6N4091 Applied Economics NFQ Level 6 Assignment Sample Ireland
The 6N4091 Applied Economics course is a NFQ Level 6 course. It is designed to provide students with a practical understanding of the principles of economics and their application to real-world situations.
The course typically covers topics such as supply and demand, market structures, international trade, economic growth, and monetary policy. Students will also learn how to analyze economic data, use economic models to make predictions, and evaluate economic policies.
The course is aimed at individuals who want to develop their understanding of economics and its practical applications. It is suitable for students who have previously studied economics at an introductory level, as well as those who are new to the subject.
Assignment Task 1: Research the principles of economics to include macro- economics and micro-economics which are relevant in the operation of a business.
Economics is the study of how people allocate scarce resources to meet unlimited wants and needs. There are two main branches of economics: macroeconomics and microeconomics. Macroeconomics deals with the overall functioning of the economy, while microeconomics focuses on the behavior of individuals, firms, and markets. Both branches of economics are important for businesses to understand as they operate in the economy.
Principles of Microeconomics Relevant to Businesses:
- Supply and Demand: The law of supply and demand is the most basic principle of microeconomics. It states that the price of a good or service is determined by the supply and demand in the market. Businesses need to understand how changes in supply and demand affect their products or services.
- Opportunity Cost: Opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. Businesses need to consider opportunity cost when making decisions about resource allocation.
- Marginal Analysis: Marginal analysis is the process of analyzing the additional costs or benefits of a decision. Businesses need to consider marginal costs and benefits when making decisions about production, pricing, and investments.
- Market Structures: Microeconomics also includes the study of different market structures, such as perfect competition, monopolistic competition, oligopoly, and monopoly. Businesses need to understand the market structure in which they operate and how it affects their pricing and output decisions.
Principles of Macroeconomics Relevant to Businesses:
- Gross Domestic Product (GDP): GDP is the measure of the total output of goods and services in an economy. Businesses need to understand how changes in GDP affect consumer spending and their own operations.
- Inflation: Inflation is the rate at which the general level of prices for goods and services is rising. Businesses need to consider inflation when making pricing decisions and planning for the future.
- Monetary and Fiscal Policy: Macroeconomics includes the study of government policies, such as monetary and fiscal policy, which can have a significant impact on the economy. Businesses need to understand how changes in government policy may affect their operations and plan accordingly.
- International Trade: Macroeconomics also includes the study of international trade, including trade agreements, tariffs, and exchange rates. Businesses need to understand how international trade policies may affect their operations and plan accordingly.
Assignment Task 2: Analyze the economic aims of the government to include management of employment, inflation, international trade and economic growth.
The government plays a vital role in managing various economic objectives, including employment, inflation, international trade, and economic growth. Below is a brief analysis of each of these aims:
Management of Employment:
- One of the primary economic aims of the government is to manage employment by ensuring that the economy provides enough jobs for its citizens. The government can achieve this objective by implementing policies that encourage investment and business growth, such as tax incentives and reducing bureaucratic barriers. The government can also provide employment opportunities directly by investing in infrastructure and public works projects.
- The government aims to maintain a stable inflation rate, which means that the prices of goods and services do not rise too quickly or too slowly. High inflation can lead to a decrease in the purchasing power of consumers, while low inflation can lead to deflation and economic stagnation. The government can use monetary policies, such as adjusting interest rates, to manage inflation.
International Trade Management:
- The government also aims to manage international trade by implementing policies that promote exports and protect domestic industries. Governments can achieve this goal by negotiating trade agreements, imposing tariffs and quotas, and implementing subsidies for local industries.
Economic Growth Management:
- Finally, the government aims to manage economic growth by creating an environment that is conducive to investment, innovation, and productivity. The government can achieve this objective by investing in infrastructure, education, and technology. The government can also encourage entrepreneurship and innovation through tax incentives and business-friendly policies.
Assignment Task 3: Demonstrate an understanding of the components and calculation of Gross Domestic Product and other measurements of National Income.
Gross Domestic Product (GDP) is a measure of the economic performance of a country. It is the total value of goods and services produced within the borders of a country in a given time period, usually a year. GDP is a commonly used indicator of the size and health of an economy.
