Business Economics

Introduction

The assignment is made based on the business economics. In this assignment, there are discussed economic factors that help in determining the price of lead. There are also discussed the demand and supply of the commodities and also discussed the law of demand and the law of supply. Economic theory is also discussed in this assignment. There are also define private cost, private benefits. External factors and the actions taken by the government against the external factors are also included in this assignment.

Using supply and demand analysis identify which you believe to be economic factors in determining the price of lead.

In economics, the consumers are considered as free machine as the consumers has ability to move freely in case of buying any products from the market. Price mechanism is considered as one of the most important factor of price response which causes shortage of price to rise and surplus of price to fall. If consumers consider more goods than demand it exceed supply and on the other hand consumers consider less goods than supply it falls demand of that product. The price mechanism is important for determining the price response to the demand and flow of supply.

A change in demand:

A change in demand refers to the changes of the demand of goods which indicates the shortage of goods. In that situation the firm has to give more focus on fulfilling the demand through supply of goods like lead. As the demand for lead is available in the market so the firm will be able to make more profit in the supply of lead in the market. On the other hand, a fall in demand refers to the surplus of goods like lead in the market. In that time the price also fall in the market considering the goods lead. Now it would happen that less profit is obtained (Begg, 2009).

A change in supply:

A change in supply refers to the changes of the supply of goods which indicates the surplus of goods and also affects fall in price. In that situation the target of a firm is to create demand for the product lead. On the other hand, a fall in supply indicates shortage of goods in the market than the needs of product lead. This situation means that the demand of the goods is more but the supply of product is less that’s why the firm needs to focus on more production.

Economic factors in determining the price of lead:

Some economic factors that are affect in changing the price of lead in the market place. Those factors are discussed below:

Rise of demand for lead: if there is change of demand that means upward change of demand then the price of lead will increase. On the contrary, if there is change of demand that means downward change of demand then the price of lead will decrease. In the demand of goods lead there is occurred relative change of price in return the relative change of quantity of goods. If there is increase of price of goods then there will decrease quantity of demand.

Shortage of goods:

Shortage of goods refers that the production of goods is short and thereby the demand of that goods will increase in the market. The consumers demand for the product is increase as the price is decrease. If some conditions remain constants the price of that goods will increase as the demand of that goods lead is high. The reason behind is that the supply of goods is shortage.

Price of goods to rise:

The price of goods will rise if the supply of goods is also rise. In normal sense, there is considered that if the supply of goods increase then the price of goods also increases. In other sense, if demand fall then the price of goods also increase but the supply of that goods must available in the market.

Increase of supply for lead:

If there is increase of goods lead then the price of relative product will also increase. According to law of supply, the more the supply of goods is increase the more the price of goods lead will also increase. The producer of lead has a target of the more the product will produce the more there would sale of the product and made more and more profit.

Consumer income:

The demand to a consumer and the price of a product is an important factor when the consumer looks to income level. In the economics, there is said that if the disposal income is increase then the consumption level is also change. If the income level of the consumers is increase then the consumption level is also increase automatically and the unit per sale of the product is also increase. Some macro factors that negatively affect the income level. Recession and inflation is one of them that down the income level of the consumer or reduce the consumption level when the inflation occurs.

Price of competitors:

Before launching a product in the market place it is important to know the price of the relative price set by the competitors. The product availability and the price of the product greatly affect the demand of the product. So before determining the price the producer should keep in mind that the price set for the product can’t much affect in the demand of the product to the consumer’s mind.

Changing taste and preferences of consumer:

If there is change the taste and preference of the consumers then there will affect in demand of that product. If there is change of lifestyle of the consumers then the demand for the product may decrease. That moment the demand for the product can be long last or can be very short run. If the consumer turns his or her preference into other product not the product lead then the demand for the product is also decrease. The effect in the price level may be short run.

