簡介

經濟學的理論工具，不是簡單可以被用作商業決策的應用程序。通過觀察經濟如何在商業世界里運作，我們開始更清楚地了解問題。該報告包含了重要經濟概念的解釋，是為了幫助商業男女參加會議，了解如何在自己的組織運用經濟學。在第一個方面，它主要講機會成本的稀缺性與選擇，微觀經濟學和宏觀經濟學的概念。之后，該報告說明了個人的需求和市場的需求，也提到在短期和長期的企業產出決定。然后，在后市場的需求上，市場均衡是顯示在下面，其中包含了供應過剩和需求過旺。此外，完全競爭和寡頭壟斷的含義都在以下領域提到。最后一部分講的是凱恩斯主義經濟學和貨幣主義經濟學，它在第一次世界大戰和第二次世界大戰期間被廣泛使用。

Economics theory tools

Introduction

Economics theory tools, rather than simply application can be a useful aid business decisions. Through observing how the economy in the business world, we began to understand the subject more clearly. The report contains an explanation of key economic concepts and is intended to help business men and women attending the conference to understand how to apply economics in their own organizations. In the first sector, it is mainly talking about the conceptions of scarcity and choice, opportunity cost and the micro and macro economics. After that the report illustrates the individual demand and market demand, what is more, the firm's output decision in the short-run and long-run is also mentioned. Then, after the market demand the market equilibrium is showed on the following, which contains the excess supply and excess demand. In addition, the meaning of perfect competition and oligopoly are mentioned at the following sector. The final part is talking about the Keynesian economics and Monetarist economics, which were wildly used during the First World War and Second World War.

Main body

Economics

“As it is known that human wants are unlimited and the available resources are limited and all of human beings are making the alternative use of resources. This means that all human beings are faced with the problem of scarcity and choice.” (www.blurtit.com after Robbins 1939)

Economists are mainly having three considerations, which defined as the resource scarcity is the premise of economic analysis, Choice behavior is the object of economic analysis and the resource allocation is the core effective economic analysis.

There is always a situation that relative to the human resources needs of people always can free or free access. Because of the existing resources this case, how the effectively allocating resources is needed in the economic investigations. Then achieve maximum degree of human welfare. The definition of scarcity refers to a particular in the space, a specific resource relative to the overall limitation and desire of any human desire for unlimited increase, in the specific space-time finite resources in human desire of large overall demand. (Montani, Guido (1987))

The concept of opportunity cost which has many uses of the scarce resources to make economic subject selection, choice would make costs, and then the cost of choice we call the opportunity cost. When a certain resources used in the production of some products give each other a quantity of a product's opportunity cost, it is a decision made by the other options up the best purposes.

Economic problem solving and the relationship between economic opportunity costs are reduced to solve the problem of how to make choice of opportunity cost minimum.

Opportunity cost

Opportunity cost has little comparative advantage. Simply, it can be understood as the certain resources of a purpose which has the best benefits than others and then abandon other plans. Opportunity cost is mainly used in the process of investment. In the investment decision-making, abandon the subprime plan then the lost is called “potential benefits”, which is the opportunity cost of the optimal scheme. (Kibbe, Matthew B..)

For example, a person wants to purchase a car there are two choices for the person, one is to buy the Benz SLK, the other is to buy the BMW M3, if the person bought the SLK then the cost of M3 would be the opportunity cost for the person.

Microeconomics and Macroeconomics

Microeconomic refers to the quantities economic activity, namely single economic units of economic activity, that is to say it refers to the individual enterprise, business unit and economic activities. For example, the individual enterprise production, supply and marketing, individual exchange prices are all belong to the microeconomics. The operation of microeconomics depends on the price and the market signals for induction then through competition to adjust and balance itself. But the macroeconomic operation, there are many market mechanism cannot achieve, which should depend on the global society need national interests, after that, using various methods for the macro regulation and control. (Nicholson, 2005.)

