Breathing Life into Econs

2007-06-25T09:23:00.000+08:00

1a. Explain how equilibrium price is determined. (3marks)
Equilibrium price is the price where the market clears and that quantity demanded meets quantity supplied. There is neither shortage nor surplus. The market is in equilibrium.
This is true when demand curve and supply curve intersects at point E, where it is known as the equilibrium point. At equilibrium point E, equilibrium price is PE. Should price be higher than the equilibrium price, there will be surplus and there will be a downward pressure on price till equilibrium price is reached again. Should price be lower than PE, there will be a shortage and there will be an upward pressure on price till PE is reached again.

1b. With the aid of a diagram, explain how changes in the factors described in
the article affected the price of grapes. (4 mark)

Price of grapes is affected both by changes in demand and supply factors but largely supply factors. Demand for grapes fell whereas supply of grapes increased greatly.
Demand factor:
 Demand for grapes fell as a local winery has collapsed.
Supply factors:
 Supply of grapes increases due to dramatic increase in plantings over the last seven years due to expansion of the industry.
 Successive favourable seasons such as mild summer and minimum rain which meant little damage to the grapes

Graphically, demand curve shifts to the left and supply shifts to the right (students
might want to comment on the extent of the shifts). As a result, equilibrium point
moves from E1 to E2. Price fell from P1 to P2.

2a. Define price elasticity of demand. (1mark )
Price elasticity of demand refers to the responsiveness of quantity demanded of a good to a change in its price.

For Qn (2a) students must give definition in words not the mathematical expression.

2b. Use the concept of price elasticity of demand to explain why the
exceptional crops had not been positive for grape-growers.
(3marks)

The exceptional crops had not been positive for grape-growers because the increase in supply had caused price of grape to fall such that income of grape growers were adversely affected. This is because grapes are the main ingredient for wine and therefore it has an inelastic demand (PED<1). Thus when price of grapes fell, it would not be compensated by a proportionate the increase in quantity demanded for grapes Graphically, when supply of grapes increases greatly, ceteris paribus, there will be a rightward shift of the supply curve from S1 to S2. Price falls greatly from P1 to P2 but quantity demanded for grapes only increase slightly from Q1 to Q2. The gain in revenue ZE2Q2Q1 is much less than the loss in revenue P1P2ZE1.This suggests that there will be a fall in revenue.

3. With the aid of a diagram, explain how the wine market will be affected due to the change in the price of grapes. (3 marks)

Grapes are factor of production of wine. As the price of grapes falls drastically, this means that the cost of production of wine will fall. This implies that the supply of wine will increase. Supply curve of wine shifts to the right from S1 to S2, ceteris paribus. Price of wine falls from P1 to P2 and quantity demanded for wine increases from Q1 to Q2.

4. Imagine that you are the chair person of the Riverland Wine Grape Growers Association. Evaluate 2 methods which you can adopt to prevent a recurrence of the problems described in the passage. (6marks)

Students can suggest ways to reduce the growth of industry: 1. Limit the number of grape growers in the industries by increasing the barrier of entry to limit new potential grapes growers. Examples are such as increasing payment for license fee to the Association, reducing the availability and allocation of land for growing grapes. 2. Increase the cost of production on existing grape farmers. This can be done by increasing the rental cost of land, interest of capitals and wages of labour or even through increasing of agricultural tax or decreasing agricultural subsidies This helps to reduce the supply of grapes Evaluation: May be anti-competitive in nature. May result in opposition by grape farmers Students can also suggest ways to establish new markets for grapes. 1. Embark on R&D to expand the uses of grapes so that increase in demand for grapes may help meet the increase in supply of grapes.

Evaluation: Takes time and incur large research costs 2. Explore new markets overseas to sell the excess supply of Australian grapes. Evaluation: Depends on the success of free trade agreement with partner country. May benefit Australian but not the importing country as price of grapes produced by importing country may be depressed robbing livelihood of farmers in the importing country.

Ride the Wave

2007-04-17T23:13:00.000+08:00

Economics is about making the right choice. Find out what economist think the next big thing is for people to capitalise on and get rich from in this 21 century. Watch this video! You might be making the right choice...

