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Introduction: Economics Assignment Sample
In this assignment, we will be focusing on the macroeconomic concepts, microeconomic concepts as well as basic mathematical concepts (which have their implications in economics).
As the title suggests, Macroeconomics deals with the Macro (or the Aggregate/Large) view of the economy, such as the functioning of govt policies, be it Fiscal or Monetary. It also deals with the National Income Accounting, like Gross Domestic Product (GDP) and per-capita Income (PCI) (Heijdra, 2017).
Microeconomics, on the other hand, deals with the study of small economic units, which, when come together, form the economy as a whole. As the title suggests, Micro means 'small,' henceforth, this involves dealing with firms, and individual households as well as businesses, to understand the functioning of the economy at its very base, or from the root level. Examples of microeconomic concepts are – Average Cost (AC), and Marginal Physical Product (MPP).
Mathematical Economics takes into account the basic mathematical formulae and exercises of calculation or the arithmetic processes, which, when applied alongside the economic framework, helps in forecasting as well as formulating a specific route or path the economy must have taken or is going to follow in the future. Now, this might at times involve some concepts which have relations to the statistical concepts such as Mean, Median, Mode, et al. Sometimes we also use mathematical concepts such as Matrices and Calculus, which have their implications in Microeconomics and Macroeconomics also (Minford and Peel, 2019).
Questionnaire
Q1.
For low-budget smartphones in general and also high-end smartphone brands like Samsung, APPLE, and Motorola, the price elasticity of demand is often inelastic.
That is, the demand for the good is unresponsive to any change in the price. This type of behavior is often seen in goods which are perceived by consumers to be a necessity; now, this can be a lot of products like Groceries, Gas, Water, and on. But for a mobile phone to be considered a necessity, might make a few old-souls to raise their eyebrows and shake their head in disgust while muttering 'This generation is so spoilt.'
Anyways, in the present scenario, mobile phones have genuinely become a necessity. Gone are the days of fixed home landlines, even 12-year-olds roam about with an iPhone nowadays, and it has nothing to do with its affordability, well maybe it has got to do with 'affordability' a bit because that's why we are dealing with Price Elasticity of Demand, but in layman's term, it has become a utility. And for a utility, the price legitimately doesn't matter a bit. This is because any utility is good, which can be used to accomplish day to day menial as well as exhausting tasks (Heijdra, 2017).
So, bottom-line, if people cannot live without an iPhone, then its price elasticity of demand is INELASTIC[ -1 < Ed< 0]. And, no matter at what price APPLE decides to sell it, it’s always going to have a market and ample demand for it. This can be traced due to it’s
Brand Value
Technological superiority in comparison to other brands
Unique Operating System
Excellent Customer Service
The superiority of Items used in manufacturing.Â
Q2.
There are always various factors that go about in the determination of Price Elasticity of Demand of a product, but they are usually different for an essential good or a utility item like iPhone. This could be since although being an essential commodity, it’s used more extensive and far-stretched than the use of say, a carton of Milk. Easily explained, if I am paying around 1000$ for a carton of milk, I need to be sure that it's going to make my bones as strong as titanium.Â
Therefore, if a person is going to be paying a thousand bucks for an iPhone, they are going to have a tad bit of rationality and skepticism while buying it. The factors which contribute to that can be summarised as follows:
Availability of Substitutes: If Samsung has a phone which has the same features as that of the latest iPhone and is 50$ cheaper, then a rational person would prefer Samsung to the latter.
Consumer Loyalty: Going ahead with the above example, if the person is an APPLE enthusiast, then no matter the price, he is always going to choose the iPhone every time.
Income Level: Obviously with a high-end pricing strategy of APPLE, income level plays a major part for a consumer going for it, however so, with recent EMI and financing plans by carrier companies like Verizon and all, it has become comparatively easier to get one of your own (well, technically it isn't yours until you pay all the instalments).
Complementary Goods: As we know, APPLE products are only compatible with other APPLE products, unlike other competitors in the technological sphere. But this also works as something which gives APPLE the 'exclusive luxury' brand status, and therefore it adds on to its value, thereby making it a thing of prestige (if, you own it) (LIU and LIU, 2016).
Therefore, we can say that a decrease in the price of the iPhone in the second year let to a higher number of sales and also a greater revenue, by$350 Million.
