11 Economics

1. 11 Economics Quizzes

2. Producers • You own a small airline. Which sector of the Economy are you? • You own the company alone. What kind of business structure do you have? • What are the advantages and disadvantages of this business structure? • You want to expand and invest in some new & bigger air planes to carry more passengers. Suggest 4 sources of finance • You decide to offer package holidays instead of just air travel. What kind of business expansion is this?

3. Producers continued. • You decide to form a private company with your best mate Tim. What are the advantages and disadvantages of this business ownership? • 3 months later you find your business is getting a bit hard for you and Tim to manage. Which management structure would be best for your business? • Several big airlines have entered the market and you are finding competition a bit tough. You enlist the services of Sarah’s Advertising and Marketing Firm.What services can Sarah’s firm provide you with? • A year later business is booming, explain how you and Sarah are interdependent? • 4 years later you have a fleet of 10 aircraft, 2000 staff and business is booming but you notice that some of your costs seem to be rising more than your profit? Explain why?

4. Producers • State the factors of production & their rewards • Define dividends • Describe the difference between a merger and a takeover? • Define Productivity • Explain how division of labour and specialisation lead to increased productivity? • Describe Economies of Scale. • Why are there now more people employed in the Tertiary Sector than Primary? • Name 4 producer goals

5. Surplus….. The market for ACDC Concert Tickets is in Surplus. A) Show this & then B)Explain how the market will return to equilibrium. Remember: Identify Explain Relate

6. Surplus…Answers A)See WB/Notes B) I: A surplus is where the price is above equilibrium and the Quantity Supplied exceeds the Quantity Demanded. E: The Price in the market will fall to clear excess tickets. When the Price decreases, Quantity Demanded will increase and Quantity Supplied will Increase until Equilibrium is reached. R: The market will clear when the Quantity Supplied is equal to the Quantity Demanded.

7. Equilibrium • Define a Market • Show a market in Equilibrium • Show a market with Excess Demand • Show a market with Excess Supply • State the other name for Excess Demand • State the other name for Excess Supply

8. Equilibrium (Answers) • A market is a place or situation where buyers and sellers meet to exchange goods or services. • See diagram • See diagram • See Diagram • Shortage • Surplus

9. Equilibrium again! • Define Equilibrium • If Excess Demand, the price will need to………? • If Excess Supply, the price will need to………..? • Show the Market for Jonas Brother’s CD’s in Equilibrium. • Show the (likely) effect of the price of Miley Cyrus CD’s decreasing in Price • What has happened to the equilibrium Price…….?

10. Answers • Equilibrium is where supply = demand. Or where all that consumers are willing and able to demand is supplied. There is no surplus or shortage. • Increase • Decrease • See WB • See WB – Assuming is a substitute – Decrease in Demand. • It will decrease, as will equilibrium Quantity

11. The Market for High School Musical 3 Tickets For each of the following events draw up the market and show the effect on either S or D • The Price of Tickets Falls from Pe to P1 • ZacEffron is caught in a drug and racial abuse scandal • The Federal Gov’t decreases the min wage for Actors • HSM 3 receives 10 Grammy nominations • Tax cuts are announced for youths • The Federal Gov’t announces stricter regulations for employment of young people

12. More supply & demand This time for Twilight – New Moon • Kristin & Rpatz are backtogether, then split no together…no split… • The US gov’t grants the production unit a subsidy • Stephanie Meyer goes to court and gets a higher royalty • True Blood win’s more Emmys • Rpatz is voted most sexiest man ever!

13. Twilight S & D Ans • Demand Increases – Pe & Qe ↑ (Tastes & Preferences) • Supply Increases – Pe ↓ Qe↑ (Subsidy) • Supply Decreases – Pe ↑ Qe ↓ (Cost of Production Increases) • Demand decreases Pe & Qe ↓ (Substitute) • Demand increases (Tastes and Preferences) You are being manipulated!!!

14. Demand • Explain the Economic Problem. (Hint link Limited Means, Choice, Scarcity, Opportunity Cost & Unlimited Wants • Budget Catfood is an example of which type of good? • Demand for these types of good increases as your income increases? • Define disposable income. • State the law of demand • Explain the law of demand • I ate six chocolate truffles stands for? • Show an increase in quantity demanded • Show a increase in demand • What is the difference?