Ride The Wave - These bloopers are hilarious

Survey to win iPod!

2007-04-17T10:45:00.000+08:00

Hi students,
An international survey is being undertaken into students' perceptions of economics. It is being conducted by Andrew Mearman (UWE, Bristol) and Tim Wakeley (Griffith University, Australia) as part of the mini- project funded by Economics Network. The major goal of the survey is to ascertain students' perception of the economics discipline and to identify factors which influence those perceptions so as to improve curriculum design, improve recruitment, retention and overall satisfaction with economics.

All students taking part will have the option to enter a prize draw to win an iPod.The survey can be completed online until 30.08.07. Students wishing to complete the survey should go to http://www.survey.bris.ac.uk/ltsn/perceptions.

Tomatoes!

2007-04-09T23:02:00.000+08:00

Hi all, this is an impromptu attempt to come out with a worksheet to teach price elasticity of demand. YIKES!!
As you guys know that your test on Demand, Supple and Price Elasticity of Demand is just round the corner, I would very much like to start looking at the application and analysis on price elasticity of demand with this article on “Tomatoes”!
Please do me as well as you a favour by reading the following articles and try to answer the following questions. But of course, have your notes with you as you attempt those questions.

NB: You are strongly encouraged to download the article so that we can discuss in class.

Tomatoes: A star is grown
A national advertising campaign is set to begin promoting the humble fruit's virtues.
By TOM ZUCCO, Times Staff Writer
Published January 25, 2006

[Times photo: Bill Serne]
John M. Jack oversees tomatoes as they run through a vat of chlorinated water to be cleaned and sanitized at West Coast Tomato in Palmetto.

It's red, round, a little seedy, and as much as a fruit can be, about to become a national TV star.

For the first time in its 50-year history, the Florida Tomato Committee on Monday will begin a national ad campaign touting the virtues of the Florida tomato.
Four 15-second spots will repeat 600 times over the next 21/2 months on The Food Network, Discovery Health, DIY (Do It Yourself) and other cable channels. The $500,000 campaign is aimed at women age 25 to 54 and was developed by SenaReider, an ad agency based in San Francisco.

The ads are relatively simple, but not dull. One spot shows a picture of a stunningly plump tomato with a female voiceover:
"A whole tomato contains only five grams of carbs, no cholesterol, and was once thought to be an aphrodisiac.
"Fresh, Florida tomatoes.
"You're into that ... aren't you?"

Cute. But to Florida's nearly 125 commercial tomato growers, the messages have a deeper importance.

Virtually all the field-grown tomatoes in the United States sold from December through May each year come from Florida. For the entire year, the state accounts for about 1.5-billion pounds of tomatoes, or 50 percent of all of the domestically produced tomatoes sold in the country.

The 2004-05 hurricane seasons, however, put Florida tomato farmers in a pickle. The storms wiped out many fields and sent the price of tomatoes to triple in some cases. Some restaurants, including Wendy's, were forced to take tomatoes off their menus or make tomatoes available only upon request.

After each hurricane season passed, Florida growers replanted quickly and got their shipments into stores. However, this did not bring good news to the growers as prices started to fall. There was a tomato glut in 2004 and again last year. The price sank so low early last year it was cheaper for growers to let their tomatoes die on the vine than to pick, wash and ship them for sale. Farmers wound up donating more than 700,000 pounds of tomatoes, in part to draw attention to their surplus.

This is where the ad campaign comes in. The spots praise the fruit's succulence and health benefits, and also include much-needed handling messages. The ads are also designed to bring retailers into the campaign.

"It takes a little time," Samantha Winters, director of education and promotion for the Tomato Committee, said of the effort to inform the public. "We want people to know prices are coming down, the crop is here, and we're excited about this season.

"The tomato," she said, "is the big hero."

Questions:

Using demand and supply diagram, illustrate how the market for tomatoes was affected when hurricane hit Florida in 2004-05.
Explain why restaurants owners are either taking tomatoes off their menus or only serving upon requests?
Using the concept of price elasticity of demand, explain why the increase in the supply of tomatoes did not bring good news to the growers at all.

Explain the reason behind the Florida Tomato Committee’s decision of launching the ad campaign. How successful do you think this ad campaign will be in helping the tomato growers.