There are discussed below the supply and demand curve:

Demand curve:

Demand curve refers to demand of goods and quantity of goods with changes in its price in a certain period of time in the market place.  In the demand curve there are shown that horizontal line expresses quantity of lead on the other hand vertical line there are shown price of lead. In the diagram, when the price of lead is in the point of PA then the quantity is in the point of QA. PA and QA create point A by matching in the point. Here in this point A, it shows that the price is high than the quantity demanded. On the other point, when price is PB then the quantity demanded up to QB. PB and QB match in the point B. in the point B price of goods lead decrease on the other hand the quantity is decrease. Point A and point B together shows demand curve.

Law of demand:

·         When the price of goods lead is increase then the quantity of demand decrease.

·         When the price of goods lead decrease than the quantity of demand increase.

Supply curve:

Supply curve expresses the supply of goods and quantity of goods with changes in its price in a certain period of time in the market place. In the figure 2 there are shown the supply curve. In the supply curve there are shown that horizontal line expresses quantity of lead on the other hand vertical line there are shown price of lead. When the price of goods is in the point P0 then the supply of the quantity is QO. When the price of goods lead is increase PO to P1 then the quantity of goods lead also increase QO to Q1. It can be said that if the quantity of goods is increase then the price of that goods is also increase.

Law of supply:

·         When the price of goods lead is increase then the quantity of supply is also increase.

·         When the price of goods lead decrease than the quantity of supply is also decrease.

Shift in supply and demand curve of lead:

Shift in demand curve:

A shift in demand curve refers to the increase of the demand of the product lead where there is price fixed (all conditions held consent). In figure 3, in the demand curve there are shown that horizontal line expresses quantity of lead on the other hand vertical line there are shown price of lead. The demand curve shift upward from the demand curve (D) to demand curve (D1). The reason behind upward of demand curve is that whether there is change in income level of the consumers. For instance, a person regularly eats a pizza in exchange of 3$. But few days earlier he is consuming two pizza. The demand for consuming pizza has increased because of increasing of income level but the price of pizza remains unchanged.

Shift in supply curve:

Shift in supply curve refers that changes in the supply but not the prices. In the figure 4, there are In the supply curve there are shown that horizontal line expresses quantity of lead on the other hand vertical line there are shown price of lead. The supply curve is shifted upward it indicates that the price has decreased. On the other hand, when the supply curve is shifted downward it indicates that the price of goods has also increased. When supply shifted downward then the price has also down from the point E to E”. When supply shifted upward then the price also upward from E to E’.  

Identification of externalities that arises from the excessive consumption of saturated food fat by some individuals. What can government do to try to reduce this type of consumption?

Externalities:

Externalities refers that the cost and benefits that one person or one body did not allow to choose cost and benefits which is incur. Many economists have given suggestion to take proper initiatives to undertake policies against externalities. The reason behind going against the externalities that the actual parties are deprived from gaining the actual costs and benefits. These costs and benefits can be said external costs and benefits (CottonPricingDiscussion/CottonPricingDiscussion.pdf, 2010).

External effects of consumption:

The consumers buy a product for his/ her consumption and get benefit from the consumption. But the leftovers from the consumption sometimes may occur more cost for refining the place of the product from the environment. The refining cost may go beyond the consumption cost or producing cost of that product. The consumption of any product may affect positively or negatively in the society. The total consumption of the goods may be different from the total cost of goods that the consumers consume.  If there is total cost is raise above the total benefits then it can be called external costs or benefits of the actions. Those effects can also be called consumption externalities.

Production externalities:

The owner of the firm produce product for the selling the product to the market place. If there is occur like that the owner produces a product that product may create benefits or costs for the consumer. If the product generates benefits for the people then it’s ok but the total cost of the production is different from the benefit of private by the firms then it can be said production externalities (Lipsey, 2007).

Negative externalities:

Negative externality is known as the cost that the third party is suffered for the transaction of the economic. The consumer and the producer are considered as the first and second party whereas the third party can be of any individual, group of people or may be organization. Externalities are also referred as the external cost. Most of times the externalities are arise from the consumption of the product. For instance, when there are produced the product in the factory, there are occurred emissions of carbon-di-oxide. The emission of carbon-di-oxide gas is harmful for the society. 

