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Report on Australian Economy

   

Added on  2020-02-18

11 Pages1530 Words77 Views
Running head: ECONOMICS FOR BUSINESS Economics for BusinessName of the StudentName of the UniversityAuthor Note

1ECONOMICS FOR BUSINESS Table of ContentsIntroduction:....................................................................................................................................2Stable Equilibrium in an economy (Microeconomic sense):...........................................................2Stable Equilibrium (Macroeconomic Sense):..................................................................................4Stability in the economy of Australia:.............................................................................................6Stabilizing policies of the Australian Economy:.............................................................................81) Automatic Stabilizer:...............................................................................................................82) Discretionary Stabilizer:..........................................................................................................8Conclusion:......................................................................................................................................9References......................................................................................................................................10

2ECONOMICS FOR BUSINESS Introduction: Equilibrium, in terms of economics, refer to the situation in the market, where thedemand forces and the supply forces have reached to a mutually balanced point and both of theforces do not have any incentive to deviate, provided there is no influence of any external force.In this context, a stable equilibrium is defined as the balanced situation, which if deviates, underthe influence of the external factors, comes back to its original equilibrium situation eventually.Explaining this economic concept of stability of equilibrium, the report tries to analyze thecurrent stability conditions prevailing in the Australian economy and discusses whether theeconomy is in stable equilibrium or not (Baumol & Blinder, 2015). Stable Equilibrium in an economy (Microeconomic sense): The demand side in economics represents the consumer behavior and the supply sidereflects the behavior of the producers. When both these sides reach to a mutually agreeingsituation then the market reaches to an equilibrium condition, which can be seen below:

3ECONOMICS FOR BUSINESS Figure 1: Stability in the Equilibrium(Source: As created by the author)The above figure shows that the equilibrium situation occurs at the point of intersectionof the demand and the supply curves. Here, the point of equilibrium is E. At this point, theoptimal price is given by P0 and the optimal quantity demanded is given by Q0. When the price increases from P0 to P1, the demand for the commodity reduces as theexisting buyers buy less and the potential marginal ones, who were initially marginally present,completely leave the market. On the other hand, an increased price attracts new entries in thesupply side of the market, thereby increasing supply and creating an excess supply in the

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