Pepsi vs Coke

2007-04-08T17:42:00.000+08:00

Pepsi vs Coke - The funniest home videos are here

Pepsi Price Surprise

2007-04-08T17:32:00.001+08:00

A price change in Pepsi led to more students drinking Coke.Watch it!

Demand Supply, Groundwater and Public Policy

2007-04-08T17:19:00.001+08:00

This video explains how government's water conservation policies can help to decrease the demand and increase the supply of water in today's world where water is becoming more precious and scarce. Determine how would the demand and supply curves be affected after imposing the water conservation policies are imposed.
Note: the issue of water conservation is very real and urgent! Please do your part to help our Planet Earth. Planet Earth needs our help.

Defending Globalization

2007-04-07T20:24:00.001+08:00

Today I met a lady who takes up multiple jobs. She works as a production line worker on weekdays and a masseur on weekend. Candidly yet poignantly, she told me that life is going to be more and more difficult in the next 5 years as Globalization extends its tentacles further.Ending off our conversation, she expressed hope that her children who are in ITE can survive in today's competitive world. As someone who is supposedly educated and wealthier, I am ashamed to say that I sub-consciously chose to see only the benefits of Globalization.With a rich consumers' mindset, I am only concerned whether goods and services will get cheaper with outsourcing taking place to India, China, Indonesia, Vietnam, Mexico etc . I have forgotten that the poor will be hit the hardest by globaliztion. This is so as these low skilled workers jobs are slowly lost when companies shift their production elsewhere.This leaves people like the lady whom I met jobless. As much as I know the pros and cons about Globalization as an Economics teacher, today's conversation reminded me that all is true and happening around us. They are not just stories from textbooks.....While as much as I see the benefits of globalization, I do hope that more are done to alleviate the plight of the poor.
I accidentally yet coincidentally, I stumbled upon this video.Hope you guys learn something about Globalization!

Dangerous Ideas! Beware!

2007-04-03T22:47:00.000+08:00

While I enjoyed this week's lessons on drawing of demand and supply graphs so far. I have come to notice that students have some dangerous ideas lurking in their minds.

Dangerous idea #1: An increase in Demand, ceteris paribus, will cause Supply to
increase.

This is absolutely something we want to avoid. What you guys actually meant is that an increase in demand will cause quantity supplied to increase. Take a look at the following diagrams.

Fig 1 shows that when demand curve shifts from D to D1, price increases from P1 to P2. Upon seeing a higher price, producers will have more incentive to increase production. This leads to an increase in quantity (supplied) from Q1 to Q2. Now, take a close look at Fig 2. It is actually the same supply seen in Fig1 without the demand curves.

Can you see that there as price increases from P1 to P2, there is an increase in quantity supplied from Q1 to Q2?

Henceforth, once again, an increase in demand, ceteris paribus, will cause quantity supplied to increase.

Dangerous Idea #2: An increase in supply, ceteris paribus, will cause demand to increase.

This dangerous idea is similar to the above. Therefore, the explanation to debunk such dangerous idea is the same as discussed above. (Please try out the explanation yourself). The correct understanding should be an increase in supply, ceteris paribus, will cause quantity demanded to increase.

Guidelines on how to write an analysis on Demand & Supply

2007-04-03T09:18:00.000+08:00

To all students,

I am happy that most of you are able to follow the topic on Supply, Demand and Price Determination. Most of you manage to draw the Supply/Demand diagram correctly by shifting the curves accordingly to changes in factors.

You guys have excellent thinking! Keep it up!

However, I am concerned of how you guys explain your illustrations in words. In fact, many of you have voiced concern on how to explain what have been illustrated on your graphs for essays and short structured questions. Some of you are also caught off guard by the use of technical terms such as “shifts”, “movement”, “quantity demanded”, “quantity supplied”, “downwards/upwards pressure” and so on. To address such concern, I have decided to give you some guidelines to make your explanation clearer and more “sophisticated”.

However, I must stress that the guidelines are not the best. You can always try to explain in your own way. Remember, they are just guidelines. For simplicity, I will be using the example below in my entire demonstration:

Eg: Oil price is expected to go up next week

Step 1: Always state the effect of the change and which curve should shift

As people expect oil price to go up next week, this will increase their willingness to buy oil now so that they would be able to avoid paying a higher price later. This will increase their demand for oil now and shift demand curve to the right.

