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 1....................................................................................................................................2
Goods Types and Price Elasticity of Demand........................................................................2
Decision for Consumption of Item.........................................................................................3
Answer 2....................................................................................................................................3
Production Types and Firms Growth Strategies....................................................................3
Growth and Expansion of Firm in Gold Mining....................................................................5
Answer 3....................................................................................................................................5
Fiscal Policy Theory..............................................................................................................5
Implementation of Fiscal Policy by Government of UK.......................................................6
Answer 4....................................................................................................................................7
Globalization and International Trade Benefits.....................................................................7
UK benefited by Globalization and International Trade........................................................9
Answer 5....................................................................................................................................9
Ratio Analysis......................................................................................................................10
Investment Decision.............................................................................................................11
Reference..................................................................................................................................12

2FINANCIAL AND ECONOMIC LITERACY FOR MANAGERS
Answer 1
a)
Goods Types and Price Elasticity of Demand
The goods, in general are classified into two types normal and the inferior goods. The
goods, which is normal is defined as the rise in the level of income affects the rise in the
demand level. In this type of good, the consumption increases with the rise in the income.
The normal goods is also called necessity goods because in this type of goods, quality is least
important than the level of demand for the goods that decreases with the increase in income
(Varian 2014). However, as opposite to the normal goods is inferior goods, for which there is
decrease in demand with the increase in income. When the economy improves and wages
increases, the consumers would be preferring alternative to the inferior goods that are
costlier. It does not relate to quality rather it relates to affordability. Further, other types of
the goods are complementary goods, luxurious goods, snob goods and giffen goods (Evans,
Evans and Mayo 2017).
Price elasticity of the demand is the concepts, which helps to indicate the relationship
between demand of the quantity and price by consumers in the given time–period. This is the
measure, which shows the responsiveness of the quantity demanded of goods or services to
the changes in price level. It is considered as the vital concept of the microeconomics. Below
is the formula of price elasticity of demand (Coglianese et al. 2017).
Price Elasticity of Demand= %changes in the Quantity demanded/ % changes in the Price
Level.
Therefore, the business organizations, with the price elasticity would be able for
predicting the changes in total revenue with the changes in the price predicted. Further, with
the help of this, different prices can be charged for the different markets, in case of

3FINANCIAL AND ECONOMIC LITERACY FOR MANAGERS
differences in income groups’ elasticity. It helps in enabling the government to predict how
many the policies of taxation impacts the products (Labandeira, Labeaga and López-Otero
2017).
b)
Decision for Consumption of Item
The demand of the goods and services are affected by the price level. It is also
affected by the type of the goods and services that are being sold. If there is availability of the
substitutes then it affects the demand elasticity. Moreover, income level of the consumer
helps in playing important role in consumptions decisions of types of goods and the services.
The factors such as time, necessity as well as substitutes availability are responsible for the
price elasticity changes of goods and services. In case of availability of more substitutes, the
demand of the goods and services will be more elastic and vice-versa. Further, customers
would be willing for paying higher for the goods and services that exerts comforts. Moreover,
increase in the price of one product will result in moving towards substitutes products by the
customers (Möhlmann 2015).
Answer 2
a)
Production Types and Firms Growth Strategies
Production of the utility for individuals is the main purpose of the economic activity.
Production is generally defined as the combination of the various inputs of the materials and
the immaterial inputs in order to make something for output or consumption. This is the
method that is being used to convert input or raw materials into finished products in
manufacturing process. The factors of production such as capital, labor, and raw material are
being purchased by the business organizations to transform the resources into the finished