EXTRA WORK 1：PED

PED:the responsiveness of the quantity demanded to a change in the price of the product.

Formula:%ch in quantity demanded/%ch in price

Notes:PED>1:ELASTIC;PED<1:inelastic:ped=1>

When the PED is elastic,if the producers drop the price,they will gain more,when they increase price,they will get a loss.


But when PED is inelastic,producers increase price,they gain more revenue,they loss profit when they decrease the price.


PED is one of the most efficient way to measure economy and market,and there are several important factors :

1.substitute:

Substitute,we can simply treat it as competitors,If a lots of producers produce the same kind o produce.Its quantity demand is elastic,the more substitutes,the bigger PED number are.Therefore,substitute is a main factor which can affect PED.

2. income level:

If there is an increasing in consumer income,the demand may increase,because people have more income than before,it may encourage people buy goods and services.But the problem is people may buy demerit goods,such as cigarette,which has negative efforts on the third parties,cause market failure,and in order to get more profit,producers may over produce demerit goods,make market failure even worse.At last,government may increase taxation to correct it closing to MSC

3.Time:

If there is a new product selling today,people may buy it,as it`s fresh goods,and want to try it.Demand may increase sharply,but....after a period of time,the demand for the product may decrease and keep remain..

4.Taste:

As I said in 3,time is a factor which might affect PED,taste is same as time,after a new product is introduced into market,people are eager to buy it,but different types of people have different tastes...after a period of time, demand for the product may decrease a lot,because of the different tastes.

5.Economics problems:

we know UK economy has deeply recession.People don`t want to expend,the demand for specific(people want but don`t need to buy)goods may decrease, because people may not need it for their normal life.So they don`t have to buy them when there is an recession.

ECO 18th Balance of payment

Balance of payment:a record of money flows coming in and going out of a country.



WHAT IN BALANCE OF PAYMENT?



1.trade in goods



2.trade in services



3.net flow investment income



4.transfer of money







Trade deficit:money going out is more that money coming in

Fashion laptop carry cases

This product is about the laptop carry cases,it is not a new product for us,but the point is it`s fashion and especially for female.It`s easy to understand why more product aimed to female,these product has different attraction points,as for this product,it has slight difference,separated into cold colours and warm colours.And different type of bags are for different size of the laptops.

Pink might be the most popular colour for female,as same as white...they are both attractive colours,it might attract female...

They also provide mini cases,which can just put a small size laptop into it,it might useful,because it is easy to carry,good advantage for females.

But I don`t think it is new attraction product....the reason...

Firstly,when you buy the laptop,you may get the laptop case for free,so people may not buy a new one for fashion.

Secondly,lots and lots producers have already realise this kind of market,it doesn`t make any big innovation about cases...people have more choices....

NEXT,as I know so far, some luxury brands has this kind of product as well,it makes this product has less competitive,people prefer to buy expensive,high quality,well known brands product.Even though your product is better,people won`t buy it....

Also, the price is not acceptable for mid-level income consumers,it`s a limitation.

Eco 17th Macroeconomic and TAX

Macroeconomic equilibrium:

TAXes:

The money which government use to improve health,education,and sort of problems is tax

Category of Tax:

direct TAX:tax which get from the percentage of people`s income and company and cannot avoid.

As we know, people and salary monthly,but they must pay income tax at the same time.This is one way where government get the money from in order to something else to improve specific section.In China the start point is 1600 yuan(160pound),but as your income increase your income TAX will increase as well....income TAX is the one of the main TAX government used to get money from,it plays a important role in government.

Also,company should pay direct TAX as well,it is the percentage of your company profit.Big company pay thousands and thousands TAX to the government.

indirect TAX:a tax levied on the goods and services

another essential TAX is indirect TAX,which we can see it everywhere.Whenever we go shopping and buy something we may noticed that there is VAT(value added tax)a part of the indirect TAX in the end of receipt,in UK is has reduced to 15%.In some luxury goods,such as cars,clothes...etc..government will higher the TAX for controlling.As for cigarette,UK government has higher the TAX,the tax is even more that cost.Furthermore according to the elasticity if higher the TAX on cigarette ,consumer will pay more(inclasticity) the reason why government do that is because it cause negative externality(which affect third parties)it is harmful for our normal life

But it`s not easy to control people not to smoke by using TAX on cigarette,because it`s inelasic even the TAX is high and price is increase,people are likely to buy it as normal.

Eco 17th

1.I put comment on first-time`s blog(It`s about house price)



2.David`s economics(the bank of England on deflation)

Deflation:a sustained fall in the general price level

Bad deflation:fall in aggregate demand may result in a harmful consequence.Lower aggregate demand will cause business firms to cut back production.It may cause unemployment ...Also might influence a country`s economy growth...

Good deflation:a fall in price level arising from cut costs of production to stimulate cosumers expending,supply will shift to the right,therefore more and more producers may have satisfying profit from deflation.Moreover productivity likely to rise as well....so we know that the output is growing.Country`s international competitiveness increase gradually.

3.Economics teacher`s blog:

ECO 16th

PPC(production possibility curve:show the maximum quantities of different combinations of output of two products
Opportunity cost:the next best alternative foregone
Elasticity:the extend to buyers and sellers respond to a market conditions
Unemployment:people are out of work but willing and able to work
Inflation:a sustained rise in the price level
Economic growth:an increase in real GDP,in the maximum output that the economy can produce
Exchange rate:the price of one currency in terms of another currency
fiscal policy:the taxation and government spending decisions of a government
monetary policy:decision on the interest rate the money sullpu and exchange rate
supply-side policy:policy to increase aggregate supply



AD:the total goods and service in period of time



AS :the total amount that producers in an economy willing and able to supply

Result...

