomics and microeconomics, to be precise. In
this report consist of different questions those categories into macro economics and macro
economics.
MICROECONOMICS
QUESTION 1
Explain in detail three types of elasticities in economics and how it can be calculated
Elasticity is a measurement of a variable's responsiveness to a dependent variable, most
frequently the variation in amount requested in resulting from changes in other parameters,
including pricing. The extent to which people, customers, or manufacturers adjust their desire or
the levels which allow in reaction to pricing or annual income is referred to as price elasticity in
finance and economics. It's mostly used to figure out how much a modification in a product's or
service's pricing affects customer desire.
It is considered to be 'completely' inelastic if elasticity = 0, implying that demand will stay
constant regardless of price. Perfectly inelastic items are unlikely to exist in the actual world.
Whether there was, manufacturers and distributors could pay anything they wanted, and
customers still would have to purchase them. Even air and water, since no one has command
over, come close to being perfectly inelastic goods (Dolfin, Leonida and Outada, 2017).
Price elasticity: The quantity requested for a product is affected through any rise in the
value of commodities, if it's a drop or a rise. Whenever the value of ceiling fans rises, for
instance, the number of fans purchased decreases. The Price Elasticity of Demand is a metric that