StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Macro Economics - Coursework Example

Cite this document
Summary
Reverse causality is a causal relationship that arises when there is a cause and effect relationship between variables. This means that the fact that events…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER98.4% of users find it useful
Macro Economics
Read Text Preview

Extract of sample "Macro Economics"

Macro and microeconomics Error of omitted variable and reverse causality Error of omitted variable is the error that occurs due toomission of a certain variable in determining a correlation. Reverse causality is a causal relationship that arises when there is a cause and effect relationship between variables. This means that the fact that events follow each other does not prove that the first event caused the other event. For instance, there is a relationship between high-income levels and good health whereby high incomes can lead to good health and at the same time good health can enable a person to work hard to increase productivity (Hill 2014).

Demand curveDemand curves are curves that show a relationship between the price of a product and the quantity demanded. It is shown when the values of price are plotted against the values of quantity demand. It shows what consumers are willing to buy at various prices.Demand for widgetsPrice 50 D 40 10 D 2 8 10 DemandThe demand curve has a negative slope (-5) which indicates that an increase in there is an inverse relationship between price and the quantity demanded. The demand curve therefore shows a negative relationship between the variables, which means that an increase in price causes a decrease in demanded quantity and a decrease in price causes an increase in quantity demanded.

The two therefore have an inverse relationship.Equation for demand curveIncrease in the income of consumers will lead to increase in demand for widgets. This is because widgets are normal goods and change in income results to a positive change to demand of normal goods. There will therefore be a shift in demand curve for widgets to the right as a result of the increased demand. The shift in the demand curve will cause to an increase in the quantity of widgets demanded at each level of price. The shift to the right will cause an increase in demand and therefore the demand value in the equation will increase with increase in income.

Supply curveA supply curve is a curve that shows a relationship between price and quantity supplied by the sellers. The supply curve slopes from the left to the right. This shows the direct relationship between quantity supplied and price.Price 50 S 10 3 15 supplyThe slope of the supply curve has a positive value (+3.3). This indicates that there is a positive relationship between price and the quantity supplied. Price and supply are therefore directly related.Effects to the supply curveChange in price of the input used to produce will result to a decrease in supply of the widgets.

This will result to a shift in the supply curve upwards indicating a decrease in supply. Less quantity of the widgets will therefore be supplied at the same price levels to enable the suppliers to cover for the increased production cost (Hill 2014).Equilibrium price and quantity Price D S 20 6 QuantityThe equilibrium point is the point at the intersection of the demand and the supply curve. This is the point where demand curve equals the supply curve. In the case of widgets, the two curves intersect at the point where price is 20 and the quantity is 6.

These are therefore the equilibrium price and quantity respectively.At a price of 50At a price of 50, the consumer will buy less number of widgets, which will be below what is supplied by the suppliers. This will then result to surplus in the market and a state of disequilibrium. Price reduction will be used to clear the surplus.At a price of 10This will be a price below the equilibrium and therefore it will result to excess demand. This is because consumer will be willing to supply more than suppliers can supply.

This situation will be cleared by increasing the price to get back to the equilibrium. Price D Di Si S Si Di S D QuantityAn increase in the cost of oranges will result to a decrease in supply for the juice, causing a shift of the supply curve to the left. A fall in the price of apple juice, which is a substitute, will lead to a decrease in demand for orange juice thus a shift of demand curve outwards to the right. An increase in price of apple juice will lead to a shift in demand curve to the right and reduction in cost of producing oranges will result to a shift in supply curve to the right.

Reference Hill, B. (2014). An introduction to economics: Concepts for students of agriculture and the rural sector.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Macro Economics Coursework Example | Topics and Well Written Essays - 500 words”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1688896-macro-economics
(Macro Economics Coursework Example | Topics and Well Written Essays - 500 Words)
https://studentshare.org/macro-microeconomics/1688896-macro-economics.
“Macro Economics Coursework Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/macro-microeconomics/1688896-macro-economics.
  • Cited: 0 times

CHECK THESE SAMPLES OF Macro Economics

The Evolution of Macro Economics in the UK

In the paper “The Evolution of Macro Economics in the UK” the author discusses the issue that after the failure of the UK economy in the World War II there was a lack of confidence towards the classical economic theory.... Keynes introduced his own ideas that were greatly followed by the government of the UK....
4 Pages (1000 words) Assignment

Effect of Level of Consumption Within the Country

It has an affect upon the Macro Economics as it is the tool to attract more consumers towards the banking instruments, not only from the domestic investors but also from the foreign investors.... Macroeconomics deals with the collective performance of the whole economic system.... Monetary policy is one of the significant components of the… When the UK Government monetary policy committee will increase the interest rate, the demand for credit will be higher and the consumption pattern will decline as the consumers will be moving toward savings rather than consumption spending....
4 Pages (1000 words) Essay

The business cycle

On the other hand the classical economics theory believes that the modern economy is too flexible and the so the changes in the spending pattern does not affect the employment and the real output (Romer.... Economic growth is actually not a steady phenomenon as it is characterised by a period of fluctuations....
4 Pages (1000 words) Research Paper

Macro Economics-- Redbox Price Hike Could Dodge Netflix Outrage

Though it may seem harsh, the actual cost of renting a DVD for a day will only go up by 20 cents.... In response to this, the share price of Coinstar,… One positive to this move is in the way that Redbox announced it to their loyal customers.... Ultimately, the real reason behind the price hike is increasing operating costs....
1 Pages (250 words) Essay

Why I Want to Graduate Economics Program

The paper "Why I Want to Graduate economics Program" highlights that one can easily see the value of economics by analyzing different societies in relation to their economic stability.... The reason the author chose economics is that he feels he has a lot to offer to the world.... One of the main reasons why I gained interest in the undergraduate economics program is the crucial importance this discipline has in the world today....
1 Pages (250 words) Admission/Application Essay

Mitigation of the Threat of Under-Consumption in a System of Abundance

In such a situation, the people of plenty do not… To ultimately address the problem of under-consumption, the corporate guided market should take the necessary measures. The first step should be the promotion of marketing activities for the commodities Micro and Macro Economics Mitigation of the Threat of Under-Consumption in a System of Abundance Abundance is economic system in which the rate of consumption is lower than that of production.... ullivan, A, Steven, MS, 2003, economics: Principles in action....
1 Pages (250 words) Essay

The Relationships between the Chinese and the United States Education

This essay "The Relationships between the Chinese and the United States Education" discusses the effect of communication skills, English proficiency, perceptions of the United States, and personality on the relationship between Chinese students and their American friends.... hellip; According to the session “facts about Chinese learning,” it can be interestingly observed that it is the inward will efforts and strengths that determine the performance of individuals in education or any academic pursuit....
1 Pages (250 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us