Economics Assignment: Self-Reflection On Macroeconomic & Microeconomic Concepts
This economics assignment allows you to reflect on how your previous assessments have helped you to understand the overall subject contents and apply the core concepts in real-time job environment. This assignment is to mainly help you reflect how the unit has helped you with a sound understanding of the volatility of business environment and effective decision making as business economists. Your reflection will be a maximum of 1500 words. You will have a minimum of 6 academic references to support your answer. Do not include information from blogs. You will follow APA 6th edition referencing style.
In this economics assignment, I will discuss how I can understand the core macroeconomic and microeconomic concepts through completing previous assessments. Moreover, I will also discuss how these understandings can be aligned with the real-time business environment. In this context, it is essential to mention that the business environment depends heaving on the fluctuation of a country’s economic factors as these factors act as external factors for businesses. In assessment 1, I have focused on the microeconomic aspects of Australia considering the current issue of the country. In assessment 2, I have discussed various macroeconomic factors to understand the economic trends of Australia for the last 5 years. In this assessment, my main motive is to analyse and discuss how the changing business environment can affect the decision-making of business economists significantly. For this, I am going to describe the main findings of previous assignments in a brief way to show my understanding of basic economics. Followed this, I will discuss how these concepts influence business economists to make decisions accordingly for all businesses.
Findings from previous two assessments:
In assessment 1, I have tried to incorporate the present microeconomic issue of Australia in the context of its housing market. I have studied two housing schemes, which are the First Home Owners Grant (FHOG) and the First Home Plus (FHP) to understand which one is better. From analysis, it is seen that the first scheme is better as it helps first-time homeowners to purchase houses in different regions of the country by granting loans as per the land value. Hence, this housing scheme helps the eligible home purchasers to meet their housing demand and this in turn leads the housing market of Australia to become a stable one. From the assessment, I also have seen that due to the elastic demand for the houses, more people intend to purchase houses as price burden to afford a house falls slightly. The housing market has a monopoly structure as the number of sellers is only one, which is the government of the country. On the other side, the number of buyers is large across the country and the seller can practice price discrimination by offering different grants to people in different locations of the country.
The second assessment helps to figure out the present macroeconomic condition of Australia by considering some basic macroeconomic factors. For this, I have taken indicators such as GDP per capita along with inflation rate and the unemployment rate to analyse their trends for the last 5 years. From the analysis, I have seen that the country’s slow pace of GDP growth, higher unemployment as well as inflation rate tends the economy to face a recession in the coming years. In addition to this, the study also has tried to cover the present social issue of the country, which is the outburst of COVID-19 pandemic across the country and its impact on the economy. From analysis, it is observed that the entire country has gone into a complete lockdown condition where not domestic production activities as well as international trade are operated. However, to maintain economic activities along with the well-being of common people, especially daily wager, the government of Australia adopts both fiscal and monetary policies like other Asia-Pacific countries. Hence, from this analysis, I have understood that macroeconomic factors have overall impacts on businesses and to recover from a recessionary stage, the government needs to play a crucial role.
Impact of economics on a country’s business environment:
After discussing these two assessments, it can be said that both micro and macro-economic conditions have direct and indirect impacts on a country’s business environment and hence to overcome risks, the decision-makers need to make adequate policies and strategies (Hanafi,2020). To understand the impact of various economic consequences on business, the following section has discussed the relationship between economic factors and businesses.
Growth of gross domestic product and per capita income of a country:
The gross domestic product reflects a country’s national income by considering the total production of goods and services within a year. Hence, this reflects whether a country develops its products across the world or not. In addition to this, GDP per capita indicates the income of an individual in the country. This shows the purchasing power of the country’s people and their living standard. Per capita income is the basic measure of a country’s growth. If it increases over the years then it implies that more people become able to purchase goods and services. Therefore, it shows that people can demand more goods and services in the market and this further can increase the total productivity of the businesses (Dwiyanto, Fauzi & Rini, 2019). Therefore, if the national income along with the per capita income of the country increases at a faster rate than business economists decide to produce more for gaining more revenue. On the contrary, if the economy grows at a slower pace with slow per capita income than business economists will decide to reduce production for avoiding loss.
When prices of a basket of goods and services increase continuously in a country then it can be said that the country is facing higher inflation. A small percentage of inflation that is from 2% to 3% is good for an economy. However, a higher inflation rate than anticipated can cause the county to face various difficulties. This situation occurs when the overall money supply increases continuously in the economy and this in turn increases the production capability of buyers. However, excess demand compared to supply creates demand-pull inflation in the economy (Krol, 2017). As a result, product price increases. Inflation also occurs due to increasing costs. To bear excessive production costs, producers are forced to increase product prices in the market and this in turn increases aggregate price levels in the market. Thus, the changing price levels make an uncertain condition for businesses.
Unemployment can also have a direct and adverse impact on a company’s business. The main aim of a business is to maximize profit by selling products to consumers. On the other side, consumers demand products but along with this they also need to be capable enough to purchase those products. However, unemployment reduces the number of capable customers and this in turn reduces the total demand for the companies’ goods and services in the market. Thus, from here it can be said that an increasing number of unemployed people can reduce the opportunity of a business to grow and to gain profits from the market (de la Cruz, Jover & Gras, 2018). On the contrary, an increasing number of employed people can help businesses to gain more profits due to the availability of more potential customers. Therefore, depending on the employment of the country, business economists will decide pricing strategies for their businesses accordingly.
The business cycle influences the business strategies of a country’s entire businesses. The cycle fluctuates and hence has four stages which are boom, depression, recession and recovery (Fritsch & Kritikos, 2016). Business economists can gain profits in boom and hence they will advise companies to increase product prices while businesses will lose in recession and this stage, will reduce production as well as the total number of employees to reduce production costs.
Apart from these, businesses are also influenced by microeconomic factors, which are demand, supply and market structure.
Demand and Supply:
In microeconomics, demand and supply are considered two basic concepts that have a direct relationship with a business. Demand comes from consumers who intend to purchase a product to fulfil their requirements. However, consumers prefer to purchase goods when these have comparatively low prices while sellers intend to sell products at high prices. Thus, an equilibrium condition occurs when both buyers and sellers tend to transact goods and services at a certain price (Wan, Dresner & Evers, 2018). However, an increase in price can affect demand for a good or service differently as demand elasticity is not some for all products. In the case of elastic demand, producers can charge higher prices as people cannot reduce their demand for it. On the contrary, producers cannot increase the price for elastic goods as people can reduce their demand for those products if price increases slightly. Thus, before setting the price of a product, sellers or producers need to decide the demand elasticity for the product.
Type of market:
In microeconomics, markets can be divided into perfect competition, monopoly, perfectly competitive and oligopoly. Different markets follow different structures and hence manage to need to decide business decisions accordingly with different characteristics of those markets (Yang & Gabrielsson, 2017). From analysis, it can be said that business economics can influence a monopolist to charge higher prices for gaining economic profit while for a competitive business, they will provide price taking strategies.
From the entire analysis, it can be said that economic concepts have a close relationship with the activities of real-time businesses. Due to the variation of market conditions due to fluctuation of the inflation rate, unemployment rate, GDP growth and per-capita income growth of people, the entire business sector needs to decide effective marketing and pricing strategies to gain profit and to earn more revenues. In addition to this, changing microcosmic factors also influence business decisions of a particular company and hence business economists need to select proper strategies accordingly.
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