There are three methods to calculate GDP, and they are:
- Expenditure Approach: This method calculates GDP as the sum of all the spending on final goods and services produced in a country within a given time period. It is calculated as follows:
GDP = C + I + G + (X-M)
Where C is the consumption expenditure by households, I is the investment expenditure by firms, G is the government expenditure, X is the value of exports, and M is the value of imports.
- Income Approach: This method calculates GDP as the sum of all the income earned by the factors of production within a country in a given time period. It is calculated as follows:
GDP = wages + profits + rent + interest
Where wages are the payments made to labor, profits are the payments made to the owners of firms, rent is the payments made for the use of land, and interest is the payments made for the use of capital.
- Production Approach: This method calculates GDP as the sum of the value-added at each stage of production. It is calculated as follows:
GDP = value-added of all firms within a country
Where value-added is the difference between the value of output produced by a firm and the value of inputs purchased by the firm.
Other measurements of national income include:
- Gross National Product (GNP): GNP is similar to GDP, but it includes the income earned by a country’s residents from their investments and work abroad, and excludes the income earned by foreigners within the country.
- Net National Product (NNP): NNP is the GNP minus the depreciation of capital stock over the year.
- National Income (NI): NI is the sum of all incomes earned by the factors of production (labor, capital, land) in a country during a given time period.
- Personal Income (PI): PI is the income earned by individuals and households in a country, including wages, salaries, rent, interest, and transfer payments.
- Disposable Income (DI): DI is the income available to households after taxes and other deductions have been taken out. It is the amount of income that households have to spend or save.
Assignment Task 4: Research the main instruments of fiscal and monetary policy to include how each approach can be applied to modern economics and the supply of money within an economy.
Fiscal and monetary policies are two important tools used by governments and central banks to manage economic activity and stabilize the economy.
Fiscal policy refers to the use of government spending and taxation to influence the economy. The main instruments of fiscal policy include government spending, taxation, and transfer payments.
Government spending: Governments can use public spending to stimulate economic growth by investing in infrastructure projects, education, and healthcare. By increasing government spending, there is an increase in aggregate demand which can lead to increased output and employment. However, excessive spending can lead to inflation, which can have negative effects on the economy.
Taxation: Taxes can be used to reduce aggregate demand and control inflation. By increasing taxes, consumers and firms have less disposable income which can lead to decreased consumption and investment, and ultimately reduced demand. However, excessive taxation can also have negative effects on economic growth.
Transfer payments: Transfer payments refer to government payments to individuals and firms, such as welfare and subsidies. These can be used to redistribute income and reduce poverty, but excessive transfer payments can lead to inefficiencies and distortions in the economy.
Monetary policy refers to the use of interest rates, money supply, and other monetary tools to control the economy. The main instruments of monetary policy include open market operations, reserve requirements, and discount rates.
Open market operations: The central bank can buy or sell government securities to increase or decrease the money supply. By buying government securities, the central bank increases the money supply, which can lead to increased spending and economic growth. By selling government securities, the central bank decreases the money supply, which can help to control inflation.
Assignment Task 5: Examine supply and demand theories and concepts to include the economic implications when these factors are influenced by forms of intervention.
Supply and demand are the two fundamental factors that determine the prices and quantities of goods and services in a market economy. The theory of supply and demand explains how prices are determined and how they change in response to changes in either supply or demand. When supply or demand is influenced by intervention, such as government policies or external shocks, it can lead to significant economic implications.
Supply refers to the amount of a good or service that producers are willing and able to sell at a given price. The law of supply states that as the price of a good or service increases, the quantity supplied also increases, and vice versa. This relationship between price and quantity supplied is illustrated by the upward-sloping supply curve.
Demand refers to the amount of a good or service that consumers are willing and able to buy at a given price. The law of demand states that as the price of a good or service increases, the quantity demanded decreases and vice versa. This relationship between price and quantity demanded is illustrated by the downward-sloping demand curve.
