Microeconomics and Macroeconomics: Elasticities, Aggregate Demand and GDP

Economics

Table of Contents
INTRODUCTION.....................................................................................................................................3
MICROECONOMICS...............................................................................................................................3
QUESTION 1...........................................................................................................................................3
A. 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....................................................4
MACROECONOMICS..............................................................................................................................5
A. Explaining each component of the aggregate demand (GDP) with examples .............................5
B. Is GDP a good measure for well-being of a nation. ......................................................................5
Conclusion ............................................................................................................................................6
REFERENCES..........................................................................................................................................6

INTRODUCTION
Economics is described as a method or tool to combine most of the needs that are termed
positive with available budgets, termed direct debit. It's all about business, keeping a fair and
sustainable balance between the different words. It's one of the most basic economic
concepts. In addition, we have several core economics concepts, depending on the
circumstances (Anderson, J. L and et.al., 2019). It has 2 ways to get to the principles of
economics, macroeconomics and microeconomics to be precise. In this report, these
categories in macroeconomics and macroeconomics consist of various questions.
MICROECONOMICS
QUESTION 1
A. Explaining three types of elasticity in economics and how it can be calculated
Elasticity is a measure of a variable's response to a dependent variable, most commonly
the variation in the amount requested due to changes in other parameters, including pricing.
The extent to which people, customers, or manufacturers adjust their desires or the level they
allow in response to pricing or annual income is known in finance and economics as price
elasticity (Boustan, L. and Langan, A., 2019). It is mainly used to find out how changing the
pricing of a product or service affects what customers want.
Price elasticity: The amount of a product in demand is influenced by every increase in the
value of the goods, be it a decrease or an increase. For example, if the value of ceiling fans
increases, the number of fans buy decreases. It is a metric which measures how sensitive a
desired quantity is to a change in value (PED). It can be calculated by using the following
mathematical equation:
PED =% change in quantity demanded% / price change
Income elasticity: The response of the demand curve for a given item to changes in the real
income of the people who bought it, given the same other factors, is known as the income
elasticity of demand. The percentage change in the asking price directly proportional to the
changes in sales is the equation for estimating the income elasticity of demand. It can tell
whether a product is a need or a luxury by looking at the income elasticity of demand
(Carrasco-Gallego, J. A., 2017.).
YED =% Change in Quantity Demanded% / Change in Income