Step 2 (And Very Impt!!!):

Always hold price at “old price” and describe how the price mechanism works to achieve a new equilibrium
At the old price of Pold, the market is in disequilibrium. At Pold, Qss is less than QDD, hence there is a shortage. Consumers would be unable to obtain all they wanted would be willing to pay a higher price. Producer, unable or unwilling to supply enough will be happy to accept a higher price. This creates an upwards pressure on price. As price rises quantity demanded falls and quantity supplied rises. The rise in price will stop at P1 where Qss eventually equal QDD. Shortage is eliminated at Q1.

Step 3:

Simply state the equilibrium price and equilibrium quantity

Henceforth equilibrium price is P1 and equilibrium quantity is Q1

Why Study Economics

2007-03-21T21:17:00.000+08:00

Why study Economics?
Top reasons to study Economics
1. Economists are armed and dangerous: "Watch out for our invisible hands."
2. Economists can supply it on demand.
3. You can talk about money without every having to make any.
4. Mick Jagger and Arnold Schwarzenegger both studied economics and look how they turned out.
5. When you are in the unemployment line, at least you will know why you are there.
6. If you rearrange the letters in "ECONOMICS", you get "COMIC NOSE".
7. Although ethics teaches that virtue is its own reward, in economics we get taught that reward is its own virtue.
8. When you get drunk, you can tell everyone that you are just researching the law of diminishing marginal utility.
9. When you call 1-900-LUV-ECON and get Kandi Keynes, you will have something to talk about.

Fishball

2007-03-05T23:50:00.001+08:00

Cute!! Interesting to find out why a bowl of 6 fishballs and 6 beefballs are solld@ HK$20 respectively whereas a bowl of 3 fishballs and 3 beefballs is sold@ HK$22. IT IS ALL ABOUT DEMAND! Might go through the concept discussed one day in class....

(But for those who understands Cantonese! Canto speakers you might want to help translate the content to your non-canto speaking frenz)

Factors Affecting Supply

2007-03-05T22:57:00.000+08:00

As I do not think it is nice to leave discussion on the on the supply side, I have decided to put in an entry on some NON PRICE FACTORS affecting supply. (NB: Non-price supply factors will result in a shift of supply curve graphically)

Here it goes!

FACTORS AFFECTING SUPPLY OF A PRODUCT

(a) State of technology
Technological changes take place over time as a result of innovation and enterprise. With improved production methods, output of goods would go up, thus giving rise to increases in supply.

(b) Prices of factor inputs
The price at which producers are willing and able to sell output depends on the costs of factors, including wages, rent payments, fuel, interest rates and raw material prices. If factor prices increase, then the costs of producing the same quantity of the good also increases, so producers need to cut back on supply, even though the price of the good itself has not changed. The effect of this increase in the costs of production shifts the supply curve to the left.

d) Prices of related goods
Changes in the prices of other related goods may affect the supply of a commodity whose price does not change. If the prices of other goods increase, the production of these goods will become more profitable, and resources would tend to move towards the industries making these higher-priced commodities. The production of goods, with prices unchanged, would now be less attractive to suppliers.

e) Government policy
The imposition of indirect taxes and granting of subsidies will bring about changes in supply. A tax imposed on a good increases the cost of supplying that good, forcing suppliers to cut back on production. Subsidies have the opposite effect; they lower the costs of production and supply is increased.

f) Number of suppliers
More suppliers increase supply. On the other hand, if suppliers leave the industry, market supply will fall.
g) Weather conditionsThe output of agricultural products is determined by variations in the weather. Favourable weather conditions can increase supply while poor conditions would bring about decreases in supply

Factors Affecting Demand

2007-03-05T22:46:00.000+08:00

Hi!

As many of you have requested for the notes on NON-PRICE FACTORS affecting demand, I have decided to put up this entry. (NB:non-price factors result in a shift of the demand curve graphically). I have tried to cut down on the words but tried to retain the essence of the explanation as much as possible. Hope you guys find it useful!