When an intervention affects supply, such as a change in taxes or regulations, it can cause a shift in the supply curve. For example, an increase in taxes on production can increase the cost of production, which reduces the quantity supplied at any given price. This results in a leftward shift in the supply curve, which leads to higher prices and lower quantities in the market.
Similarly, when an intervention affects demand, such as changes in income or consumer preferences, it can cause a shift in the demand curve. For example, if there is an increase in consumer income, this may lead to an increase in demand for normal goods, resulting in a rightward shift in the demand curve, which leads to higher prices and quantities in the market.
Interventions can also affect both supply and demand simultaneously. For example, during an economic recession, the government may introduce a stimulus package to increase demand for goods and services. This can result in an increase in prices and quantities in the market, but it can also lead to higher production costs and lower supply.
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Assignment Task 6: Examine factors affecting price elasticity and price inelasticity to include examples of how the market structures respond to price controls.
Price elasticity of demand refers to the responsiveness of the quantity demanded to changes in the price of a product or service. Price inelasticity of demand refers to the opposite, where changes in the price of a product or service have a relatively small effect on the quantity demanded.
There are several factors that can affect price elasticity and price inelasticity, including:
- Availability of substitutes: If there are close substitutes available for a product or service, consumers are more likely to switch to a substitute if the price of the original product increases, resulting in higher price elasticity. For example, if the price of Coca-Cola increases, consumers may switch to Pepsi or another soda brand, making Coca-Cola more price-sensitive.
- Proportion of income spent on the product: Products that consume a larger proportion of a consumer’s income are more likely to be price elastic. For example, if the price of gasoline increases, consumers may reduce their consumption of gasoline by driving less, carpooling, or using public transportation.
- Necessity of the product: Products that are deemed necessities are typically more price inelastic, meaning that changes in price have a relatively small effect on the quantity demanded. For example, if the price of insulin for diabetics increases, those with diabetes will likely continue to purchase the product regardless of the price increase.
- Time: In the short run, consumers may not have enough time to adjust their consumption patterns in response to price changes, resulting in a more inelastic demand curve. In the long run, consumers have more time to adjust, making the demand curve more elastic.
Assignment Task 7: Appraise costing methods and economies of scale to determine the impact of diminishing returns on revenue within a commercial or state-run entity.
Costing methods and economies of scale can have a significant impact on the revenue of a commercial or state-run entity, and diminishing returns can become a challenge that needs to be addressed. Here’s an appraisal of these concepts and their impact:
There are several costing methods that a business can use, including variable costing and absorption costing. Variable costing only includes variable costs in the cost of a product, while absorption costing includes both variable and fixed costs. The choice of costing method can affect the company’s profitability, as variable costing can result in a lower cost per unit, making it easier to generate a profit. However, absorption costing provides a more accurate picture of a product’s true cost, including all overheads, and can help the company set appropriate pricing.
Economies of Scale:
Economies of scale occur when a business can produce goods at a lower cost per unit due to increased production. For example, a company may be able to purchase materials in bulk, which reduces the per-unit cost of those materials. Alternatively, a company may be able to use specialized equipment to increase production efficiency. As a result, the company can produce more units at a lower cost, increasing profitability. However, there comes a point where the benefits of economies of scale start to diminish, and costs begin to increase, leading to diminishing returns.
Impact of Diminishing Returns on Revenue:
Diminishing returns occur when increasing production results in decreasing marginal returns. This means that each additional unit produced results in a smaller increase in revenue or profit. For example, if a company increases production beyond a certain point, the cost per unit may start to increase, offsetting the benefits of economies of scale. This can lead to a decline in revenue and profits, as the cost of production outweighs the benefits of increased production.
To address this challenge, a business may need to consider alternative strategies, such as introducing new products or services, diversifying into new markets, or investing in research and development to create new efficiencies. It may also be necessary to adjust pricing strategies to maintain profitability.
Assignment Task 8: Identify market structures to include examples of private sector and state entities which operate under different types of structures.
There are four main market structures: perfect competition, monopolistic competition, oligopoly, and monopoly. Each market structure has unique characteristics that affect how firms operate and compete with each other.
