PPF Curve -Microeconomics

PPF Curve

So today we will be talking about the PPF curve and the economics theory behind it.

If you miss the first economics post of this series of posts click here->  how markets work?

So what are PPF curves?

PPF curve- Well PPF curve stands for production possibility frontier which in essence show the maximum productive potentials of an economy using two goods or services when working at full capacity.
The PPF curve can also show the opportunity cost of using scarce resources.
For example if the scarce resource is milk, then there is a trade-off between producing cheese or yoghurt from the milk. The PPF curve can show this like in the diagram below.

That's all for today guys. Hope that the information was helpful regardless of the posts size. If you missed our last post on Scarcity, click here -> Scarcity

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Economic Resources - Microeconomics

Economic Resources

So today we will be talking about economics resources and the economics theory behind it.

 If you miss the first economics post of this series of posts click here->  how markets work?

So what is economics resources?

They are goods and services that are available to both individuals and businesses which are ultimately used to produce valuable consumer products.

Economics resources are therefore the factors of production. These are Capital, Enterprise, Land and Labour. These are explained in more detail in the table below.

These four factors can be remembered using the acronym CELL.

C- capital
E- enterprise
L- land
L- labour

The environment is a scarce resource and the planet has a limited amount of resources. They are made up of non-renewable and renewable resources.

Renewable resources- Renewable resources are resources that can be used over and over again without potentially running out and also it can be replenished. Examples of this include oxygen, fish or solar and wind power. However if the resource was to be in demand more than the amount being produced or able to produce the resource would decline.

This could be prevented and controlled by for example reducing deforestation, or imposing fishing quotas.

Non-renewable resources- Non-renewable resources are resources that cannot be used over and over again due to the fact that they will finally run out at some point. Examples of this are oil, fossil fuels etc... as they cannot be replenished at the rate they are being used.

That's all for today guys. Hope that the information was helpful. If you missed our last post on Economics Methodology, click here -> Economics Methodology

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Economics methodology- Microeconomics

Economics Methodology

Welcome to the designing brilliance blog and today we will be discussing and talking about economic methodology.

So in economics, economists need to make assumptions. Assumptions on events that may occur or things that may change or stay the same such as whether the shares market may grow or go into decline.  Economists are not able to conduct scientific experiments and therefore use real-life scenarios to make models such as the demand curve and supply curve which was shown in yesterdays post on how markets work? There are two types of assumptions that are made; these are positive and normative statements.

Positive statements- 

They are statements which are objective and therefore can be tested by factual information to be proven true or false. The statements would use words such as 'will ' and or  'is'.

For example "raising the taxes on alcohol will lead to a fall in demand of alcohol and a fall in profits of pub landlords". This is a positive statement.

Another example of a positive statement would be " higher temperatures will lead to an increase in the demand for sun-cream"

The key part to remember when identifying a positive statement is that it includes words such as 'will' and the statement can be tested and results can be examined and then the statement can be accepted or rejected.

Normative statement- 


Normative statements are value judgements; so in essence they are opinion based and can be subjective. They are not based of factual information! Normative statements use words such as 'should' generally.

For example " the free market is the best way to allocate resources" is a normative statement as it is opinion based as it suggests one way is better than another without any factual evidence

Another example of a normative statement would be " The government should increase tax on alcohol".


That's all for today guys. Hope that the information was helpful. If you missed our last post on how markets work?, click here -> how markets work?

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How markets work ?- Microeconomics

How markets work ?

A warm welcome and hello from everyone here at Designing Brilliance. It been quite a while since we last posted however we are in the process of putting a new team together. So we look forward to posting more posts on our blog!

So in today's post we will be looking into education and microeconomics in particular.

The first topic we will be looking at is how markets work. We will be taking a look at the basics on supply and demand and the determinants of price.

Lets get started with a quick definition of price mechanism- the price mechanism is the means by which consumers and producers interact to determine the allocation of resources between different goods and services. In essence this basically means that consumers and producers decide where resource (e.g oil, wheat etc...) are used.

There are three types of functions of price mechanism which can be remembered using the acronym SIR

S-signalling
I- incentive
R- rationing

DEMAND

 Now moving onto demand. What is demand? It is an insistent and peremptory request. That is the google definition; however demand in economics is the wants and the needs of the consumer. Demand is shown in a graph known as the demand curve which shows the relationship between the price of and item and the quantity demanded over a period of time. The demand curve is shown below in red.

There are some factors that cause a shift in the demand curve as shown by the movements of the demand curve from the red to the blue as shown in the graph above. These factors include

Income- So for example an increase in income would suggest or imply that the consumer has more disposable income and therefore may demand more of product thus increasing demand (shift of demand curve to the right)

Tastes/ trends- Tastes and trends are one of the most common factors that cause shifts in demand. This is because a sudden change in rend for an item can cause demand for a product to change. For example lets say a new craze of converse shoes comes into fashion or trend then more consumers will be requesting or asking for the product and in essence will cause the demand curve to shift to the right. A shift to the left would occur if the trend became negative (e.g a bad review or health impact causing demand for the product to reduce).

Substitutes- What are substitutes. Well this can be kind of hard to explain so I am going to give an example. So different brands offering the same product. E.G Heinz baked beans Vs Tesco baked beans.

Competition- Between brands competing can change demand for one or more products.

Price- The price of a product can determine whether the consumer would want to buy one good over another. For example I would probably buy a can of beans costing £0.50 rather than £0.51 or any more expensive. Therefore the demand for the beans costing £0.50 would increase theoretically and the demand for the other beans would theoretically decrease.

SUPPLY

Finally onto the last part of today's article we will look at supply. What is supply? Supply is the quantity of a good or service that a producer is willing and able to supply to a market at a given price in a given time period. Supply is shown on a graph using the supply curve as shown in the diagram below.

There are some factors that cause a shift in the supply curve as shown by the movements of the supply curve from S to S1 in the blue as shown in the graph above. These factors include:

Weather- If there was good weather then it could potentially mean that a farmer may have a larger yielded crop resulting in a shift in supply to the right where as if there was to be a natural disaster such as a drought it would most likely result in a decrease in supply (shift to the left).

Subsidies-  Subsidies are amounts of money that are given to individual firm in order o help boost their production in order to supply more and the subsidies do not need to be paid back. Subsidies allow producers to reduce over all and cost per unit item; therefore allowing producers to supply more goods and services.

Technology- Technology can play a part in increasing the supply. If better technology is used for example using machine to make a product and making the process automated rather than having workers making items it will reduce costs as well as increase productivity and thus increase quantity supplied.

Cost of production- If costs of production are high it is very likely that producers will only be able to produce a limited amount of products or services whereas if costs of production are kept low then the amount that is supplied is considerably higher. resulting in a shift in the supply curve to the right.

That's all for today guys. Hope that the information was helpful. Don't forget to subscribe and leave comments below and share share share !  :)

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