Macroeconomic refers to the total economic activity, namely the overall economic activity, which refers to the entire national economy national economy and economic activities and operation. For example, total supply and total demand, the value of the national economy and the growth rate, the main economic relationship of scale, the general level of prices, the overall level of employment and unemployment, the total import and export scale and change and so on.

Individual demand curve and the market demand

The demand curve is shown with the relationship between the demand and the price. It refers that all other situation are the same; in every price level buyers are willing to buy the table or curve of different quantities. The demand can be observed, the curve of demand can appear in any shape, in order to meet the demand of the theorem of the demand curve can only is to lower the tilt. Individual demand curve means that individual consumers would buy a product the quantity and the relationship between the prices.

“The demand schedule, depicted graphically as the demand curve, represents the amount of some good that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, personal tastes, the price of substitute goods, and the price of complementary goods, remain the same. Following the law of demand, the demand curve is almost always represented as downward-sloping, meaning that as price decreases, consumers will buy more of the good.” ( "Marginal Utility and Demand". Retrieved 2007-02-09.)

As the supply curve of the marginal cost curve, reflect the demand curve depends on the marginal utility. Consumers would buy a given number of good, in a particular price, if the marginal utility of extra consumption, opportunity cost price, which depends on the marginal utility of alternative choice of consumption. This demand plan is defined as the willingness and ability to consumers to buy goods in the given time frame.

The market demand is the customer in a certain area, certain time, certain marketing environment and marketing plan for certain goods or services are willing and able to purchase quantity. It is visible that market demand is the summation of consumer demand.

Output decision in a short-run and long-run

Output refers to the process of production of creating useful goods or services, which can be used for further production or consumption. Output is mainly used in the production of consumption or further processing various useful goods and services.

In economics, the concept of the short-run refers to the decision-making time frame of a firm in which at least one factor of production is fixed. Costs which are fixed in the short-run have no impact on a firm's decision. For example a firm can raise output by increasing the amount of labor through overtime. A firm can make three changes in the short-run which are Increase production, decrease production and shut down. In the short-run, a profit maximizing firm will: if the price is less than the marginal cost then increase production, if the price is greater than the marginal cost then decrease production, continue to produce such as average price changes cost less than average total cost, even greater than the price and If the variable costs more than average closing price. Therefore, the general variable cost is the world's largest company in short-term losses is will occur. (Arrigo Opocher and Ian Steedman,)

In economic models, the long-run time frame assumes no fixed factors of production. Firms can enter or leave the marketplace, and the cost (and availability) of land, labor, raw materials, and capital goods can be assumed to vary. In contrast, in the short-run time frame, certain factors are assumed to be file. This is related to the long run average cost curve, an important factor in microeconomic models. (Boyes, W. 2004)

A firm can make several changes in the long-run: enter an industry, increase its plant, decrease its plant and leave an industry. “Long run marginal cost refers to the cost of providing an additional unit of service or commodity under assumption that this requires investment in capacity expansion. LRMC pricing is appropriate for best resource allocation, but may lead to a mismatch between operating costs and revenues.” (Boyes, W. 2004)

All production occurs in the short run. The long run is a planning and implementation stage. In the long-run, a company could decide that it needs the production scale of building a new factory or add a production line. Companies may decide the new technology, and shall be included in the production process.

Equilibrium price and equilibrium quantity

Equilibrium price is the price which supply and demand has a same intersection point. Also it is equal to the quantity of supply and demand for commodities, which is the price that the supply price and demand price are equally. In the market, it is because of the power supply and demand interaction. Market price trend to equilibrium price, if the market price is higher than the equilibrium price then the market will appear on the market excess supply, excess supply to the market price tends to decline. On the contrary, if market price is below the equilibrium price the market will appear on the market to excess demand, frontal needs to market price tend to rise until the equilibrium price. It is obvious that the market competition makes the market stable at the equilibrium price.

To a certain extent, the equilibrium price in the market economic activities reflects the internal relations, especially the equilibrium price theory about the price elasticity of demand and supply of the price elasticity of analysis. For the production and operation of enterprises has important practical value decision.

