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Introduction : Economics Assignment Sample on Determinants of Movement Dynamics and Rural Income Generation
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Task 1
Family Dollar Groceries
Family Dollar Groceries was founded in November 1959 in Charlotte, North Carolina, U.S. The headquarter of this company is located in Chesapeake, Virginia, United States (Family dollar, 2021). This company is providing products including groceries, toys, housewares, and more.
Demand
Demands in economics are the quantity of the goods according to the purchasing ability and willingness of the customer to purchase (Aloisi, 2019).
Law of Demand
In the context of law of demand, the quantity that is purchased and the price at which it is sold have an inverse relationship. According to the economic behaviour of people, they have a tendency to give higher priority to requirements and goals that are more urgent than those that are less urgent. According to Hildenbrand (2019), this continues to be a manner that individuals pick among the limited means that are available to them. On the other hand, for every economic good, for example, the first item consumed by customers is typically the one that satisfies the immediate demand, which helps increase customer satisfaction to the maximum possible level. This is because customers get their hands on the product first.
Movement in the same curve
A change in the cost of a commodity of FamilyDollar Groceries might result in a shift in consumer demand for that commodity. In turn, this causes a change in the shape of the demand curve. Such a shift in consumer demand causes customers to fluctuate their demand, which in turn creates a shift in the demand curve. Price shifts can cause movement along the curve, which can either be an extension or expansion (because there is more demand) or a contraction (because there is less demand).
- Demand contraction: When the cost of grocery goods of FamilyDollar Groceries is increased from its initial price, there is a resulting decrease in demand for the product. According to Viviani and Terzuolo (2019), this results in a decline in demand for a product. Along the curve, a contraction in demand can be identified by an upwards movement. In one such instance, a piece of snacks that was originally priced at $12 had a demand of 80; however, after the price was re-strategized to $16, the demand dropped to 60. This indicates that demand will continue to decrease.
- Demand expansion: When the price of a commodity of FamilyDollar Groceries like quick meals, goes down, this phenomenon, known as an extension in price, takes place. When the price of canned foods drops from $12 to $10, there is a noticeable uptick in demand for the goods, and consumers tend to buy more of them. According to Caskey and Fazzari (2019), a motion in the demand curve can be used to determine an extension in demand for a product.
A shift in price does not indicate a change in the shape of the curve; rather, a shift in price just indicates a demand movement from one demand point to another demand point.
Changes in curve
Any variation from the original demand curve represents a change in demand for the product that is not directly attributable to the price of the product. This occurs when the demand for a service or good shifts even when the cost of such services or goods remains the same. For instance, a change in the curve is analysed whenever there is a decrease or increase in demand for breakfast that is unrelated to the price of the item. Muth (2019) are of the opinion that a shift can be signalled by movement in either the left or the right direction. A rise in demand is shown by movement toward the right side of the graph, while a decline in demand is shown by movement toward the left side of the graph. The shift in demand for the food product could have been caused by several different factors. These include things like commodities that are gaining or losing popularity, a rise or reduction in the pricing of replacement goods, an increase or decrease in the prices of substitute goods, changes in income, and seasonal influences.
The fact that an increase in demand can result in a lower price for butter is one of the best illustrations of how the demand curve for bread can shift to the right side of the graph (Hildenbrand, 2019). The bread and butter of FamilyDollar Groceries are foods that go well together and are frequently consumed together. Consequently, a reduction in the price of butter may result in an increase in the demand for and consumption of bread, despite the fact that the price of bread remains unchanged at $12.
Supply
The number of products or resources that industry players are able or willing to provide to the customer is referred to as supply (Pigou, 2019).
Law of Supply
In microeconomics, the Los theory, which is also known as the law of supply, is a law that asserts that all other factors being equal, when the cost of a good increases, the tendency for the quantity delivered by the suppliers to increase is the opposite of what happens when the cost of a product decreases. The available quantity of the commodity is declining on average. According to Gale (2019), supply law states that when the price of a commodity such as housewares increases, suppliers have a tendency to supply the goods more in an effort to increase their profitability by increasing the number of goods that are offered for sale. Alternately, when FamilyDollar Grocery's housewares are sold at lower prices, the company produces a significantly lower quantity of those goods because the lower prices result in a lower revenue and profit.
