Page 33 Questions

1. Demand is the quantity of a good or service that consumers are willing and able to purchase. Demand can increase or decrease depending on determinants such as price, substitutes, consumers’ income and many more.

Economic growth is the steady growth in the productive capacity of the economy as measured by the GNP.

2. One possible increase for the price of copper was the large demand in China (But it is demand in China…recovery of copper prices). China had been using large amounts of copper for various projects. China had been buying copper wiring for construction projects and for the Shanghai Expo. The government had been spending copious amounts on infrastructure of buildings that which required massive amounts of copper.

3. Prices of appliances are expected to rise because of the rising demand for copper. The demand from China, England and the United States (Copper prices on the London…data published recently) led to the rise in copper, which in turn will lead to the increase in prices of appliances. The rise in copper prices will increase the price of manufacturing appliances therefore decreasing supply and increasing prices.

4. The text suggests that copper prices will fall after projects in China are finished, and I agree with that statement. After the need for copper is reduced in places with such large demand for copper, the price of copper will decrease as well.  The demand will not drop dramatically considering copper is used in manufacturing many other things such as dishwashers and washing machines. The drop in demand will leave excess supply until equilibrium is reached. 

Demand Curve Essay Questions

1.       Distinguish between a shift in the demand curve for a product and a movement along the product’s demand curve.

Demand is the quantity of a good or service that consumers are willing and able to purchase at a given time at a given time period. A demand curve is a graph showing how the demand for a good or service varies with changes in its price. Demand curves are convex to the origin but are drawn straight for ease of analysis Movement along the demand curve happens when there is a change in price that causes the quantity demanded to change. An increase of the price will lower demand while lowering the price will increase demand.

A shift of the demand curve happens when there is a change in any non-price determinant of demand. Some non-price determinants are income, the price of other products and tastes or preferences. A shift to the left indicates a decrease in demand whereas a shift to the right indicates an increase.
An example of a shift in the demand curve is shown below.

2. With reference to two different determinants of demand, explain why the demand curve for bicycles might increase.

The most basic way to increase the demand curve of bicycles would be to lower their price, however, there are also many non-price determinants of demand.  Substitutes are one non-price determinant. If the price for a substitute of a bicycle were to rise, the demand for bicycles would go up. For example, if the price of push scooters were to rise, the demand for bicycles would go up.
Another determinant would be change in the age structure of the population. If the percentage of younger people in an economy rises, the demand for bicycles will most likely rise due to the fact that bicycles appeal to the younger population. If the percentage of younger people were to decrease, so would the demand for bicycles. 

Planned Economy vs Free Market Economy

Over the past century especially, the great debate over whether free market economies or planned economies results in better results for a country's economy have been greatly intensified. Each system has advantages and disadvantages.

In a planned economy, the government manages all resources. The government decided what to produce, how much of it to produce and how to produce it. The government’s goal is to provide services and goods to everyone. Some advantages are that everyone is guaranteed the same standard of life. Prices are controlled therefore everyone can afford to buy goods and services. There is also no unemployment. Some disadvantages are consumers cannot choose what goods and services are produced and some companies can be inefficient due to the lack of profit motive.

In a free market economy the people choose what gets produced and how it gets produced. The people have the right to own property and start their own businesses. Some advantages are the consumers have more choice and what gets produced depends on their demand. People can make as much money as they please. Industries are more motivated because their goal is to make a profit. The market corrects itself and keeps the flow of money going. Some disadvantages are that there is unemployment. Some small businesses could be overrun by larger businesses and many people could lose their jobs as a result. Some workers can be given poor working conditions and poor pay because companies are not regulated as often. A huge inequality in wealth can lead to the poor revolting just like during the French Revolution.

Most countries have a mixed economy with only three countries having a planned economy. Personally, I believe that a free market economy is better as long as it is regulated and kept fair. A free market economy is better because people can make their own economic choices and can gain a big profit from taking business risks.