(a) Prices and demand of related products
i. Substitute(s)
A substitute product is an alternative product that can replace another because it satisfies the same want. Examples of substitutes include coffee & tea and public buses & the MRT. If the price of tea changes, demand for coffee will change in the same direction eg a rise in tea prices causes a fall in the quantity demanded for tea and a rise in demand for coffee, even though the price of coffee itself has not changed.

ii. Complement(s)
A complementary product is one which must be used at the same time with another to satisfy the same human wants eg coffee and milk and petrol & cars. If petrol prices rise, demand for cars will change in the opposite direction (though the prices of cars have not risen, people find it more expensive to own cars, resulting in a fall in its demand). Complements are said to be goods that are jointly demanded.

(a) Consumers’ money income
i. Normal goods
These are goods whose demand rise with a rise in money income of consumers and vice versa. ie we buy more electronic gadgets, clothes and travel more when our incomes rise.

ii. Inferior goods
These are goods whose demand vary inversely with consumers’ money income. For instance Pentium 1 computers and fans. Consumers prefer less of such goods when their incomes grow.

(b) Consumers’ tastes and preferences
Consumers' tastes and preferences are influenced by their income, peers, advertisements, pop-star appeal, age, sex, culture etc. Changes in consumers’ tastes in favour of (or against) a good/service will raise (or reduce) its demand.

(c) Expectations of future price changes
The fear or expectation of a future price rise will induce people to buy more now thus raising demand for the good (consumer durables) concerned. If they expect the price to fall in future, they will postpone their purchases now thus reducing demand for the good concerned.

(d) Availability of credit facilities and hire purchases
Easy credit facilities eg. availability of low interest loans and favourable terms offered by banks makes the cost of borrowing funds or spending on credit more attractive. This would raise the demand for loans to encourage consumption of, and demand for, goods and services.
Less stringent hire purchase terms eg. longer repayment periods and smaller downpayment sum will allow more consumers the ability to buy the products now and encourage more purchases and thereby raising demand for goods such as cars, household appliances etc.

(e) Size and composition of population
A fast-growing population will demand more of most goods and services, other things held constant. Increased proportion of teenagers will raise demand for commodities that appeal to this age group eg. sports gear, fashion wear etc.
Increased birth rates will result in higher demand for baby-related goods while a rapidly greying population will mean higher demand for medical services, dentures, walking sticks etc.

(f) Seasonal factors
The demand for many goods and services such as clothing, food, water, healthcare and travel is influenced by seasonal climatic conditions.

“In the month of January, around the island of Singapore, heavy downpours have boosted businesses for some and caused havoc for others.” ST 15/1/06.
What were some of these affected businesses?
Did the changes represent a movement along, or shift of, the demand curves of these goods services?

(g) Government distribution of income
A reduction in personal income tax rates will result in greater disposable income and encourage the consumption of goods and services. On the other hand, an increase in GST tends to reduce the consumption of goods and services.
A progressive tax system (by taxing the rich more heavily) and giving subsidies to the poor will redistribute income in favour of the lower income group, thus their demand for other goods besides basic necessities may rise eg better food and housing.

(h) Other government economic policies
Anti-smoking campaigns, car ownership schemes eg. Certificates of Entitlement (COE) and Electronic Road Pricing (ERP), housing grants and the Economic Restructuring Shares are further examples of government policies that affect demand for related goods and services.

2007-03-01T18:12:00.000+08:00

Economics Basics: Demand and Supply

Supply and demand is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy. Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply and demand.

The relationship between demand and supply underlie the forces behind the allocation of resources. In market economy theories, demand and supply theory will allocate resources in the most efficient way possible. How? Let us take a closer look at the law of demand and the law of supply.

A. The Law of Demand
The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other words, the higher the price, the lower the quantity demanded. The amount of a good that buyers purchase at a higher price is less because as the price of a good goes up, so does the opportunity cost of buying that good. As a result, people will naturally avoid buying a product that will force them to forgo the consumption of something else they value more. The chart below shows that the curve is a downward slope.