Movement in the same curve
Based on the supply law, a shift in the supply curve occurs when the amount of the commodity that is supplied changes in tandem with a change in the price of the commodity, regardless of whether the other factors that determine supply stay constant. The phrase "movement in SC" was coined by Copes (2019) to refer to any changes that occurred inside the supply curve. A shift in SC denotes a change in the quantity supplied and the price of the good as it moves from one point on the curve to another. This type of change in the curve of supply is referred to as a motion in the supply curve. This kind of thing can be divided into two categories:
- Supply extension: When all other factors remain the same, supply extension will result in a situation in which the quantity of an item that is delivered will grow in response to an increase in its price. For instance, the word "supply extension" is used to describe the situation in which the price of a pocketbook goes up, which in turn leads to an increase in the quantity supplied.
- The graph that is displayed above shows how the price of chocolate from FamilyDollar Groceries has increased from 10 rupees to 20 rupees, which has led to an extension of supply since the quantity that is supplied has also greatly increased.
- Supply Contraction : The term "supply contraction" refers to the situation in which the quantity of a product that is supplied decreases in response to a decrease in the product's price, presuming that all other factors remain constant (Viviani and Terzuolo, 2019).
For instance, the supply of ice cream reduces as the price drops from $20 to $10, as depicted in the preceding graph. This is because consumers are able to purchase less of the product. According to Hartree and Hill (2019), ice cream manufacturers cut output whenever prices drop because doing so lowers the profit margins they get from selling their products. On the other hand, if a significant number of people stockpile the frozen dessert, supply and demand may cause the price to increase once more. Aloisi (2019) adds that when the price of ice cream goes higher, manufacturers and distributors have a tendency to lower the amount of ice cream they produce.
Changes in curve
When the supply of commodities shifts for reasons other than the pricing of comparable commodities, such as advancements in technology or production costs, for example, this can create a change in the shape of the supply curve. In these kinds of situations, the SC does not compress or expand; rather, it moves totally, which is referred to as a change in curve. In SC, one can see both an upwards shift and a descending shift. According to Muth (2019), an upwards shift in supply is described as occurring when the supply of a product grows but the price of that commodity stays the same.
An increase in supply is indicative of two factors: an increase in supply at the same price as well as the same supply at a lower price. The first scenario is when the SC of ice cream from FamilyDollar Groceries goes up but the price of such a product stays the same at $20, and the second scenario is when the price of the ice cream goes down (to $10), but the quantity that is supplied stays the same. Both scenarios have the same outcome.
On the other side, a downward shift indicates a decrease in the number of goods supplied while maintaining the same price for the product. The findings of Costello et al. (2020) indicate that this demonstrates a negative change in SC. This reveals two potential outcomes, which are either a smaller supply for the same cost or the same supply at a higher price.
The downward shift could be used to identify which of these two occurrences has occurred if the cost of a packet of chips at FamilyDollar Groceries remains at $10 but the amount available decreases, or if the price remains at $10 however the quantity available grows to $20.
Task 2
Models of the economy in the 20th century
Economics According to Keynes
In the 20th century, Keynes founded a new school of economic thought that came to be known as Keynesian economics. In common parlance, it is referred to as macroeconomics. Goodfriend and King (2019) assert that Keynes referred to the work of past economics as "classical". According to Keynes, the ideas proposed by the classists may be applied to individual decisions and the markets for products; however, this does not correctly represent the functioning of the economy. The Keynesian macroeconomic theory portrays economies on a broad scale, which can reflect the unemployment rate, the average inflation (at price level), or the aggregate demand for all goods. According to Keynes's theory, governments are significant participants in an economy. In addition to this, it asserts that it can pull the economy out of recession by enacting expansionary fiscal and monetary policy, which refers to the management of the economy through the manipulation of taxation, the creation of new money, and the spending of government funds (Caskey and Fazzari, 2019).
Synthesis of the neoclassical style
Marginalist microeconomics and Keynesian macroeconomics, two difficult subfields of mathematics, rose to popularity in the middle of the twentieth century and came close to dominating the field of economics across the Western world. The neoclassical synthesis is one such theory that emerged as the dominant economics paradigm. College professors and academic researchers and policymakers all subscribe to this school of thought. The other school of thought is known as heterodox economics. Thomas (2020) claims that when the neoclassical synthesis was established, other economic philosophical schools began to grow. Public policy and ongoing academic disagreements with different theories which have gained a foothold at different times are rooted in the conflict between neoclassical microeconomics, which sees free markets as advantageous and effective, and Keynesian macroeconomics, which sees marketplaces as intrinsically vulnerable to catastrophic failure.
It was proposed that the tension that exists between macroeconomics and microeconomics could be resolved by incorporating hypotheses and aspects of microeconomics into macroeconomics, as well as by further developing microeconomics in order to provide micro-foundations for Keynesian macroeconomics. Different economic theorist streams and lines of research have been pursued to investigate this issue. According to Gale (2019), this has resulted in the growth of fresh techniques such as behavioural economics and a rebirth of interest in schools of economic thought that were previously marginalised, such as the Austrian school.