15. Demand ans • The economic problem is Scarcity. This means that humans have Unlimited Wants relative to Limited Means (time, money and skill). So they must make a Choice on how to allocate their Limited Means. Each choice results in a Opportunity Cost. This means the next best option foregone. • Inferior • Luxury, Normal • Income after Tax • As price increases, quantity demanded decreases, price decreases quantity demanded increases. Ceteris Paribus. • Consumers are motivated to try and get the best value. When the price is low it is more affordable so Quantity Demanded will increase where if the price is higher it is more expensive so Consumers will decrease their quantity demanded. • Income, Advertising, Substitutes, Complements, Tastes & Pref. • Both *8 & 9- See WB • Increase in Quantity Demanded caused by increase in price. Increase in Demand caused by a change in non price factors. E.g Increase in advertising.

16. Supply • Define Market Supply • State the Law of Supply. • Explain the Law of Supply • List the non price factors of supply • Show a increase in Supply • Show the effect of a price decrease • Define a Tariff • Define a Quota • Show a decrease in Supply • Show an increase in Quantity Supply

17. Demand and Supply for Cell phones • Show effect of following: • Increase in price of text messages (complement) • New signal towers need to be built to maintain current coverage • Cell phones go up in Price • Gov’t gives a subsidy to Cell phone producers • Cell phones said to give you cancer • New Moon features lots of cell phone use, making it look cool. • Text bulling leads to a ban on cell phone use by under 16 year olds. • Successful wage negotiations by cell phone manufacturing workers leads to increase in their wage. • PAYE is increased in all brackets – 25%, 38%, 45% • Company tax decreased in NZ.

18. Supply Ans • Total of all Individual Supply at each and every price & or horizontal summation of all individual quantity supplied at each and every price • Price Increases, Quantity Supplied Increases, Price decreases, Quantity Supplied decreases • Producers motivated by profit. A higher price means more profit to compensate for a producers opportunity cost. What they could be doing if not increasing production. An increase in price makes producers more willing and able (cover extra costs) to producer/sell/supply more. • Costs of Prod, Related Good, Tech, Productivity, Legal, Trade, Environmental, Cultural, Political • Q 5-6,9-10 See WB • Tax on imported Goods • A limit on the amount that can be sold/Exported/Imported

19. Interdependence between Sectors Draw up a 5 Sector Circular flow showing only money flows List the 5 Sectors and fully describe each including the relationship they have with other sectors. e.g. Households: All households (consumers) in an economy. • Producers – G & S, Expenditure, Resources, Income • Financial – Savings, Loans (credit) Interest • Gov’t – Taxation, Benefits (Transfer Payments)

20. Complete (2007)

21. Flows…. (2007) • Name a money flow from Producers to Banks • Explain how this flow is affected by more investment by firms. • Name a money flow from Government to Households • Explain how this flow is affected by more unemployment in households.

22. Effects of a change & Flow On Effects • Gov’t increases company tax • Manufacturers increase production • Gov’t increases income tax • Increase in Transfer Payments • Increase in Tourism to NZ • Increase in Exports • Increase in value of NZ$ (appreciation) • Payment for Carbon Credits required (ETS) • Increase in the Minimum Wage • Increase in House Prices

23. More effects & changes • Increase in Fonterra payouts to farmers • Increase in interest rates • Kiwisaver Introduced • Oil exploration begins in Southland.

24. Gov’t Increase income tax ↑in income tax will make Consumers Disposable Income↓, & the Government will collect > income tax revenue • Consumerswill d < g & s, switch to inferior products, buy < luxuries, save < • Producers sell less g & s b/c consumer expenditure has ↓. →< production, < Investment, < Employment (poss cut back on existing),< Revenue , < profits • Financial receive < savings (b/c h/h ↓savings) so lend out < → < revenue, profits • Gov’t received > income tax, may be able to repay debt, ↑ ↑ Gov’t expenditure inc transfer payments. Might receive < income tax in future if unemployment increases, also < GST • Overseas < D for Imports, < Import Payments,

25. Payment for Carbon Credits required (ETS) This means the introduction of the Emissions Trading Scheme. Firms who emit CO2 > allowed will have to buy credits (COP ↑), firms who emit < CO2 than allowed will be able to sell\ credits (COP ↓). Likely prices for most G & s will ↑ H/H - ↓ D for G & S, ↓ Savings Prod - ↑ Prices (Supply will ↓) to pay for ↑ COP, Invest CO2 reducing tech. Financial - ↑ Profits – (↑loans for Firms), but will receive < savings from Consumers, maybe ↑ Credit to Consumers to pay for ↑ Prices Govt – Regulating ETS may mean < Expend on other areas of Gov’t exp. <Consumer Exp & Incomes , < Taxation Overseas – Less Imports & Exports – “Food Miles” – Less D, Prices Increase in NZ = Export Prices Increase