A, B and C are points on the demand curve. Each point on the curve reflects a direct correlation between quantity demanded (Q) and price (P). So, at point A, the quantity demanded will be Q1 and the price will be P1, and so on. The demand relationship curve illustrates the negative relationship between price and quantity demanded. The higher the price of a good the lower the quantity demanded (A), and the lower the price, the more the good will be in demand (C).

B. The Law of Supply
Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.

A, B and C are points on the supply curve. Each point on the curve reflects a direct correlation between quantity supplied (Q) and price (P). At point B, the quantity supplied will be Q2 and the price will be P2, and so on.

Time and Supply
Unlike the demand relationship, however, the supply relationship is a factor of time. Time is important to supply because suppliers must, but cannot always, react quickly to a change in demand or price. So it is important to try and determine whether a price change that is caused by demand will be temporary or permanent.

Let's say there's a sudden increase in the demand and price for umbrellas in an unexpected rainy season; suppliers may simply accommodate demand by using their production equipment more intensively. If, however, there is a climate change, and the population will need umbrellas year-round, the change in demand and price will be expected to be long term; suppliers will have to change their equipment and production facilities in order to meet the long-term levels of demand.

C. Supply and Demand Relationship
Now that we know the laws of supply and demand, let's turn to an example to show how supply and demand affect price.

Imagine that a special edition CD of your favorite band is released for $20. Because the record company's previous analysis showed that consumers will not demand CDs at a price higher than $20, only ten CDs were released because the opportunity cost is too high for suppliers to produce more. If, however, the ten CDs are demanded by 20 people, the price will subsequently rise because, according to the demand relationship, as demand increases, so does the price. Consequently, the rise in price should prompt more CDs to be supplied as the supply relationship shows that the higher the price, the higher the quantity supplied.

If, however, there are 30 CDs produced and demand is still at 20, the price will not be pushed up because the supply more than accommodates demand. In fact after the 20 consumers have been satisfied with their CD purchases, the price of the leftover CDs may drop as CD producers attempt to sell the remaining ten CDs. The lower price will then make the CD more available to people who had previously decided that the opportunity cost of buying the CD at $20 was too high.

D. Equilibrium
When supply and demand are equal (i.e. when the supply function and demand function intersect) the economy is said to be at equilibrium. At this point, the allocation of goods is at its most efficient because the amount of goods being supplied is exactly the same as the amount of goods being demanded. Thus, everyone (individuals, firms, or countries) is satisfied with the current economic condition. At the given price, suppliers are selling all the goods that they have produced and consumers are getting all the goods that they are demanding.

As you can see on the chart, equilibrium occurs at the intersection of the demand and supply curve, which indicates no allocative inefficiency. At this point, the price of the goods will be P* and the quantity will be Q*. These figures are referred to as equilibrium price and quantity.

In the real market place equilibrium can only ever be reached in theory, so the prices of goods and services are constantly changing in relation to fluctuations in demand and supply.

E. Disequilibrium

Disequilibrium occurs whenever the price or quantity is not equal to P* or Q*.

1. Excess Supply
If the price is set too high, excess supply will be created within the economy and there will be allocative inefficiency.

At price P1 the quantity of goods that the producers wish to supply is indicated by Q2. At P1, however, the quantity that the consumers want to consume is at Q1, a quantity much less than Q2. Because Q2 is greater than Q1, too much is being produced and too little is being consumed. The suppliers are trying to produce more goods, which they hope to sell to increase profits, but those consuming the goods will find the product less attractive and purchase less because the price is too high.

2. Excess Demand
Excess demand is created when price is set below the equilibrium price. Because the price is so low, too many consumers want the good while producers are not making enough of it.

In this situation, at price P1, the quantity of goods demanded by consumers at this price is Q2. Conversely, the quantity of goods that producers are willing to produce at this price is Q1. Thus, there are too few goods being produced to satisfy the wants (demand) of the consumers. However, as consumers have to compete with one other to buy the good at this price, the demand will push the price up, making suppliers want to supply more and bringing the price closer to its equilibrium.

F. Shifts vs. Movement
For economics, the “movements” and “shifts” in relation to the supply and demand curves represent very different market phenomena:

1. Movements
A movement refers to a change along a curve. On the demand curve, a movement denotes a change in both price and quantity demanded from one point to another on the curve. The movement implies that the demand relationship remains consistent. Therefore, a movement along the demand curve will occur when the price of the good changes and the quantity demanded changes in accordance to the original demand relationship. In other words, a movement occurs when a change in the quantity demanded is caused only by a change in price, and vice versa.

