Valentine's Day
Since our group's article has been barred to pple w/o a subscription to The Economist, here's a replacement article:
The Economics of the Rose Market
http://www.mises.org/story/1164
Just in time for Valentine's Day!
Sneak preview to inspire you to click that link:
now click & find out why, and comment. (or as Alycia would say in accordance with the tag-board: anmerkung!)
- Group 3: Tocks, Dorothy, Yan Sheng, Jean
The Economics of the Rose Market
http://www.mises.org/story/1164
Just in time for Valentine's Day!
Sneak preview to inspire you to click that link:
Why are rose prices so high on Valentine's Day? Ask the lovers - the consumers - and they'll say it's the florists. Ask the florists, and they'll say it's the wholesalers. Ask the wholesalers, and they'll say it's the growers. Ask the growers, and they'll say it's the costs.
The real reason? It's the consumers.
now click & find out why, and comment. (or as Alycia would say in accordance with the tag-board: anmerkung!)
- Group 3: Tocks, Dorothy, Yan Sheng, Jean
posted by t12cjc | 6:45 pm
3 Comments:
HELLO, this is wanting and erica. hurrrr. okay hear us out, even if LB and SHUIE is deaf (:
okay, since there is a higher dd of roses on vday, there must also be an equally high supply of roses. therefore, the price will increase due to the higher supply. this is due to the law of ss; states that the change in qty ss is proportional to the change in price. when ss increases, price also rises due to rising factors of production. prices need to be higher in order to cover the increasing costs. therefore. on vday, dd for roses are high, and there is a need for increase in supply, and thus prices of roses increase too.
roses are also relatively less elastic than normal goods on vday since it is supposed to signify love. therefore, even though prices of roses are very high, there is still a relatively great dd for them as people are willing to pay for the roses since it is only "once a year".
love, roses! :D
Qn1:-Suggest some reasons for the fall in consumer spending.
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ans: the fall in consumer spending could be due to several reasons. firstly, that the UK economy was in a recession, which induced people to save, instead of spend. the paradox of thrift can be used in this answer, showing that the fall in consumer spending would result in adverse effects on the cycle of income and domestic consumption. hence, also causing a fall in overall spending and income in the UK.
Secondly, the rise in oil prices also caused a rise in the production of goods and transport costs. this lowered the profits of companies if they had to absorb the additional costs. for example, in the UK, taxi drivers had to bear the cost of higher fuel prices for a period of time, before they recieved subsidies from the government. All these would ultimately affect consumers by reducing the consumer surplus, because taxpayers are consumers too.
Qn 2- Using economic analysis, explain how a "fall in consumer spending" and "high oil prices" will affect the UK economy.
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Ans: Oil prices and consumer spending are interlinked. Using demand and supply to analyse the situation, the higher the price of a good, the less the demand. When oil, an important commodity used in the making of many products and also used in the vehicles that transport raw materials and goods.
this would cause the overall production cost of the good to rise. and when the price of a good rises, demand falls.
Using keynes theory, not spending income on domestic goods would mean a withdrawal in funds, reducing the amount in the circular flow. this would in turn cause an overall fall in the national income levels, and have a negative effect on the UK economy.
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Qn3- Explain the impacts of a fall in interest rates on the national income of the UK economy.
Ans:
Using keynes theory, when interest rates fall, the cost of borrowing would be lowered, this induces borrowing, and causes injection to increase as investment too will rise. When investments in UK rises, income generation will occur, and people will have more disposable income. assuming that mpc is 0.75, there will be an increase in consumer spending by 75% of their change in income.
a rise in Disposable income causes a rise in domestic consumtion. this would be beneficial to the UK economy as it creates more jobs, and brings the aggregate expanditure to a higher level as the countries productivity is now raised.
- Suggest some other ways to promote greater growth in the economy.
In the UK, the fiscal policy may be used. this occurs when the government intervenes in tax and government expanditure to stablise the economy.
The government can increase expanditure on public goods like roads and buildings, creating income in the country and stablalising the economy.
it can also reduce tax, so that consumers have a more disposable income, causing a rise in domestic consumption.
oh. crap. that was natalie cheong. the t12_cjc :)
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