The equilibrium price is consumers willing to pay that equal to the producers to provide certain during which are willing to accept the price. The equilibrium price means a kind of commodity quantity demand is the price. At the same time, the price of commodity supply and demand as the equilibrium price equal price, the quantity demand is called the equilibrium quantity.

The formation of equilibrium price

The equilibrium price is on the market supply and demand in the process of competition between forms spontaneously. The equilibrium price is the price of the forming process of decision. Therefore, the price also is the competition between supply and demand of the market. There must note, the equilibrium price formation, the price is decided is completely spontaneously. If there are external intervention and then this price is not the equilibrium price.

So we can easily know that when the price reaches 5 pounds, the demand and supply are equally.

Excess supply and demand on market equilibrium

In the market transactions, when the buyer is exactly equal to the amount to buy that sellers willing to sell quantity, we call it market equilibrium, also can say the market transactions are measured. In the economic system, an economic affair is various economic strength of interaction. If the economic affairs related aspects of various power can restrict each other or cancel, so the economic affairs is in a relatively quiescent state, and will keep the state unchanged, now we say the economic affairs in the state of equilibrium.

In economics, economic equilibrium is simply a state of the world where economic forces are balanced and in the absence of external influences the values of economic variables will not change. It is the point at which quantity demanded and quantity supplied is equal. (Sullivan, arthur; Steven M. Sheffrin (2003).).

In general, equilibrium state supply equal demand if supply greater than demand the market is unbalanced state this part of the more than supply demands that excess supply.

Excess demand at a given price refers to the balance of supply and demand, which often used in the economic equilibrium analysis. The relationship between supply and demand, excess demand curve slopes downward from left to right the intersection of the longitudinal axis and for the equilibrium price.

Perfect competition

The most extreme market competition is completely competitive market, which is also called the pure competition market. Fully competitive market competition is not sufficient to any obstacles and interference of a market structure. The government of the market and not make any intervention, only maintaining social stability and resist foreign aggression.

In economics, completely competitive market participants are in no market competitiveness. Due to the condition of perfect competition is strict; there is few whether completely competitive market. However, the concept of perfect competition can serve as a useful benchmark, to measure the real life, imperfect competition market.

Short-term balanced perfectly competitive markets

There are several characteristics of perfect competition; there are many main parts of economy in the market and every subject and small scale, so they are not through any influence on the market sale behavior of supply and demand, also can affect the market price, everyone is the market price of the passive recipients. Various resources can be completely free flow without any restrictions.

The market information is complete and symmetrical, manufacturers and habitants can obtain complete market information both sides does not exist mutual deception.

Oligopoly

Oligopoly is a situation that few sellers leading the market. Oligarchic is also contains monopoly factor and competitive factors and closer to complete monopoly of a market structure. Its salient features are a few manufacturers have a monopoly of the market, the manufacturer of the total output of high rate of industry, in order to control the product supply in the industry. There are two main reasons of the oligopoly occurs, one is because of the monopolistic competition in the market, namely, the competitive advantage of enterprises through the market monopoly, the other is because of the government legal administration monopoly, the laws and rules of the industry by a company to monopolize power and to some control in order to improve efficiency.

Due to the manufacturers and occupy the market share number, no matter how, a manufacturer's actions will affect the opponent's actions and affect the whole market. So, each decide himself in the oligarch's strategies and policies pay attention to his opponent this strategy and policy and reaction. (Sullivan, Arthur; Steven M. Sheffrin (2003). ) The oligarchic monopoly is a manufacturer of independent business unit, independent characteristics, but their behavior and influences each other, interdependent. Then the oligarchic manufacturers may have various ways to achieve common ideas or cooperation.

Oligopoly market structure is similar with the monopolistic competition. It contains monopoly factor also includes the competition factor. Oligopoly market exist obvious barriers for its entry. This is a enterprise can hold most of the market share of the necessary conditions, also is the oligarchic monopoly exists. The most important is the most basic of these factors exist obvious scale economy.