In the diagram there are shown that the vertical line expresses cost benefits and in horizontal line the expresses output. In one side P2 and Q2 matches and on the other point P1 and Q1 matches the two match point shows the marginal private benefit (MPB). In the other segment there are shown marginal social cost (MSC) and marginal private cost (MPC). In the graph there are seen an area that is shown separately that denotes social welfare loss. When marginal social cost (MSC) is stay greater than the marginal private cost (MPC) then there occurred social welfare loss. The social welfare loss is occurred for negative externalities.

Social benefits refer to the combination of private benefits with consumption externalities. On the other hand, social costs refer to the combination of private costs with production externalities. Private cost refers to the cost of producer or supplier’s providing cost of the services. Private cost includes internal costs like inputs, rent, depreciation cost but there are maintained restrict by excluding the external costs. Private benefit refers to the benefit that a person gets that benefit from the transaction whether it is by buying or selling the products.

Concepts of market failure:

Concepts of market failure are discussed below:

Market power: if there is occurred that the market is run as monopoly market then the total environment of the market loss its identity. Bearing a monopoly market is one kind of market failure. In monopoly market, only one firm or one company offer their market in the market place. There has also disadvantage of monopoly market. Those are no bargaining, only price fixed by the company and fixed price. In the monopoly market the profit is maximized by the company through their proper output. As there are no same product is obtained in the market, so no competition in the market. The consumers are loser in the market because of the lack of bargaining of the same product to buy. The price has to bear high by the consumers and that’s why the company makes profits higher (Pass, 2005).

Consumer surplus:

Consumer surplus refers that the difference between the total consumption received by the consumer and the total expenditure that the consumer wants to actually pay for the product in time of buying the product.

In the diagram there are shown that the vertical line shows price (P) of the product and the horizontal line shows quantity (Q) of the product. By bargaining the between the producer and the consumer the price is set in the equilibrium point B. there are also shown that the triangle APB shows that the consumer surplus. The consumer gains consumer surplus by bargaining with producer in times of buying the goods (Sloman, 2008).

Producer surplus:

Producer surplus refers to the difference between the amounts that the producer is willing to receive by selling the product and what amount the producer actually receive. The producer receive amount by selling the product.

In the diagram there are shown that the vertical line shows price (P) of the product and the horizontal line shows quantity (Q) of the product. The price is determined by the bargaining between the producer and the consumer. The demand of consumer and the supply by producer come into a point that is equilibrium point O. now the producer surplus is incurred in the diagram that is made a triangle BAO. The producer gain producer surplus up to ABO triangle (Ltd, 2010).

Government intervention in the market:

The government has an intention to control the market by following some strategies. These strategies like imposing regulation, subsidies and taxation. The government has also target of maximizing the social welfare. The main targets of intervention in the market are discussed below:

·         Ensuring maximum welfare facilities

·         Breaking up monopolistic market

·         Giving more focus on negative externalities

·         Promoting goals that helps in national advancement

The reasons behind government intervention in market are discussed below:

Government intervenes the market so that the market can’t face inefficiency of products or goods in the market place. Inefficient market refers not that the products or goods are not available in the market rather it may be occur that the commodities may be available in some of the business owners. The government intervene the market normally for some major objectives. Those are discussed below:

Maximizing the social welfare:

Government intervention is occurred through regulation and acting as corresponding. The total market judgment and market observation has an impact on inefficient market. Through the market regulation, the government can wield the monopolistic power. Through the regulation, the government can provide social welfare.

Macro-economic factors:

Sometimes macro-economic factors affect the government to take responsibility of the society. In times of recession and inflation government subsidies and manipulate the money. The reason behind providing the subsidiaries in times of recession and inflation is for minimizing the default situation of the economic force.

Socio-economic factors:

Sometimes government interfere the market for maintaining socio-economic factors like producing goods that ensures health and safety of the consumers. The government also imposes taxation and welfare programs for the benefits of the people of society.

It can be said that government works for the welfare of the society and for the nation by intervening the monopolistic market and also breaking down the inefficient market.

Conclusion

In this assignment, there have included some economic theories and practices that describe the basic overview of the business economics subject. There are some externalities those harm the social welfare. The government should take proper steps against those externalities and take proper steps that the society can be beneficial.