- Perfect competition: This market structure is characterized by a large number of small firms, all selling identical products, with no barriers to entry or exit. Examples of private sector firms that operate under perfect competition include farmers selling wheat or corn. A state entity that operates under perfect competition is a public park that charges no admission fee.
- Monopolistic competition: This market structure is similar to perfect competition, but with one key difference. While there are still many firms in the market, each firm offers a slightly different product, and there are low barriers to entry and exit. Examples of private sector firms that operate under monopolistic competition include restaurants, where there are many options with slightly different menus. A state entity that operates under monopolistic competition is a state fair that has multiple vendors selling similar products.
- Oligopoly: This market structure is characterized by a small number of large firms dominating the market. These firms may have some degree of control over price and output, but there are still some barriers to entry. Examples of private sector firms that operate under oligopoly include airlines and cell phone service providers. A state entity that operates under oligopoly is a state-run lottery, where there are only a few providers of lottery services.
- Monopoly: This market structure is characterized by a single firm dominating the market, with high barriers to entry. The monopolist has complete control over price and output. Examples of private sector firms that operate under monopoly include utilities like electric or water companies. A state entity that operates under monopoly is a state-run liquor store that has exclusive rights to sell alcohol in the state.
Assignment Task 9: Report on a wide range of economic terms and their significance in relation to an economy.
Economics is the study of how societies allocate scarce resources to fulfill their unlimited wants and needs. The following are some important economic terms and their significance in relation to an economy:
- Gross Domestic Product (GDP) – GDP measures the total value of goods and services produced by a country in a given period of time. It is an important indicator of the health of an economy.
- Inflation – Inflation refers to the rate at which prices for goods and services rise over time. High inflation can have negative impacts on an economy, such as reducing the purchasing power of consumers and eroding the value of savings.
- Unemployment – Unemployment refers to the number of people who are willing and able to work, but cannot find employment. High unemployment can lead to reduced consumer spending and lower economic growth.
- Interest rates – Interest rates refer to the cost of borrowing money. They play an important role in determining consumer and business spending, as well as inflation.
- Fiscal policy – Fiscal policy refers to the use of government spending and taxation to influence the economy. It can be used to stimulate economic growth, reduce unemployment, and stabilize inflation.
- Monetary policy – Monetary policy refers to the actions of central banks to control the supply of money in the economy. It can be used to influence interest rates, inflation, and economic growth.
- Trade – Trade refers to the exchange of goods and services between countries. International trade can be an important source of economic growth, but it can also lead to job displacement and trade imbalances.
- Supply and demand – Supply and demand refer to the forces that determine the price of goods and services in the market. Understanding these forces is important for businesses and policymakers in making decisions about production and pricing.
- Market structure – Market structure refers to the degree of competition in a market. A highly competitive market can lead to lower prices and better quality products, while a monopolistic market can lead to higher prices and reduced consumer choice.
- Capitalism – Capitalism is an economic system in which private individuals and businesses own and operate the means of production. It is characterized by competition, profit motive, and a focus on efficiency.
Assignment Task 10: Evaluate economic theory and concepts within a range of work-based scenarios.
Economic theory and concepts can be applied to a range of work-based scenarios, including:
- Supply and Demand: The law of supply and demand is a fundamental economic concept that can be applied to many work-based scenarios. For example, a business that produces a popular product will likely see an increase in demand, which could lead to an increase in price. Alternatively, if there is an oversupply of a particular product or service, the price may decrease as a result.
- Opportunity Cost: The concept of opportunity cost is often used to evaluate work-based decisions. Opportunity cost refers to the cost of choosing one option over another. For example, if a business chooses to invest in new technology, they may have to give up the opportunity to invest in other areas of the business.
- Marginal Analysis: Marginal analysis is a tool used to evaluate the benefits and costs of small changes in production or consumption. For example, a business may use marginal analysis to determine the optimal number of employees to hire or the amount of inventory to carry.
- Comparative Advantage: The concept of comparative advantage is often used in international trade, but it can also be applied to work-based scenarios. Comparative advantage refers to the ability of one entity to produce a good or service at a lower opportunity cost than another entity. For example, a business may choose to outsource certain tasks to a third-party provider that has a comparative advantage in that area.