Aspects of microeconomics and macroeconomics

Aspects of microeconomics and macroeconomics On this assignment will be looking into different aspect of microeconomics and macroeconomics, will be taken into consideration the definition and concept of the whole question as follow below. Part 1 (Micro section) Q1 To help understands by defining Demand that is the quantity of a good which consumers want, and are prepared and able to pay for. In this case the demand of organic food and drink has fallen sharply, and the main influence for fallen on demand for those products are: price; income; the price of substitute goods; the price of complements; taste; demographic factors; advertising and expectations. Price is one of the most important factors and it shift demand curve when it rises, the effect is shown by a movement along the demand curve, because consumers are likely to substitute cheaper alternative goods. http://upload.wikimedia.org/wikibooks/en/c/c1/DemandCurveMovementExample2.png The demand curve is downward-sloping, showing that as a price falls, demand rises, and vi ce versa. In this graphic, a reduction of price from P2 to P1 causes a rise in demand from Q2 to Q1. Usually, the more people earn, the more they will spend. The demand for most goods increase as income rises, and these goods are known as normal goods. And organic food and drink are normal goods, because the demand falls as consumers’ income falls, and vice versa. Demand can change sometimes, because of the expectation of price changes in the future. For example, post-Christmas sales may push customers to postpone spending until January. In an article entitled Food Price, Ellis makes the point that (à ¢Ã¢â€š ¬Ã‚ ¦) â€Å"The proportion of shoppers buying organic food dropped by five per cent in the previous year. In July 2009, research carried out by marketing consultancy Cohn and Wolfe also reported that British shoppers are turning their backs on premium foods, organic produce and Fair-trade goods. According to the Cohn and Wolfe report, 69 per cent of shoppers say they i ntend to stick to their belt-tightening shopping practices even after the downturn ends† (†¦). www.bbc.co.uk/food/food_matters/foodprices.shtml#what_about_the_recession. Q2 The production possibility frontier illustrates the problems of scarcity and choice and the opportunity cost of resources allocation decisions. The opportunity cost of something is what you give up to get it. To understand the idea the economy, which produce two goods as manufacturing and financial services, with all resources employed, producing more financial services can only be achieved by some sacrifice on manufacturing services. It can be illustrated on diagram below shown. B A 0 The frontier shows all the maximum possible outputs given the economy’s existing quantity of resources. It can have any combination of goods along the line. Point A shows a society which is failing to use all of its resources to the full, either through inefficiency or unemployment. Point B is currently unachievab le, but can be achieved throw economic growth. The shape of the curve is bowed outwards to the origin, is based on the notion of that society progressively allocates more resources to the production of a particular good, the opportunity cost of doing so will increase. In other words the curve is bold because the more input the less is the output.