I finally got AAU in 3 exams.....
I can`t believe I got U in business studies.....
nobody knew what did I review for business...except my mother...
But...everything has gone.....

Really should do something.....

McDonald's warns of revenue drop

McDonald's`s--one of my favorite fast-food brand,which I know big mac meal is 3.89 with large coke,large fries and a big mac burger.

Even though the whole world economy downturn,but MC does`t be affected that much.Because they have lower price and good market share and market size all over the world.

MC is elastic,it has more competitors, KFC is a good example,so if their price is lower than KFC,they will gain more.People are likely to buy cheaper goods during the crisis when the two fast-food companys produced same food.

But from the latest figure shows that there is 1.4% sales rise in FEB 2009 but compared with an increase of 11.7% in February 2008,it may tell us something.....

Experts said as the US currency is stronger and the commodity costs will squeeze its first-quarter,so we know there is a little rise in FEB 2009 but can`t compared with 2008...

After all,MC still is one of the famous brands is the world,we can image MC will do a good work during downturn when other brands have financial problems

ECO unit 1 review:YED

DEFINATION:the responsiveness of the demand for a product when a chenge in income



Formula:YED:%change in demand/%change in income

normal goods:have positive income elasticity

1. normal luxury:income elasticity is grerter than 1 YED>1


2. normal necessity:income elasticity is less than 1 YED<1

Inferior goods:have negative income elasticity

ECO review:tax ......demand

From the chart we can obviously see that when the demand for a product is elastic,and we draw the supply curve with tax.The supply price is higher(p1-p2),producers pay more,and quantity for this product is lower than before(q1-q2)


In this case,when the demand for the product is inelastic,supply price is higher with tax (p1-p2).Consumers pay more,and the quantity for this product is decreased,but not as same as when the demand is elastic.

ECO unit1 review:PED

Defination:the responsiveness of the demand for a product following the changing of the price.

PED=0(perfect inelastic)
It tells us whenever the price increase or decrease,the demand for this product doesn`t change.

PED=1 (perfect elastic)(unit elastic)

whenever the demand for a product change,the price of the product doesn`t change

PED:0-1 (inelastic)

From the chart we know if price increase(p3-p2),the retailers gain more....however,if the price fall(p2-p3),retailers lost more.

PED>1(elastic)
if the price increase(p3-p2) retailers lost more,price decrease(p2-p3) retailers gain more.

Formula:PED=%change in demand/%change in price

WHAT WILL AFFECT PED?

1. Any substitutes?
2. Period of time
3. Taste
4. Peak and off-peak demand
5. Income
6. Inflation
7. Economy growth
8. TAX

WHAT IF INCOME GOES UP?

the demand curve might shift to the right from d-d1,the price will increase from p0-p1.

EURO......same conclusion

The European Central Bank (ECB) has cut its key interest rate to 1.5% from 2.0%, the lowest since it started setting euro rates in January 1999.

As US and UK...Euro zone has also be affected by whole world economy crisis,as we can see from he chart,the interest rate of Euro zone has fallen down to 1.5%.It looks probably different from UK,but essentially,they are same....

1999,when Euro interest rate started setting to 2000,the interest rate has moved up from 2.5-4.5%,this situation might tell us that Euro is stronger that US dollar....Euros become more competitive.It has positive circumstance.

And from the start of the 2006 to end of the 2007 the interest rate had increase again...from 2-4%(SAME AS UK)

But from 2008-2009, it had jumped rapidly and incredibly....the economy crisis became more dangerous for a country`s economy...especially for capitalist countries and developed countries...

"Reduce interest rate"more and more countries which has been impacted by economy crisis and credit crunch is using this economy policy to help native economy and hope it will gradually recover ...but it`s not depends on the government, UK has published the policy before EURO ZONE,but it`s not efficient...more people are still waiting for what will happen next....

Fortunately,the economist said that such problems will be come over,moreover,the economy will recover and increase....

Canada 0.5%

Canada's central bank has cut its key interest rate from 1% to 0.5%, a record low.

Incredible......I even can`t believe it.Before I saw this news,I knew than UK economy has been impacted deeply,and in order to recover from economy crisis,and to encourage demand, government published more and more acceptable policy...one of those is to dercease the interest rate to 1%.

But Canada government published this policy,so what might happen in the future?

Demand:as the interest rate goes down to 1%,it is more likely to encourage consumers to expend more money on goods and services.Furthermore lower interest rate might also encourage people to take a short or long-loan to start a business(might not )or pay for the mortgage.In conslusion,the aggregate demand will shift to the right....

EXCHANGE RATE:the main key point---exchange rate, the related to the interest rate,if the interest rate goes down, the exchange rate might fall,therefore it is cheaper for the exporters and more expensive to the importers,it may have a balance of payment surplus(if other factors are equal,the GDP will increase???maybe ...we will talk about it later...)

I/X:as for the import and export.Firstly let`s think about import,because of the low interest rate,people are more likely to buy....but we don`t know whether it is made in China or someoneelse...

G.S:reducing interest rate also will affect the government spending to increase the financial support like subsidy to the small businesses,help car industry or nationalise the bank...(like Uk)

TAXATION:the VAT tax will fall ....encourage consumers...and tariffe,another kind of tax,might reduce...to fit for the demand...

SAVING:definitely will goes down...

AFTER ALL...let`s think about GDP?will it increase?

IF interest rate...fallen,

government spending increase(if others keep equal):GDP increase

consumption increase(if others kep equal):GDP increase

investment increase(.....):GDP increase

export>import(...):GDP increase

BUT!

IF interest rate ...fallen

the taxation decrease,government gain less from tax,the government spending decrease(...):GDP decrease

investment might not support the CAN`s economy because it`s risky,and can even get profit...

investment fallen(...):GDP decrease