Price elasticity of Demand (Ed) = (Change in Qd/Qd) * (P/Change in P)
4/10*700/175 = 1.6 = Ed
Since Ed >1
Therefore, we can infer that the price elasticity of demand for the iPhone is Elastic. A
Q4.
With a low number of entry and exit barriers in the perfectly competitive market, getting a firm into the market and exiting the market is not as haphazard in comparison to an Oligopolistic setup. This can be explained through an example, which is as follows:
Suppose in the Arcade Games business market, two firms already exist. One of them is Sony Entertainment (PlayStation), and the other is Microsoft (XBOX). Now, this type of market set-up is that of a Monopolistic competition, but for the sake of the question, we are assuming that the market set-up is that of a perfectly competitive market. Being a perfectly competitive market, APPLE ARCADE steps into the main fray, thereby displacing the 50-50 market share of both Sony & Microsoft, with the new market share being 33.3% for each of the firms(Jawad et al., 2018).
Consider that in the short run, APPLE ARCADE starts to earn a supernormal profit because people prefer it more in comparison to its other two competitors. Now earning Supernormal Profits is only possible in the short run. This is because, in the long run, more firms will enter in the market thinking they can earn supernormal profits like APPLE ARCADE as well, however so, their entry in the market would do nothing else but redistribute the total market share amongst the existing companies, thereby eventually leading to every firm earning Normal Profits(LIU and LIU, 2016).
Henceforth,
 Short Run – Supernormal Profits
In the Long Run, Supernormal Profits -> Entry of Firms -> Redistribution of Mkt Share -> Profit Shares decrease, and firms earn normal profits. Â
Q5.
In the first place, the brand is basic and simple to utilize. Truth be told, it is instinctive. At the point when I changed from a Microsoft PC and working framework to an APPLE PC and working framework, I didn't allude to any guidance manual. I simply turned the gadget on and began utilizing it.
Also, the Operating System (OS) is smooth and stylishly satisfying. Its plan is moderate. It and my Tesla Model 3 share that same cloud platform, practically speaking. Truth be told, my iPhone combines pleasantly with my Tesla and with the Bose headphones, and as well as JBL Harman audio system has an outer volume control that works flawlessly with APPLE gadgets. I feel that these brands fit well together because they share attention on greatness, advancement, and clean plan tasteful (Salamone et al., 2017).
APPLE has not been an open stage. It controls what programming is utilized with its gadgets, nearly wiping out similarity issues, accelerating preparing time, and making it progressively hard for infections and malware (Liu, 2018).
APPLE has become the anti-Microsoft brand. In other words, it has become a better option than Microsoft-fuelled gadgets. Individuals have worn out on the issues related to Microsoft-based stages, particularly identified with PC security, infections, and malware.
In-store client assistance is best in class, promoting the problem-free naturally simple nature of the brand. What's more, the stores strengthen the planning stylish of the brand.
APPLE is an inventive organization and isn't apprehensive about making something new that makes a past item sold. Witness iPods. They are not scared of foreseeing client needs and wants and are glad to convey benefits that clients had not by any means envisioned. The production of iPhone applications is a case of this (Jawad et al., 2018).
The cross-similarity and correspondence between the entirety of APPLE's gadgets is another positive part of the brand. Â
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In the above graph or diagram, the Demand Curve (or it is usually known as DD curve), is the downwards-sloping curve in red colour. The downward-sloping nature of the demand curve is because, with a price increase, the quantity demanded decreases and vice versa.
The upward-sloping curve is the Supply Curve, also known as the SS curve). It is the upwards-sloping blue-coloured line. The SS curve is upward sloping in nature due to the reason that as price increases, producers of a commodity or services intend to produce more of that commodity and thereby supply it in larger quantities. Therefore, an increase in price, increase the supply of a good and vice versa
The extra mobile roaming charges in other nations led to a loss in the consumer surplus of the consumers who had travelled to another nation; this was because they were now paying more than the reservation price they had for this service (Hennessy and Wolf, 2018).
(Reservation price is the maximum amount a consumer is willing to pay for a good or service).
However so, this additional tariff charged in a foreign country, led to an increase in the producer surplus of the suppliers, as higher tariff charges than usual, led to more income and henceforth more surplus.
