Principle of Economics

This is my reflective essay. My favorite topic will be Topic 1. I think it is interesting as the economic principles can be easily related to our lives. The four concepts are Trade offs, Opportunity Costs, People Respond to Incentives and Marginal Benefits and Costs. When we are making a decision, we have to think from various aspects. By obtaining a benefit, we tend to lose the others. It requires us to think deeply and compare the opportunity cost. I learnt that the decision of one changes with the changes of the external factor.I have to be cautious in making decision and not to be easily affected by other factors. It is also beneficial to me to learn that excessive amount of a certain thing brings negative effect. I can easily relate it to my social life and it makes it more interesting and easier for me to understand these principles.  Besides, I also learnt that Economics is the study of how people and societies choose to use the scarce resources available to them. I tend to think deeply that many resources are limited, and we must be wise in planning the usage. I also learnt that the economics is available at two levels, that are macroeconomics and microeconomics. It involves at the individual level and the level of the whole nation. Besides, I am also thankful that in Malaysia, we have the freedom to choose what to buy, unlike nation in North Korea and Cuba, who are restricted in the limited choices of goods. We have to appreciate our freedom and not to misuse the opportunity to explore the economy system. We must not exploit our own rights as consumer.
My personal comment will be to add interesting projects in the syllabus. We will learn it better by exploring various possibilities such as role play or real-life experience of involving in an economy system.

Tutorial questions for Topic 1:

1. What is the definition of Economics?
It is a study on how individual and economics make decision about the use and allocation of their scarece resources. 

2. What is the meaning of scarce resource?  Provide 3 examples of scarce resource (other than time & money).
Scarce resources means limited resources. Energy, water, fossil fuels, land, jobs

3. Why is the management of scarce resource important?
It is to ensure that the supply of scare resources will be consistent and will not be finished.

4. Identify and explain the 2 types of economics. Can you give one example for each type of economics?
Macroeconomics- It is a study of economics at regional and national as a whole.Land-Lordism
Microeconomics- It is a study of economics of how individuals, household and business behave. Income Tax

5. What are the 2 methods of studying economics? What does each method involve?
Positive economics- To understand how economics work with making judegement.
Normative economics- To find out if an economic outcome or behaviour is good or bad and whether they can be made better.

6. What is an opportunity cost?
It is the second best choice that you give up when making a decision.

7. For each of the following situations, describe the potential opportunity cost(s):
• Studying for your economic test
Missed out the chances to go to the party
• Driving to Sunway Pyramid to buy a Wii Console and games
Lack of concentration on your studies
• Buying a new car instead of taking the bus to work/study
Pay extra money on petrol and parking fees
• A company spending an extra $10 million dollar for research
Less 10 million dollar for promotion
• Asking girl/guy A out for a date.
Cannot ask girl/guy B out. 

8. Draw a Production Possibility Frontier (PPF) graph with the Y-axis for product A, and X-axis for Product B. Designate 2 points (C & D) on the curve.
a. What are the different quantities of product A and B produced at point C and D? What principle does point C and D illustrate?
b. Please designate a point (E) to show resources being used inefficiently.  Give 2 examples how this inefficiency can occur.
c. Designate one more point (F) outside of the curve. What does this mean? How can a firm’s PPF grow to that point? Give 2 examples.
d. Draw a new PPF graph for a growing firm (over the years).

9. One of the economic principles states that “People respond to incentives.” Explain this principle and provide a relevant example.
Influence that strongly motivated to change your decision as opportunity cost has changed. Etc. if we miss out Mr Joe's Econ class, we will not only miss out his lecture but also the tips for exam.

10. Explain what a free market (or capitalistic economy) means? Planned economy? What about a mixed economy?
Free Market- People have freedom to set up, grow, sell or shut down the business
Planned market- Government decides what to sell and produce.
Mixed- combination of both. 

Econ Topic 2:

1. The demand equation for strawberries in the Eden Village is expressed as Qd (in Kg per week) = 50000 – 5000 (p). Prepare a table to show how Qd changes as prices rise from $7 to $7.50 to $8 to $8.50. Then draw the demand curve for this product.

2. Explain the law of demand.
As the price of product increases, the quantity demanded will become lower and vice versa.

3. What is the difference between an individual demand curve and a market demand curve?
Individual curve is based on individual and market is based on a community of individuals. 

4. When you draw a simple downward-sloping demand curve, what assumptions are you making about the other factors (e.g. income of buyers, product popularity, etc.) that can affect demand?
They are in constant ( ceteris paribus )

5. A higher price for the product induces a lower demand. Why is this so? Explain.
Because people will choose other brand which one cheaper therefore the demand of the product will decrease.

6. For each of the situation below, identify the factors at play and draw the graph showing their effects on the demand curve of microwave meals:
a) Microwave meals become less fashionable.Consumer taste/ Popularity
b) The price of its substitute (say, fast food) increases. Number of buyers in market
c) Income falls and microwave meals is an inferior good. Income
d) Consumer believe that the price of microwave meals are going to increase in the near future. Expectation
e) The price of its complementary products (e.g. ketchup, salt, pepper) decreases.Price of related goods.

7. Explain the effect of number of buyer on the demand of a product.
The more the buyers, the higher the demand.

8. What do you call goods whose quantity demanded rises when income increase and vice versa? Can you give 2 examples?
Normal goods ( gadgets, cars )

9. What are complementary goods? What happens to the demand of a product when its complementary good experience a price hike? Why? Can you give an example of complementary goods?
Goods that must be used together with another. Demand decreases as the complimentary good are needed to use the product. The price of complementary goods increases, less people will buy the product. Car and petrol.

10. What are substitute goods? What is the relationship between the demand of a product and the price of its substitute? Why? Provide 1 example of substitute goods.
Goods that can replace one another. The lower the price of its substitutes, the lower the product demand, People will opt for the substitute goods for its lower price.

11. Can you think of a product whose demand goes up as its price increases? Explain why does the law of demand does not apply to this product.
Limited edition handbag. It depends on expectation as people think it is going to be out of stock.

Presentation Slides for Assigntment 1: