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Buss1040 Economics

Introduction

Economics is a key area of study to understand the market and economy. It focuses on various aspects like governments, corporations, and people. The subject looks at how we can allocate limited resources. 

BUSS1040 is a framework where students are introduced to fundamental economic ideas and concepts. It is an introductory course that is crucial for understanding the larger economic world. 

The course covers many topics. Some of the popular ones are supply and demand, market dynamics, and economic efficiency. It also talks about in detail the role of government in the economy. 

This blog explores the core ideas of economics that are taught in the BUSS1040 programs. The blog will give readers a thorough grasp of the importance of this course and how they can put it into practice: 

1.    The Fundamentals of Demand and Supply

The fundamental concepts of economic theory are supply and demand. According to the law of demand, the fall in the price of a product leads to a rise in demand. However, for this to happen all other factors must remain the same. 

In the same way, the law of supply says that as the price of goods increases, the quantity supplied also increases. It is important to understand the interaction between supply and demand.

This helps to analyse the market outcomes better. One can predict the price movements and make more informed decisions.

• Demand Curve: It represents the link between the price of a good and the quantity demanded.

• Supply curve: It represents the link between the price of an item and the quantity supplied. 

• Market equilibrium: This refers to the point where the supply and demand curves meet. It indicates the price at which the quantity supplied equals the quantity demanded. 

2. Supply and Demand Elasticity

Elasticity measures how the quantity demanded or supplied reacts to the change in price. This concept is vital for both governments and businesses. They should understand this idea to predict demand changes and price fluctuation. This will help to know products with high elasticity.  

• Price Elasticity of Demand: This helps to determine how the demand changes with the price change. Products with high elasticity see high changes in demand when prices fluctuate. On the other hand, inelastic products experience little change with a price change. 

• Price Elasticity of Supply:  This helps to determine how the supply changes with the change in price. Products that can be easily produced have high elasticity. Hence they won't be affected much. 

3.  Market structure

Market structure refers to the competitive environment in which companies operate. A market's structure has an impact on output, price, and general economic efficiency.

• Perfect Competition: Under such market types, tech firms take the lead in deciding the price. In such a market, one can see many small firms, similar products and no barriers to entry. As everyone is free to enter and operate it gives power to the business firms to regulate prices. 

• Monopoly: A market in which there is only one vendor and they control the whole supply of products. There are no substitutes for the product. The shopkeeper or monopolist is the price maker in this market. This kind of market structure can lead to inefficiencies. It also tends to increase prices for the consumers. 

• Oligopoly: This is the market state where few large firms dominate the market. These companies have a great deal of control over prices. They enjoy high freedom because of their authority. Their actions and market strategies often lead to price fixing.  

• Monopolistic Competition: A lot of businesses compete with one another by offering similar goods but not identical. This market combines elements of perfect competition and monopoly. Firms in this system have some degree of market power. 

4.  Market failures and economic efficiency

Economic efficiency refers to the point where the resources allocated exceed the total surplus. Here the term surplus refers to the sum of consumer and producer samples. However, this might not always be the case. Markets might not operate efficiently always. This can lead to market failures. Market failure is a situation where the resources are more than the surplus. 

Different Efficiency Types:

• Allocative efficiency: It is the situation where resources are distributed as per the customer preferences. 

• Productive Efficiency:  Under this, the goods are produced at the lowest possible cost. This is done to increase their efficiency. It makes it easier to have more surplus. 

• Market failures: This situation occurs when the market fails to distribute resources effectively. Here the market is the only sole factor. Some of the causes are external factors. For example, externalities where a third party is affected by the transaction. 

Public goods that can't be excluded or don't have competitors. There is the case of information asymmetry where one party has access to more and better information than the other. 

5.  The Government's Function in the Economy

Governments take various economic measures. It has to address the many market imperfections. It is charged with the duty to reallocate revenue. The policies aim to promote economic stability and expansion. Government intervention can take many forms and levels. They depend on the economic system and policies.  

• Regulation: Governments impose all sorts of regulations on enterprises. This is done to safeguard customers, employees, and the environment. The government uses several approaches for this. For example, it ensures minimum pay and upholds safety regulations. It also focuses on the environmental impact and aims to reduce pollution.

• Taxes and Subsidies: Taxes are a good source of revenue. However, they are also used to discourage negative externalities. For example, pollution. Subsidies might seem like an expense to the government. However, it promotes positive externalities. For example education. The government uses these tools to influence economic behaviour. They employ them as per the need to achieve social objectives. 

• Public goods: These are the services that are given by governments. They are different from what the private sector covers. Or it covers products that are underprovided. They are generally non-excludable and non-rivalrous. Examples of public goods include infrastructure, education, and national defence.

6.    Policies and Macroeconomic Indicators

Macroeconomics studies aggregate indicators like GDP, unemployment, and inflation. These factors help to achieve a comprehensive understanding of the economy. A complete picture is essential for Making educated judgments in business and politics.

• Gross domestic product: Also known as GDP, it refers to the entire value of all products and services produced in an economy. It is a crucial sign of the state of the economy. GDP represents the state of an economy and its people. 

• Unemployment rate:  The unemployment rate refers to the percentage of the labour force that is willing to work and is actively looking for work. An economy with low unemployment rates implies a strong economy. Whereas high rates point out that there are fewer opportunities in the economy. 

• Inflation: Refers to the rate at which prices generally rise for both goods and services. It decides the purchasing power of individuals. Many government bodies control it like central banks and the Reserve Bank of Australia. They devise many monetary policies for this purpose. 

7.    Globalisation and International Trade

International trade allows countries to produce and exchange goods they are best at. It focuses on goods that are most efficient to produce. This leads to high economic welfare globally. However, Trade flows and national economies can be impacted by many factors. For example, trade laws, tariffs, and world economic events might have a direct impact. 

• Comparative Advantage: The concept of comparative advantage focuses on the efficiency of cost production. It states that a country should focus on manufacturing and exporting commodities and services that it can produce more effectively than other nations. This way it'll have some advantages. 

• Trade barriers: Quotas, tariffs, and other restrictions can protect home businesses from outside competition. However, they can also result in inefficiencies and higher consumer prices. 

• Globalisation: It refers to the process by which economies become more integrated. It depends on factors like commerce, investment, and technology. Globalisation has encouraged economic expansion and advancement. However, it has also sparked worries about disparity. It is criticised for causing cultural homogenization and harm to the environment.

In summary

BUSS1040 Economics course shapes the understanding of the students. They will have a strong foundation in economic principles. It will allow them to comprehend the forces that shape markets and economic policies. Through the examination of fundamental ideas including supply and demand, market mechanisms, economic efficiency, and governmental functions, students acquire analytical skills. 

They can use this expertise to navigate through the intricacies of the economic terrain. One can apply the knowledge gained in this course to everyday life, corporate decisions, or policy-making. They will also be able to understand and address the opportunities and difficulties presented by the modern world's economics. 

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