Demand

1) Distinguish between a shift of the demand curve for a product and a movement along the product’s demand curve.

Demand is the quantity of a good or a service that a consumer desires and able to afford it at a given time for a price.  So it is the quantity of people who want and are able to economically afford the product.

For example, the demand for expensive items like, Rolex watches is not very high; because not many people are able to afford them therefore it has low demand. The demand for items like, toilet paper, have an enormous demand because everything needs it, and it is not very expensive.

Demand can be showed in a demand curve diagram, with price being on the y-axis and quantity demanded on the x-axis. Demand curve can shift to the left, meaning a drop in demand, or it can shift to the right, meaning a rise in demand; also the change in price of a product causes a movement along the existing demand curve.

 

With the graph it is easier to identify and understand how demand works. It shows on the diagram the demand relationship. The lower the price, the higher the demand will be. 

Even thought there are many factors that may cause the demand curve to shift, there only exists one that does not shift, which is a change in price, this only causes a movement along the demand curve. Nevertheless as the price changes the quantity demanded for the product will also change.

One effect that causes the movement along the curve is, The income effect or ‘real income’ this is how much an individual can buy with their certain income, so when the Price of a product decreases the individuals real income will increase, making it more likely for that person to buy more of the product. 

Other effect is the substitution effect; this occurs when the price of a product decreases it makes it more desirable in comparison to other, more expensive ones. The consumers will buy more of the cheaper product, to replace other, more expensive products, which have the same uses.

Nevertheless there are many factors that cause the demand curve to shift, either to the left or to the right. Factors like, income, price and quality of similar products, size of population, change of age structure, change in income distribution, personal preferences, government policy changes, seasonal changes and many others.

The demand curve can shift to the right, meaning that the product has incremented its demand at every price.

If the demand curve shifts to the left it means that there is less demand for the product.

 2) With reference to two different determinants of demand, explain why the demand curve for bicycles might increase. Use a diagram to support your answer.

The low states that it is compulsory to use a helmet while riding a bike on the street, but change to this rule has been made. 

As for now it is no longer compulsory to wear a helmet while riding a bike unless the individual is underage.

Also the government enquires citizens to ride bikes, therefore it subsidises bike companies making them cheaper to produce. 

Planned Economies vs. Free Market Economies

Planned Economies, also known as Centrally Planned Economies is and economic system which decisions are controlled by the government, this means they are responsible to dictate the production type and levels, the prices and wages. It is the government whom is in charge of the economic problem. The resources are fully owned and controlled by state-owned enterprises.

Currently there are only three countries, which develop this type of economy.

There are numerous benefits as well as immense quantities of flaws within this type of economy use in a country. This is specifically designed to help the citizens have economic equality because of the fact that it is the government who controls the resources therefore every single individual will benefit economically in the same level, as well as Planned Economies are designed so absolutely everyone gets a job education and healthcare, therefore unemployment does not exist and you are guaranteed certain standard of life,

All the factors above provide the country an opportunity to obtain the basic needs for everyone in it, so basically poverty is not a factor.

Nonetheless the fact that the government is in charge and owns the resources of production disables the citizens to gain economic independence; therefore the standard of life does not grow as fast. It takes a way the possibility for the individual to obtain infinite financial progress.

Individual studying, work and innovation efforts are not taken into account, so workers are not benefited economically for their hard work and effort.

Free Market Economies are handled by private enterprises; therefore the government has no control over them and resources of production are privately owned.

Subsequently to the inexistence of government intervention over this enterprises, it is the individual whom provides the demand and supply wage. This means that the citizen’s decide their best interest; making it a free market.

In contrary to Planned Economies, Free Market Economies also known as Capitalism, does reward the individual’s achievements. The harder one works and progresses, helping and innovating, the better the economic reward would be. Therefore the standard of life within a country with this type of economy will rapidly increase. Also it is the same individual, which chooses for itself their “best interest”

Nevertheless, because of the lack of government intervention it basically transforms into “every man for itself” so certain standard of living is not guaranteed meaning that government does not assure anything. The individual isn’t guaranteed neither a job, nor education or even healthcare, you are responsible for those yourself, resolving in huge economic and standard of living inequality.

Personally I can conclude that overall I prefer much more Free Market Economies because it encourages society to progress through hard work and innovation. The fact that nothing is guaranteed it determines society to progress in order to survive. A more knowledgeable society will exist because of the on-going pressure to overpass and exceed expectations work wise, only benefiting ourselves.  The more economic resources a better standard of living is presented, therefore if a big number of individuals are presented with it the better quality of life would be.

Inequality is a factor needed for supremacy, this means that the rich need of the poor to produce and work hard, this way a country can maintain itself, but at the same time the hard work coming from the poor would lead them out of poverty or out of low economic resources.

Also because the government has no power or intervention over these private enterprises, anyone has the opportunity to gain big economic rewards not just a few lucky people, members of the government that promote corruption.