The Keynesian economics

Keynesian economics was established in the 1930s, It is not an accident, it has its complex and profound economic root. Before the First World War, state monopoly capitalism began to appear. During the war time, the national monopoly capitalism is developing rapidly. Facing the rapid development of the national monopoly capitalism, the ruling class and group hope a new economics, to opposed laissez-faire, advocate state interventionism. To maintain the state monopoly capitalism, in theory, in practice has been demonstrated in doing things rather than against or criticism. Keynesian economics is in such a ruling class and group of desire; it is the new economics of the national monopoly capitalism. (Henry Hazlitt, March 1995)

Keynesian economic policy is the core of the view that laissez-faire advocates state intervention. Keynes had expanded government function, is mainly refers to expand government regulation of consumption tendency and lure investment function. Adjust consumption tendency, aimed at stimulating consumption, adjust investment, aims to stimulate investment. Effective demand is of consumption demand and investment demand; stimulate consumption and investment, stimulating effective demand. Keynes also believes that the government has the smartest way, on one hand, the social investment control, and increase investment; on the other hand, improving consumption tendency, increase spending. However, Keynes stressed it cannot too focused on increasing spending, and truth-value investment. Stimulate consumption and investment, can use monetary policy and fiscal policy, Keynes believes that rely on monetary policy alone to work; the main shall rely on fiscal policy. About fiscal policy, Keynes does not agree with the traditional economics keep countries view of a balanced budget deficit, on monetary policy, Keynes does not agree with the traditional economics to keep domestic price level, but think of stable mild inflation harmless.

John Maynard Keynes said that inflation was not the biggest problem but that when the economy was not doing well the government should spend money to “kick start” it. For example, if the government spends money on building roads they pay the company to do it that pays their workers who buy things with the money. The shop people spend their profits too and the economy starts to grow again. This is called the multiplier effect.

Monetarist economics

Monetary school was established in 50-60 in the twentieth century in America. Its founder, a professor at the University of Chicago is America who called Friedman. Monetary policy in theory and school believes that emphasize the money supply fluctuation is caused by economic activity and the fundamental changes occurred in the price level and the reasons. After the Second World War, Britain and other developed capitalist countries carried out long-term implement Keynesian demand management policy expanded effectively, even though, delay in stimulating economic crisis production development plays a certain role, but the continuing inflation. Friedman from the 1950s curbed inflation and oppose dirigisme as phase to challenge the Keynesian theory and policy. The traditional monetary amount that makes a new monetarist, as laid a theoretical foundation by him. (Greg; Whitehouse, Mark (2006-11-17).)

The main characteristic of monetary theory lies in the following two points, first, insists economic liberalism, against excessive intervention state, monetary assumes that in the development of social economy, market mechanism is the most important. They insisted on the free market and competition is resources and income distribution is the most effective method, which is the cause of most personal and social welfare, just like the government intersection, which will destroy the market mechanism, hinder economic development even caused by economic turmoil. So that, they vividly against any form of state intervention, especially against the post-war Keynesian theory and policies, they believe that besides money, that the government need not to limit or control any other things.

The key features of monetarist theory are as follows:

The main cause of inflation is too much money in the economy. Monetarist Economist Milton Friedman explained it this way: “too much money chasing too few goods” (www.glgroup.com). A good example of this is when art is sold at auction (e.g. the Walking Man which cost $104 million).

Tight control of money and credit is required to maintain price stability. That is done by the Central Bank controlling how much money is printed and the interest rate.

The key is for monetary policy to be credible - perhaps in the hands of an independent central bank - so that people's expectations of inflation are controlled.

Conclusion

In this report, it focuses on the conception of economic which contains several sectors mentioned above. In the first part, the scarcity and choice, opportunity cost and micro and macro economics are illustrated. After that, the individual demand and market demand also firm's output decision in the short-run and long-run are showed in the second part. The third part, it illustrates equilibrium of market which contains the excess supply and excess demand. Then the perfect competition and oligopoly are mentioned above clearly, oligopoly is a situation that few sellers leading the market. The final sector, the conceptions and establishment of Keynesian economics and Monetarist economics is mentioned.