Financial and Economic Literacy for Managers

Running Head: FINANCIAL AND ECONOMIC LITERACY FOR MANAGERS
FINANCIAL AND ECONOMIC LITERACY FOR MANAGERS
Name of the Student
Name of the University
Author Note

1FINANCIAL AND ECONOMIC LITERACY FOR MANAGERS
Table of Contents
Answer of Question 1.................................................................................................................2
Types of Goods and Price Elasticity of Demand...................................................................2
Determination of Consumption by Type of Goods and Price Elasticity................................3
Answer of Question 2.................................................................................................................4
Three Types of Production and Growth Strategies of Firms.................................................4
Growth and Expansion of Gold Mining Firm........................................................................5
Answer of Question 3.................................................................................................................6
Theory of Fiscal Policy..........................................................................................................6
Fiscal Policy Implemented by UK Government in 2018.......................................................6
Answer of Question 4.................................................................................................................7
Benefits of Globalization and International Trade.................................................................7
Benefits of UK from Globalization and International Trade.................................................9
Answer of Question 5.................................................................................................................9
Financial Performance Analysis............................................................................................9

2FINANCIAL AND ECONOMIC LITERACY FOR MANAGERS
Answer of Question 1
Types of Goods and Price Elasticity of Demand
Goods are generally classified into two categories that are normal goods and inferior
goods. Normal goods are defined as the increase in the income affects the increase in the
demand. It is that good for which the consumption increases with the increase in the income.
This is also known as the necessary goods because it does not refer good’s quality rather
demand’s level for goods relating to the wages decreases or increases. In contrary, inferior
goods are the goods for which the demand decreases as the income increases. As there is the
improvement in the economy and increasing of the wages, the consumers would have rather
more costly alternative than the inferior goods (Evans and Popova 2017). Here inferior refers
to affordability not the quality. Moreover, the other types of goods include luxury goods,
complementary goods, giffen goods and snob goods. Luxury goods are the goods in which
the increase in the income increases the major percentage of increase in the demand.
Complementary goods are the goods that are being used together such as tea and milk.
Substitute goods refer to the alternative goods such as Coca-Cola and Pepsi. Giffen goods are
the goods in which the increase in the price increases the demand. Lastly, the snob goods are
the goods in which the increase in the price encourages the people for buying more of It
(Bridge 2017).
Price elasticity of demand is one of the key concepts that help in indicating the
relationship between the quantity demanded and the price by the consumers in the given
period. It the measure that is being used for showing the elasticity or the responsiveness of
the quantity of the goods that are demanded or the services to the changes in the price, in case
when nothing but there is change in the price. In other words, price elasticity of demand is the
measure of the changes in the demanded quantity or the product being purchased in relation

3FINANCIAL AND ECONOMIC LITERACY FOR MANAGERS
to their changes in price (Evans and Popova 2017). It is one of the most important concepts of
microeconomics. The calculation of price elasticity is done by the help of following formula:
Price Elasticity of Demand= % change in Quantity Demanded of Goods and Services / %
change in Price Level.
Hence, with the help of the price elasticity, the business organizations can predict the
changes in the total revenue with the changes that are predicted in the prices. Moreover, it
helps in charging different prices for the different markets, if there is difference in the
elasticity in the income groups. Moreover, it enables the government for predicting the
taxation policies impact on the products (Huang, Tauras and Chaloupka 2014).
Determination of Consumption by Type of Goods and Price Elasticity
The decisions regarding the consumptions of the items type of the goods and the price
elasticity. The level of price affects the goods and services demand. Moreover, goods and
services types also affect the demand elasticity. Further, the availability of the substitute
goods helps in affecting the demand elasticity of the goods or the services. In addition, the
consumer income level plays the important role in their decisions regarding consumption of
the types of goods and services (Coglianese et al. 2017).
The factors that are responsible for the changes in the price elasticity of the goods are
availability of the substitutes, necessity and time. If there will be more substitutes then the
demand will be more elastic and vice versa. Moreover, if there is something that is required
for the comfort or the survival then people can pay higher prices for it. Lastly, if the prices of
one-product increases then people with some available substitutes would likely to continue
their buying his her daily product (Labandeira, Labeaga and López-Otero 2017).