The cumulative effect of the higher tariff is depicted in the lower graph, thereby showing a decrease in the consumer surplus and a simultaneous increase in the producer surplus. Â
Q7.
European Union and Parliament realised that this Roaming tariff was a sort of market failure because it was supposed to be a public good that private companies were using to their advantage to profit from it and earn higher revenue, only because different nations existing under the European Union had different pricing for Cellular services (such as calls, messages, and data) (Mitra et al., 2018).
Moreover so, by not providing the customers with knowledge about this tariff hike in surrounding/neighbourhood nations, it was also a form of Asymmetric Information, which eventually led to a market failure.
Henceforth, in simpler terms, the European Union considered this hike in data roaming charges to be a market failure solely due to two main reasons –
Privatisation of a Public Good for profiteering.
Asymmetric Information.Â
Q8.
Yes, the European Union could have taxed, if NOT subsidised this additional charge on data by the Telecom Operators.
Since most of the public services in the European nations are funded by the taxpayer's money, this would have been a good source of income for the govt. So as to balance their books or earn some additional revenue.
By taxing this additional surcharge, the govt. Could have been able to put an end to this impending market failure earlier and simultaneously would've worked towards providing a positive externality through this tariff hike money (Salamone, et al., 2017).
Now, consider the scenario of Govt. providing subsidies to their nationals to bear the additional cost due to the tariff hike; then the govt must have to bear a brunt to their pockets, but this would lead to the welfare of the public as well as to the welfare of the state, thereby helping in improving the Quality of life of the individuals (who had to shell out a fortune due to these misnomers imposed by the Telecom Companies) (Aitken and Weale, 2018).Â
Q9.
Yes, it was the moral and ethical responsibility of the service providers to provide information regarding the additional data charges and consumers when purchasing a plan, usually tend to skip such minute details, which often cost them manifold later on. But yes, the Telecom Operators and Service providers should’ve given some hint or a piece of knowledge regarding this act of slyly stealing or siphoning off money from their clients (Mitra, et al., 2018).
However so, since these companies often function, being inclined towards the capitalistic side, it is unfair for us to assume that they should've behaved in an egalitarian or socialist way. Charging additional money is alright if you're alerting your clients about it, but doing what they did is straight-up illegal and unethical (Clark, 2019).
Q10.
In the above graph, we have plotted a graph of Real Gross Domestic Product & Real Personal Consumption (of the United Kingdom) over 24 years, from 1995 to 2018.
On the Y-axis, we have the GDP/Consumption in British Pounds, while on the X-axis, we have the annual data. As we can see from the graph, the GDP and RPC both have increased over this period of 24 years apart from the period of Global recession, i.e., 2008-2009, during that time we observed a dip in both the Gross Domestic Product and Real Personal Consumption. The recession trend was due to the global recession scenario, thereby affecting the growth of GDP and Personal Consumption of the economy (Mankiw, 2020).
We can also notice that Real Personal Consumption has almost been three times (3x) that of the Real Gross Domestic Product because people tend to consume more as the GDP of the economy increases and the economy grows (Flynn et al., 2016).
The grey bars denote the recession values, -1 signifying a trough (a dip in growth) and +1 signifying a crest (a shoot in growth).Â
Q11.
Inflation is defined as the increase in the general price levels of goods and services in the economy. Now, according to the graph, the upwards-sloping line is the Short-Run Aggregate Supply Curve (in red) – SRAS. The downwards-sloping line depicts the Aggregate demand curve (in green) – AD (Yu et al., 2017).
 To understand better, these aggregate supply and demand curves are like the culmination of the individual & market supply and demand curves, respectively, for the whole economy or nation. The vertical line (blue), is the Long Run Aggregate supply curve, more commonly referred to as the Aggregate Supply curve – AS. The intersection of the Aggregate Demand and Short-Run Aggregate Supply curves depicts the Equilibrium (Vasigh and Fleming, 2016). Â
The intersection of Aggregate Demand, Aggregate Supply & Short-Run Aggregate Supply curve shows that the economy is in a state of Full Employment Level of Equilibrium.
Any deviation from this point signifies that there is some disequilibrium in the economy.