Models of the economy for the 21st century
TBL (triple bottom line)
The theory of bounded rationality (TBL) is a school of thought in economics that asserts organisations have an obligation to make a commitment to focusing on social and environmental issues to the same degree that they prioritize profitability. According to the TBL hypothesis, there should be three bottom lines rather than one single bottom line. These three bottom lines include people, the planet, and profits. According to Slaper and Hall (2019), the purpose of this type of theory is to determine an organization's level of commitment to Corporate Social Responsibility (CSR) along with the organization's effect on the environment over a period of time.
- Behavioural economics : Elements of psychology and economics are brought together in the field of behavioural economics in order to understand the process individuals behave in the real world in the specific ways that they do. This applies concepts from psychology, sociology, and, increasingly, neuroscience in order to explain the decisions that humans make, something that orthodox theories cannot do. According to Dawnay (2019), this provides new ways of thinking about the many drivers and barriers to behaviours such as the inclination of contributing to retirement savings and taking out health insurance.
- Social benefit factoring : When evaluating the efficacy of various economic policies in the 21st century, a number of younger economists have emphasised how important it is to take into account inequalities in income distribution and social well-being. According to Winters et al., one well-known economist who emphasised the importance of income redistribution within an economy was Anthony Atkinson. Atkinson was a proponent of the idea that money should be distributed more evenly (2020). In addition, Amartya Sen, a professor of philosophy at Harvard and winner of the Nobel Prize in Economics, for his studies on the inequities in wealth and poverty around the world. Sen was presented with the Nobel Prize in Economics in recognition of his contributions to the discipline. Additionally, through his work, Amartya brought ethical behaviour back into the realm of analysis. This connects Sen's line of thinking with that of early economic theorists who observed an excessive accumulation of wealth by groups and individuals, which was ultimately harmful to society.
Comparison and contrast of contemporary models
According to (2018), the Keynesian theory was the first to develop economics by shifting the focus from an internal to an external perspective, as well as encompassing all of the macroelements, in order to gain a better understanding of the status of the economy. In addition, neoclassical economics works under the assumption that multiple people have their own set of clearly articulated preferences and act in accordance with those preferences when making decisions that are both self-serving and well-informed. This is distinct from the behavioural theory, which also emerged in the 20th century but developed further into the 21st century. Behavioural theory combined aspects of economics and psychology in order to understand the ways in which individuals behave and the reasons behind those behaviours in the real world. The economic theorists of the 21st century place a strong emphasis not only on the growth of the economy but also on the transformation of the environment and of society. It is due to ideas like welfare support factoring and TBL that came into existence, according to Bourreau and Jullien (2018). Therefore, it is possible to say that the theories of the 21st century are more advanced and take into account all relevant aspects, including those that are environmental, psychological, and social, while maintaining a primary concentration on the growth of the economy.
References
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Bourreau, M. and Jullien, B., 2018. Mergers, investments and demand expansion. Economics Letters, 167, pp.136-141.
Caskey, J. and Fazzari, S., 2019. Aggregate demand contractions with nominal debt commitments: is wage flexibility stabilizing?. Economic Inquiry, 25(4), pp.583-597.
Copes, P., 2019. THE BACKWARD?BENDING SUPPLY CURVE OF THE FISHING INDUSTRY 1. Scottish Journal of Political Economy, 17(1), pp.69-77.
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Family dollar. (2021). About Us. Available at: https://www.familydollar.com/ [Accessed on 18th November 2022]
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Goodfriend, M. and King, R.G., 2019. The new neoclassical synthesis and the role of monetary policy. NBER macroeconomics annual, 12, pp.231-283.
Hartree, W. and Hill, A.V., 2019. The regulation of the supply of energy in muscular contraction. The Journal of Physiology, 55(1-2), p.133.
Hildenbrand, W., 2019. On the" Law of Demand". Econometrica: Journal of the Econometric Society, pp.997-1019.
Mankiw, N.G., 2018. What would Keynes have done?. The New York Times, 18.
Muth, R.F., 2019. The derived demand curve for a productive factor and the industry supply curve. Oxford Economic Papers, 16(2), pp.221-234.
Muth, R.F., 2019. The derived demand curve for a productive factor and the industry supply curve. Oxford Economic Papers, 16(2), pp.221-234.
Pigou, A.C., 2019. An analysis of supply. The Economic Journal, 38(150), pp.238-257.
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