Business Economics (Coursework Sample)

Diversity: Business Economics
Institution
Name
Question One.
It is one of the branches of business economics that explains how individuals deal with time, money, and resources. Households, individuals and organizations, make decisions to distribute the limited resources. This branch of economics studies how the decisions affect the general supply and demand of commodities and services. An increase or decrease in the price of goods and services is affected by the demand supply in the market. Also, Microeconomics depends on the performance of people in different parts of the economy. It also deals with the individual prices of goods and services. Buyers operate in a restricted budget. Also, it depends on the different market structures like monopoly, perfect market, imperfect market and oligopoly. In other words, microeconomics researches show the different business functions and how to set prices considering the demand and supply side of the economy. As a manager, I would consider the quantity of the products demanded and the prices of products supplied. It will enable the management team to decide when to buy from our supplies and when to sell to our consumers (Wonnacott, 2009).
Macroeconomics is also another important branch of business economics. It helps economists to understanding the stable and unstable economy. It studies the fiscal and monetary policies of the world. Macroeconomics explain the total of the economic implications dealing with the aspects of unemployment, inflation and growth. It also explains the governments, implications on the changing taxation levels. There are no complementary, substitute, standard or giffen goods in macroeconomics; Instead, macroeconomics deals with a total demand and supply of goods and services (Sloman, & Sutcliffe, 2002).
Both microeconomics and macroeconomics behavior of consumers and buyers are explained clearly. Managers must consider the macroeconomic and microeconomic effects before making their management policies for the firms. The two features are pivotal in analyzing the market conditions and the external forces affecting the economy. In conclusion, microeconomics analyzes the individuals, firms demand and supply while Macroeconomics explain the total demand and supply of the overall economy (Seager, 2004).
Question 2.
Micro economic and Macroeconomic aspect in China.
The paper will examine the demand and supply of goods and services in China and consider the unemployment levels in China. In economics, the buyers and sellers must agree on the price and quantity of goods and services. There must be a willing buyer and a willing seller; they must reach a point called equilibrium. At this point, the buyer is willing to pay a certain amount of goods at a certain price. In China, there is a high population. The theory of consumer behavior and theory of costs or production will help analyze the market structure in China. There are different market structures in China. Each business structure requires careful analysis. Consumer demands of a given product are affected by several factors (Dornbusch & Fischer 2008).
If the price of the commodity increases, the consumers will reduce the quantity of goods they want to buy. They will buy the quantity that will fit their budget because they are operating on a constrained budget. It will then affect the elasticity of demand and supply. The theory will explain how consumers buy different goods and services, allocation of income and how different prices affect their income. Under the utility theory of demand, the Chinese consumers will derive satisfaction or benefits from combining different units of products (Dornbusch & Fischer 2008). In the long run, the consumer continues to use the commodity, he or she will reach a point and the satisfaction derived will start declining. Management must take care of this point and supply the consumers with a substitute commodity. The management must not concentrate on producing a single commodity, but different commodity. It will curb the disadvantages associated with the law of diminishing (Dornbusch & Fischer 2008).
Under macroeconomic aspect, we will consider unemployment aspect. It explains how the Keynes and classical theory affects the management decisions. The management does not have a control of the macroeconomic aspects. Under unemployment and wage price, the monopoly power of supplies restricts the flexibility of the overall prices in different markets. The theory, analysis the aggregate demand and aggregate supply of goods and services. Aggregate demand is affected by different factors. Firstly, Consumption is affected by the overall disposable income( that will change if the taxes Change). Secondly, investment spending will largely depend on the interest rate offered by the world bank and government policies on the firms. State expenditures are composed by the country’s budget. Also, the import and the export decision will affect the management decision (Dornbusch & Fischer 2008).
The total demand of a country will be affected by the wealth effect, interest rate, mutiplier and international effect. On the other hand, the total demand will be influenced by the investment plans, factors of production, input costs, availability of resources, government policies, technology and production. In China there is a high population, which supplies labor in the firms (Dornbusch & Fischer 2008).
There is increasing labor supply that lowers the cost of production in most of the firms. It means that they will sell the product at a low price. Dues to the world economy, there could be an excess supply of labor that could be affected by the increased labor market flexibilities, privatization, better education and training. Unemployment could be caused by rigidity in the labor markets, generous benefits, hysteresis and growing competition in China. The management must take advantage of the increased labor supply to produce more goods. This will increase the supply of goods in China lowering the prices of these good. Also, the lower prices will increase the demand of the goods (Dornbusch & Fischer 2008).
Question Three.
* Macroeconomic conditions in china
Macroeconomic policies suggest that, strives to change the overall performance on growth rate, price stability and the job rates. The management there are many investment opportunities and a high potential for the economy to grow. The firm can also use the China’s currency rates and lower wages to export cheaper components and inputs in our manufacturing process. China controls its exchange rate by hedging to the dollar. Making exports less expensive, it will change to domestic production of goods and services.
b. Current economy (fiscal and Monetary policies)
Fiscal Policies in economics use the public or government spending and taxes to control the economic distribution of wealth, growth and demand. The policies influence the investment, savings and the growth of the economy in the long run. Also in the short run, the total demand of goods and services is affected by the aggregate demand. When the government changes the taxes and the money supply in the economy, the total demand is evidenced by the spending decisions of the households or the firms (Parkin, 2000).
The Chines economy was recently under the recession phase, and the state imposed the expansonary fiscal policy. They reduced the taxes and then increased the government spending in defense and the education sector. Recession in china will require deficit spending while, during the boom time, the government will have a surplus budget. During the recession time, the government used the discretionary policy to combat the challenge in the economy. This is the opposite of using the automatic stabilizers (Parkin, 2000).
The China government might change its expenditures and taxation policies to achieve its major economic goals. Fiscal tools are a critical tool in the federal government. Analyzing the expansionary fiscal policy, the government increases spending and or reduce taxes during the recession time. This also increases the total demand of goods and services in the economy. In China, there was an economic downturn and fall during the expansion periods (Parkin, 2000).
Under the contractionary fiscal policy, that is used during inflation, the government decreases the government spending and or increases taxation to curb the inflation. In the long run, it will help to reduce the total demand of goods and services. Lastly, the effects of expansionary and contradictionary policies will be multiplied by the central multiplier. It is important to note that the effect of fiscal policy will be limited by time lags problems and the crowding out effect (Parkin, 2000).
Monetary policy, on the other hand, uses the government securities, and interest rates to control the supply of money in the economy and to control how fast the economy grows. It majors on how to increase and spend money and the firms’ interest on the interest rates and supply of money. In general, the monetary policy is under the federal reserve system. It will affect the investment and or expanding in China because, while the recession time in China will mean that the national system lowering the interest rates and increasing the money supply. The demand for money consists of buyers and consumers borrowing for such money from the government to support the spending. The monetary and fiscal policies are affected by the desired spending by the households. When the desired spending adjusts, the total demand changes causing a change in the output and employment. The policies are used to offset and stabilize the market economy. The total market in China is affected by the wealth, interest rate and the exchange rate in the economy. In China, the main cause of the decreased dema...