RMIT Business & Economic Analysis: Micro/Macro Article Analysis Report

This report provides an analysis of two economics articles, one focusing on microeconomics and the other on macroeconomics. The microeconomic analysis examines the high cost of textbooks, applying the theory of price ceilings and price discrimination, and explores the impact of elasticity of demand on pricing strategies. The macroeconomic analysis discusses the importance of public investment for economic growth, highlighting the role of discretionary fiscal policy and the need for channeling private capital towards public investment. The report references specific articles to support its analysis and provides insights into the economic principles at play in each scenario.

Business and Economic Analysis

Table of Contents
Microeconomic Article..............................................................................................................3
Macroeconomic Article..............................................................................................................5
References..................................................................................................................................6

Microeconomic Article
No Matter What the Supreme Court Decides, Textbooks Will Continue to Be Expensive
Because of captive market, textbook publishers charge remarkably high prices. The
production of textbooks is fairly labour intensive so the cost basis is high. In this context, the
theory of price ceiling is applicable. It results in excess of quantity in demand over quantity
supplied, which creates shortage (McArdle, 2012).
In industries where the cost is high in the upfront production, there is strong drive to utilize
price discrimination i.e. to charge less in markets where, people are price sensitive and more
where money does not matter. Price Discrimination is a pricing technique being utilized by
the monopolists to maintain economic profit. It is considered as the practice of a seller who
charges different prices from different customers for similar product and it is not justified by
cost differences. Majority of consumers paying high prices believed themselves to be ripped
off and want to be allowed to pay actual price (McArdle, 2012). However, firms make money
with some of its customers paying less than average cost but more than marginal cost. It is
not possible to remain in business with all the customers paying less than average costs. In
context of textbook suppliers, the firms separate consumers into market segments on the basis
of price elasticity of demand. Elasticity proves to be beneficial in business decision-making
such as is pricing or marketing of products or services. The price elasticity of demand
measures the sensitivity of the quantity demanded by the consumers to changes in price.
Ed = Percentage change in quantity demanded / Percentage change in price
Considering it ion context of textbook suppliers, elastic demand indicates quantity demand
greater as compared to price where, the consumers are price sensitive or in less income
countries. On the contrary, in developed countries, percentage change in the quantity
demanded is smaller as compared to change in the price and consumers are not sensitive to
the price change and can purchase textbooks in higher rate as well. Through price

discrimination, sellers become able to charge what buyers are willing to pay. It also benefits
such buyers who could not otherwise afford to purchase a product but through price
discrimination, become able to purchase things at reasonable costs (McArdle, 2012).
The concept of importing textbooks to the US from the countries where books are cheaper
undermines the price discrimination concept which keeps textbooks expensive in the US but
cheaper in those countries. Instead no one wants to pay more than others for a similar thing
even if it costs them much. So, the decisions related to the textbook importing might not
make consumers satisfied with their money getting saved, it might make them feel better
regarding the high prices being paid by them.

Macroeconomic Article
Why Public Investment?
The best way to avoid weak economic growth is to channel large pools of savings into
productivity-enhancing public sector investment. Debt-fuelled investment approach leads to
economic growth slowdown and triggers financial crisis. However, public investment cannot
resolve the issue of large demand shortfall; it can also accelerate recovery as well as establish
more sustainable growth patterns across the world. Because of unconventional monetary
policies in some major economies, low yield environment develops making investors
considering high-yield options (Spence, 2015).
It should be ensured that public investments provide returns for private investors. There are
existing models applicable to ports, roads and rail systems as well as royalties system for
intellectual property. It includes expenditure on investment goods usually called
infrastructure which include highways, buildings and bridges such others. GDP does not
include transfer payments from one level of government to another. It means that properly
targeted public investment can enhance economic performance that generates aggregate
demand quickly, enhance growth in productivity by improving the human capital,
encouraging the innovations in technology as well as boosting private sector investment by
increasing the returns (Spence, 2015). In this context, Discretionary fiscal policy is
considered as the utilization of changes in government expenditure or taxes in order to alter
aggregate demand as well as to stabilize the economy. The government can increase
aggregate demand through expansionary fiscal policy and can reduce aggregate demand
through contractionary fiscal policy. So, fiscal policy is utilized by government to combat
inflation. In line to it, the contractionary fiscal policy can also be considered to be effective
against demand-pull inflation. To minimize the expenditure reduces aggregate demand i.e.
negative spending multiplier is applicable (Spence, 2015).

This is because it has been suggested in the article to encourage public investment within the
member countries of G-20 nations. In addition, international financial institutions,
development banks and national governments should search for channelling private capital
towards public investment having suitable returns. It might prove to be a significant step
towards strong and sustainable growth of the global economy.
References
McArdle, M., 2012. No Matter What the Supreme Court Decides, Textbooks Will Continue to
Be Expensive. [Online] Available at: https://www.thedailybeast.com/no-matter-what-the-
supreme-court-decides-textbooks-will-continue-to-be-expensive?ref=scroll [Accessed 29
April 2019].
Spence, M., 2015. Why Public Investment? [Online] Available at:
https://www.cfr.org/blog/why-public-investment [Accessed 29 April 2019].