Economics
a. Economics can be defined as the study of how the scarce resources and good are distributed with a given society (Cliffnotes, 2011). It involves concepts such as; scarcity, choice, opportunity cost and distribution. The term scarce simply means in short supply. Most essential goods and resources are usually scarce and therefore the society must learn how they are effectively distributed among the members. This is where the concept of choice comes in. Economic choice refers to the act of deciding between the different uses of scarce resources. While making this decision some alternative proposals for using the scarce resources will be selected while some will be left out. The alternatives left out are what are referred to as opportunity cost. Since the available resources are scarce, how they are distributed among members of the society is also important. Economics also involve the study on how such scarce resources may be distributed.
b. Positive and Normative are two types of economics. Positive economics focuses on the actual situations that exist in the society and how it can be address this situation (Schenk, 2011). Normative economics focus on how the situation should be under the ideal condition. While positive economics give an approval and disapproval of the prevailing economic conditions, normative economics pass judgment on whether the prevailing conditions are desirable or not.
c. Marginal analysis refers to an economics analytical method which evaluates the impact of small economic changes (American Business Org, 2011). It entails concepts such as; marginal utilities, contribution margin, margin cost, marginal product and marginal revenue. This analytical method may aid an organization to understand the relationship between the amount of output produce and the amount of input used. It is also used in making decision on how resources will be allocated so that benefits can maximized. It may also help an organization to optimize profits by understanding the relationship between marginal cost, marginal revenues and marginal benefits.
d. Price elasticity of demand refers to a measure of the sensitivity of quantity demanded to a change in price when all factor are held constant (Cheng, 2001). Under normal market condition the quantity demanded usually diminishes with an increase in price. There factors that affect the elasticity of demand. One factor is the nature of the good. Demand of necessity good will be less sensitive to price changes than luxury good. Another factor is availability of substitutes. Substitutes are good or services that may be used in place of the good that has been affected by price changes. Demands of good having substitutes is likely to be more sensitive to price changes than that of goods without substitutes.
e. Demand and supply factors have an impact on price of commodity. For example an increase demand of oil will lead to increase in increase in prices and vise versa (Demand, 2011). An increase in supply on the other hand, will lead to decline in oil prices. When comparing prices and demand this relation will form a curve that shifts to the right. When comparing the price of oil and its supply the curve will shift to the left.
f. Elasticity of demand has a relationship with total revenue. Goods with high elasticity are usually under the control of market forces that under the control of seller. This means that the business has limited control over the revenues generated from such goods. On the hand, the demand for inelastic goods is almost assured and therefore the business has more control over the prices, level sales and revenue they expect to get from the market.
References
American Business Org (2011). Marginal Analysis. April 28, 2011. Retrieved from http://american-business.org/537-marginal-analysis.html
Anonymous (2011). Factors Affecting Demand. April 28, 2011. Retrieved from http://www.ecoteacher.asn.au/Demand/dslide1/d37.htm
Cheng L. (2001). Elasticity. April 28, 2011. Retrieved from http://www.comp.nus.edu.sg/~ipng/mecon/sg/03elas_sg.pdf
Cliffnotes (2011). What is Economics. April 28, 2011. Retrieved from http://www.cliffsnotes.com/Section/What-is-economics-.id-305399,articleId-8204.html
Schenk R. (2011). Positive and Normative Economics. April 28, 2011. Retrieved from http://ingrimayne.com/econ/Introduction/Normativ.html
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