If the Aggregate Demand is greater than Aggregate Supply, i.e., AD>AS, then the demand for goods is higher than the actual supply there is of it, henceforth the price increases. This increase in price level is known as Inflation.
From the above diagram, P1 is the equilibrium price, and Y1 is the equilibrium output. With an increase or excess of demand, the price increases to P2, and the output supplied remains at only.
If this situation isn't kept in check, then the price further tends to increase, and a situation of hyperinflation sets into the economy, with prices of necessities skyrocketing.
When economic growth increases, disposable income, and per-capita income also increase, thereby leading to a sudden increase in demand. Since this demand often outruns the production capacity of the economy at a point, it necessarily needs inflation (Clark, 2019).Â
Q12.
BREXIT is the political phenomenon of the decade, whereby, the UK is pulling itself out of the European Union. Forfeiting itself from all the monetary, fiscal, and political pressures and responsibilities, which it has by being a part of the prestigious conglomerate of European Nations – EU. This might have a positive effect on the country as it can now do things which weren't equivocally endorsed by the other member nations of the European Union, however so, On the economic front, the United Kingdom or the UK is about to suffer a lot and that too mostly due to its severed trading relations after the endorsement of BREXIT by the ruling government (Goldberger, 2019).
The model of Aggregate Demand & Aggregate Supply might be able to explain the internal economic position and condition of Britain (through GDP and PCI), but the majority of key economic indicators such as Balance of Payments (BoP) and Net Factor Income from Abroad, along with others, can't be effectively and accurately explained through the AD & AS relationship (Mankiw, 2020).
Therefore, the AD & AS curves will give a partial picture of the economic capability and condition of Britain after BREXIT.Â
Conclusion
To summarise the assignment, I learned all about the basic economic theory and practical use of this theory from the examples of APPLE iPhones, Roaming Charges by Telecom operators, and the Macroeconomic analysis of an economy through this BREXIT phenomenon.
All in all, the researcher has developed a sound knowledge of Microeconomics, Macroeconomics, and Maths, and also learned to integrate those three essential fulcrums of economics with Pictorial representation of data through graphs and diagrams.
Although, the researcher has learned quite a handful of things he still does have some convictions relating to the above research he went through regarding APPLE Inc., which are explained as follows –
Tim Cook is an obvious business person related to the brand.
There is a sure social store related to utilizing the brand. The entirety of the abovementioned, in addition to its more significant expense, focuses, fortify this.
Enabled and connected with workers would show cautious contracting rehearses. It has been said that APPLE directors pose three inquiries of potential employment applicants:
Do they show coarseness, or the pervasiveness to take bold decisions?
Can they convey a Sterling or Ritz-Carlton level of client support?
Could they have gone head to head with Steve Jobs APPLE?
APPLE's way of life is, by all accounts, one devoted to revelation and greatness. Considering these positive characteristics together, it is no big surprise that APPLE is a top worldwide brand.
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Clark, C., 2019. National income and outlay. Routledge.
Flynn, B.B., Koufteros, X. and Lu, G., 2016. On theory in supply chain uncertainty and its implications for supply chain integration. Journal of Supply Chain Management,  52(3), pp.3-27.
Goldberger, A., 2019. Functional form and utility: A review of consumer demand theory. Routledge.
Heijdra, B.J., 2017. Foundations of modern macroeconomics. Oxford University Press.
Hennessy, D.A., and Wolf, C.A., 2018. Asymmetric information, externalities, and incentives in animal disease prevention and control. Journal of Agricultural Economics, Â 69(1), pp.226-242.
Jawad, M., Lee, J.T., Glantz, S., and Millett, C., 2018. Price elasticity of demand of non-cigarette tobacco products: a systematic review and meta-analysis. Tobacco control, Â 27(6), pp.689-695.
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Mitra, S., Mookherjee, D., Torero, M. and Visaria, S., 2018. Asymmetric information and middleman margins: An experiment with Indian potato farmers. Review of Economics and Statistics,  100(1), pp.1-13.
Salamone, J.D., Correa, M., Yohn, S.E., Yang, J.H., Somerville, M., Rotolo, R.A. and Presby, R.E., 2017. Behavioural activation, effort-based choice, and elasticity of demand for motivational stimuli: Basic and translational neuroscience approaches Motivation Science, Â 3(3), p.208.
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