Economics and Business Strategy Report: Australia Economic Analysis

This economics report provides an in-depth analysis of key economic concepts, focusing on the Solow Growth Model and its implications. The report explores the production function within the Solow model, examining its role in economic growth. It delves into the concepts of total average and marginal costs, short-run and long-run costs, and their impact on business strategies. Furthermore, the report examines producer equilibrium in both the short and long run, along with the long-run total cost curve and returns to scale. The report uses Australia as a case study to illustrate these economic principles, discussing how these factors contribute to economic stability and business success. The report concludes by summarizing the various concepts and emphasizing the importance of innovation and strategic planning for sustainable economic growth.

Running head: Economics 0
Economics and Business Strategy
5/17/2019

Economics 1
Contents
Introduction......................................................................................................................................2
Solow Growth Model......................................................................................................................3
Total average and marginal costs....................................................................................................4
Short Run costs................................................................................................................................5
Difference between short-run costs and long-run costs...................................................................6
Long run Producer’s equilibrium.....................................................................................................7
Short run producer’s equilibrium.....................................................................................................8
Long Run total cost curve................................................................................................................9
Returns to scale..............................................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

Economics 2
Introduction
This task is related to the strategy of the economic and business used in the maintenance
of the business to make the business successful. This report includes an explanation of the
country including the growth model called Solow. The Australia country is selected to discuss
the various perspectives of the report. The growth model called Solow is used to analyze the
impact of innovation and the technological progress on the proper growth of country. The
economy is very important for the country and the business runs in the same country. The
country’s economic growth is very important for the process and it includes several business
strategies responsible for the growth (Hatfield-Dodds, et. al., 2015). Economy is very essential
for the country to make a good impact on other countries and makes a better position in the
world. The economic growth is responsible for the successful nature of the country and it makes
a strong position in the world business market.
The economic and technological progress gives the great impact of innovation and
increases the economy of the country. The innovation is very much important for the overall
growth of the country and improves the overall business of the specific country (Van den Berg
and Lewer, 2015) The continuing innovation of the country will be responsible for increasing the
business strategy and the economic strategy that makes the overall business growth stable.
Economic progress is increased by using the innovating process and the country can achieve
overall growth in the market.

Economics 3
Solow Growth Model
The growth model of Solow is a model used for identifies the economy that maintains the
changes occurred in economy of the country and it affects the growth rate of the population, rate
of savings and the technological progress rate. This model totally depends on the economic
growth of the country and maintains the overall position of the country in the business market
(George, et. al., 2015). The Solow growth model includes the production function that affects the
overall production of the company and affects the growth at a high level. Solow’s model is
depending on the long run growth and it includes the following assumptions:
Production function
The production function plays a vital role in managing assumptions. The production
function give as per the linear homogeneous function of the products of the first degree of the
form-
Y= F (K,L)
Y= Output
K= Capital Stock
L= Supply of the labor force
The above-discussed function describes the production function related to the Solow
growth, which is responsible for the better economic growth of the country (Halsmayer, 2014).
This function is neo-classic in nature and it gives the constant returns to be based in the capital
and the other productivities. The production function is given as Y= F (aK, al). By this
production function, the process of the Solow growth can be managed and it becomes possible
regarding the function of products. The production function can be improved by the proper
growth of Australia.

Economics 4

Economics 5
Total average and marginal costs
The economy also includes the total average and marginal costs. This process can
increase the economic growth of a particular country like Australia. In Australia, economic
growth is just to manage the business market in the world and to get stability in economic growth
(Ackerberg, et .al., 2015). The total average costs are equal to the cost divided by many of goods
purchased. The sum of variable costs and fixed costs are also involved in this particular costs and
all this process can be managed by the use of the growth model, which innovates the business,
and the growth of the country like Australia. The time is mainly involved in the average costs
(McCombie and Thiriwall, 2016). The average costs are totally affected by the curve of supply
and the proper component of the demand and supply. The average costs can be expressed by the
common formula, which is described below-
AC=TC/Q
Marginal costs are related to the cost change process. This can be calculated as the
change in total costs that occurred at the time of production changes by one unit. The marginal
costs included the money of production related to the one more unit of any product. This cost is
included as a first derivative of the total cost as related to the quantity (Agasisti and Johnes,
2015). It can be changed with volume. This cost defines the margin of the particular product and
manages the whole process of the cost in Australia and increases the overall economic growth of
Australia as some of the business of Australia cannot manage their marginal costs and affect the
overall economic growth of the market.

Economics 6
Short Run Costs
The short-run costs also play a vital role in maintaining the economy of the country, as
these costs are very much involved in maintaining the proper growth of the organization as per
the economic conditions. The short-run costs give the short-term influence in the process of the
production and these costs are used as a short range of output (Shepherd, 2015). The short-run
costs are the important costs that are connected to the very short-term costs. These costs cannot
be used repeatedly in the business. The examples of short-run costs are the payment of the wages
and the cost of the raw materials. This cost is also used for the better economic growth and
innovation of Australia as Australian business can decline due to the proper innovation so these
costs can increase the innovation aspects in the business companies of Australia (Jacks, 2019).
In the short-run concept, the two inputs are used and among these, two inputs the quantity
of one input is varied and the quantity of other input is fixed. The various factors are used in the
short-run concept as land factors, machinery factors and these factors always remain fixed and
do not varied. The short-run costs include the total fixed cost, total variable cost, and total cost.
This cost is highly used in the process of innovation and in the process of maintaining better
economic growth in the Australia business companies (Rudebusch & Swanson, 2012). Australia
is highly required innovation and needs to achieve better economic growth.

