Ask a question from expert

Ask now

Elasticities in Economics and Commercial Banks' Money Creation

11 Pages3369 Words360 Views
   

Added on  2023-06-18

About This Document

This report discusses the three types of elasticities in economics, including price, income, and cross elasticity, and how commercial banks create money through loans and interest. It also explores the measures used by central banks, such as changing short-term interest rates, modifying reserve requirements, and conducting open market operations, to limit the ability of commercial banks to create money.

Elasticities in Economics and Commercial Banks' Money Creation

   Added on 2023-06-18

BookmarkShareRelated Documents
Economics
Elasticities in Economics and Commercial Banks' Money Creation_1
Elasticities in Economics and Commercial Banks' Money Creation_2
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
Elasticities in Economics and Commercial Banks' Money Creation_3
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
Elasticities in Economics and Commercial Banks' Money Creation_4

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Understanding Price Elasticity of Demand and the Impact of Protectionist Policies on Australian Businesses
|22
|5373
|370

Microeconomics and Macroeconomics: Elasticities, Aggregate Demand and GDP
|7
|1659
|291

Types of Elasticities in Economics and Their Calculation
|14
|3236
|99

Types of Elasticity in the Economy and How to Calculate
|11
|3157
|77

ECON 1102 - Macroeconomics - Increase in Demand
|10
|2413
|34

Market Performance of Nike
|7
|1363
|182