Like a movement along the demand curve, a movement along the supply curve means that the supply relationship remains consistent. Therefore, a movement along the supply curve will occur when the price of the good changes and the quantity supplied changes in accordance to the original supply relationship. In other words, a movement occurs when a change in quantity supplied is caused only by a change in price, and vice versa.

2. Shifts
A shift in a demand or supply curve occurs when a good's quantity demanded or supplied changes even though price remains the same. For instance, if the price for a bottle of beer was $2 and the quantity of beer demanded increased from Q1 to Q2, then there would be a shift in the demand for beer. Shifts in the demand curve imply that the original demand relationship has changed, meaning that quantity demand is affected by a factor other than price. A shift in the demand relationship would occur if, for instance, beer suddenly became the only type of alcohol available for consumption.

Conversely, if the price for a bottle of beer was $2 and the quantity supplied decreased from Q1 to Q2, then there would be a shift in the supply of beer. Like a shift in the demand curve, a shift in the supply curve implies that the original supply curve has changed, meaning that the quantity supplied is effected by a factor other than price. A shift in the supply curve would occur if, for instance, a natural disaster caused a mass shortage of hops; beer manufacturers would be forced to supply less beer for the same price.

Taken from: www.investopedia.com

24Hour Economics

2007-03-01T10:13:00.000+08:00

This video gives you a quick look at how pervasive Economics is in your Life. (NB: there are some terms/concept which you have not learnt....sit back and enjoy the cinematography than!)

24Hour Economics
http://video.google.com/videoplay?docid=8948269088526980955

2007-03-01T08:04:00.000+08:00

Captain Economics
http://video.google.com/videoplay?docid=-6124055809087653757

Hahaha....worth a watch

WHY STUDY ECONOMICS?

2007-02-28T23:31:00.000+08:00

from http://www.uwosh.edu/departments/economics/Econ_Deg.html

1. What is Economics?

Economics is a social science; that is, it is a discipline concerned with how people behave. Economists are concerned with how individuals and firms make decisions about work, consumption, investment, hiring, and pricing goods and services. For instance, how do firms go about determining whether to hire an extra worker, or if they even need to expand their company? Why do gas prices vary daily, but newspaper prices seem never to change? When should you take the first job that's offered, and when should you wait? What's a logical approach to your investment decisions? Economists also study how entire economies work and how they work together. Researchers try to explain why recessions occur and why there is inflation. What can be done to minimize these problems? Economists also try to determine why economies are different and how they work together. Why are Asian Economies are growing much more rapidly than European countries? Can European countries learn anything from Asia? Even the fall of Communism, often thought of as a purely political occurrence, can be analyzed from an Economic perspective.

2. Can I get a job?

In a word, YES! While Economics may not provide a student with a specific trade like accounting or nursing, it provides a broad base of knowledge and skills to build on. Economics sheds light on how the world, and corporations, work, but more importantly it teaches a student how to think. Corporations recognize the value of an Economics degree, and prefer Economics majors over any other Liberal Arts major. Many firms, for instance, may even prefer to hire an Economics major rather than a business major (this is particularly true for firms outside the Fox valley area). Most lawyers believe that a major in Economics, with its emphasis on logical thinking, is the best preparation for law school. It is also an appropriate major for students considering graduate work in Business, Sociology, and Political Science, as well as Economics.

3. How do I decide if Economics is right for me?Think about the following questions:

Do I care about how foreign countries trade (that trade deficit you've heard so much about)?
Would I like to understand how we use (and abuse) our natural resources and how this will affect our future?
Am I interested in knowing about the 'glass ceiling' and what we can do to get rid of it?
Do I care about the banking scandal? Would I like to be able to describe how it will affect my daily life?
Would I like to know what the stock market has to do with real people?
Am I interested in how people and firms interact in the market place?
Would I like to be able to know how to predict that wages will be going up?
Would I like to be able to predict how easy it will be to get a job after graduation?

If the answer to any of these questions is 'yes', the economics major is for YOU!