Economics 7
Difference between short-run costs and long-run costs
The costs of short-run and costs of long run both are used in achieving better economic-
growth and maintain the innovation in Australia. Although, Australia is a developed country then
also it needs to achieve better economic-growth and implement the innovation in the country.
The cost of short-run and long run have a big difference that is included in the short- run costs
the fixed and variable both costs and long-run costs only used the fixed costs and the costs
should not be varied. In the long - run the normal price level, wages and other parts are related to
economy state (Poghosyan, 2014).
The identification of cost and production started with a particular period of economists is
known as short-run. The short-run is used in the planning process and it is used in managing the
overall process of the economic and implementing the innovation in the business. The planning
for longer periods is included in the long-run process. These costs are used as the approaches of
time and increase the value of the production (Hornbeck, 2012). The different economic
concepts like supply and demand, input-output costs and several other variables come into the
long run or short run to define the changes occurred in the process of the business. These costs
can make the business process innovation.

Economics 8
Long run Producer’s equilibrium
The long-run producer's equilibrium is also a concept related to economic growth and
innovation in Australia or any other country. The equilibrium is a time on which changes are not
required and this is called a state of rest. If there is no possibility of expanding or contract the
result then the firm is said to be equilibrium. This process can give the maximum profit or
minimum loses. This can make economic growth faster and maintains the economic condition of
all over Australia (Richter and Rubinstein, 2015). The long-run equilibrium is a process related
to the competitive market when the market arises at the time when marginal revenue is equal to
marginal costs. The marginal costs are sometimes same as the average total costs. This
equilibrium can increase the economic growth of the country and make certain changes in the
economic process of Australia.
The producer’s equilibrium occurs when the company achieves maximum profit so that
economic process can be simply maintained. The producer’s equilibrium is related to the
marginal revenue and marginal cost of the production process. The economic growth becomes
stable when the equilibrium state occurs and it maintains the overall economic process of
Australia (Garratt, et. al., 2012). The profit can be increased in two conditions, which are:
(i) MR=MC (ii) MC is rising then MR

Economics 9
Short run producer’s equilibrium
The particular time at which the company can achieve output and varied it from changing
the production factors that are variable to achieve more profits or for minimum loses. The
maximum industry in the environment can be fixed so that no existing firms can leave or no new
firms can enter it. The equilibrium related to the short-run includes marginal revenue and
marginal costs. The marginal analysis helps in understanding the short-run equilibrium (Chen, et.
al., 2012). This equilibrium also helps in maintaining the economic growth of Australia and
maintains the innovations done in the specific country for better achievements.
The total cost-revenue analysis will be helpful in understanding the marginal analysis and
it can be given the proper explanation regarding the short-run producer’s equilibrium (Cooter
and Ulen, 2016). The short-run equilibrium can include some of the assumptions, which are
described below-
 The homogeneous factor of production has been used in all the firms.
 The homogeneous has been used so the curves of SAC are equal
 All of the costs are equal and the same so the uniform cost curves can be attained
easily.
Therefore, it has been analyzed that the short-run producer’s equilibrium can help in
generating better economic growth and attains better innovation in a specific country like
Australia.

Economics 10
Long Run total cost curve
The total cost curve is the best thing to achieve the proper economic growth in Australia
and this helps in achieving the innovative changes in the country so that the business can be
improved. The function of the cost used to show the minimum cost of making a quantity of some
goods. The minimum cost over time is included in the total cost curve, which is the cost function.
In this process, inputs are not fixed (Bilbiie, et. al., 2012). The long run is very different from the
short run in the variability of the factors.
The long-run total cost curve is almost the same as the short-run total cost curve. The
slope started to flatten due to the small quantities of output and for the large quantities; the slope
makes a turn-around. Long-run total cost curve includes three curves which long-run average
cost and long-run marginal cost and long-run total cost curve (Arrow and Kruz, 2013). The
description of long-run average cost and long-run marginal cost, which are described below-
 Long- run average cost
This curve defines the proper relationship among the long-run average cost, which
includes the per-unit cost that involves all the factors of production and this can maintain
the better economic growth by making a proper level of production.
 Long- run marginal cost
This process shows the curve related to the total marginal cost, which changes the long-
run total cost for producing a good, or service that gives the change in the quantity of the
result or output. This also gives the slope of the long-run total cost curve.
These curves define the better economic growth and make proper innovations in
Australia so that the country gets better profits and makes a better position in the business market
of the whole world. It has been analyzed that the long run total cost curve is the most important
process that is lurking behind the scenes.

Economics 11
Returns to scale
This is one of the methods related to the economy of business or country. As per the
information in economic, the scale returns are related to the other concepts that explain the
process of production that increases in the process of the long run. In this process, all inputs are
variables (Wheelock and Wilson, 2012). The returns to scale describe the behavior of the output
that is increased.
There are three types of return to scale, which are increasing scale returns, decreasing the
scale returns , and constant returns to scale. The increasing scale returns arise at the time when
output is increased more than the proportional changes and if output increases less than the
proportional changes then it shows the decreasing returns scale. If the proper results are
increases, the same as the proportional changes then it is called as constant returns to scale. All
three parts of returns to scale is related to the proportional changes and make differences as per
the proportion (Gertler and Karadi, 2013). This can increase the economy of the country and
make the proper economy of the country. Australia achieves better economic growth by using
this theory of returns to scale and maintains the innovations in the business of the country.