Essay! J08, page 166

(a) Explain what is meant by a current account deficit.

Current account deficit is the imbalance in nation's balance of payments current account when a country's government or firms import more goods and services than they export out. It is when a lot of money is flowing out of the country, the spending is made more on foreign goods and services rather than selling to the foreigners. current account deficit is meant when a country relies on foreigners for the capital to invest and spend.

The deficit in net income in which country exports dividends on stock or wages paid to the foreign workers in the country. If all the payments made to foreign workers are higher than the wages and dividends made by workers then, deficit will increase. the demand for local goods will increase if deficit is caused by an increase in the demand for imported goods. This will result in a fall in national income and an increase in unemployment. Thus, deficit in current account occurs.

Countries with current account deficit are normally countries that spends largely. The country's business cannot expand unless they borrow from outsiders, foreigners. However, this can only work if the country looks wealthy and if it looks like they are able and willing to pay back the loans. The borrower and the lender are said to be in a win-win situation. This is because the lender also exports goods and services to the borrowers. This way, lender can manufacture more goods and provide more jobs to more of its people.

In short-run, the current account deficit is said to be advantageous. Foreigners are willing to pump in capital and boost a country's economic growth. However, in long-run, foreigners will start doubting in their investments and may have low business confidence if the country's demand is still low. If the demand is getting lower, the national currency will gradually lose its value then, the value of asset in the foreign investors will decrease too. This will cause the demand for country's asset to be less. Thus, causing investors to stop investing.

The current account deficit cause as depreciation of exchange rate. When import is more than export, there will be less demand for country's currency. Therefore, the exchange rate will lower down. Lower exchange rate causes an exchange for less foreign goods than before with same currency. However, the depreciation rate by the current account deficit is said will improve a current account if the combined elasticity of the demand of exports and imports add up is more than 1. Demand have to be very inelastic and unresponsive to the price change then only it is advantageous.

In conclusion, current account deficit means the outflow of money of the country is more than the inflow of money of the country. Current account deficit can also be said as the imbalance in nation's balance of payment current account. Government and firms should import less goods and boost exports to improve their current account.

HOMEWORK

1 (a) Explain, with examples, the significance of the value of a good's cross-elasticity of demand in relation to its substitutes and complements. [8]

Cross-elasticity of demand, XED measures the responsiveness of quantity demanded to a change in price of its related good. The formula for XED is the percentage change in quantity demanded of good Y divided by the percentage change in price of good X.

The value of the XED acquired will be a positive value when the quantity demanded of a good is determined in relation to the change in price of its substitute good. This is because of the direct relationship between the price of its substitute good and the quantity demanded of the good. For example, lets take the two famous phone services, DiGi and Maxis. DiGi is a substitute good for Maxis. When the prices of DiGi and Maxis are similar, their quantity demanded will more or less be the same too. Assuming ceteris paribus, DiGi were to decrease their phone plan price, this would be a great factor to attract Maxis' customers over to change to DiGi, resulting a decrease of quantity demanded for Maxis. Similarly, if the price of DiGi increases, the quantity demanded for Maxis might increase too. So, we see that when price of DiGi, which is the substitute good increases, the quantity demanded for Maxis increases too and vice versa. The value of XED will always remain positive.

The value of the XED acquired will be a negative value when the quantity demanded of a good is determined in relation to the change in price of its complement good. This is due to the inverse relationship between the price of its substitute good and the quantity demanded of the good. For example, petrol and cars. Petrol is a complement good to cars. Assuming ceteris paribus, if all the petrol stations were to increase the price of petrol, this will cause petrol to be more unaffordable to some consumers. If they are having difficulty to buy petrol, then they are going to have difficulties in buying cars because cars run on petrol. Therefore, if the price of petrol, which is the complement good increases, the quantity demanded for cars will decrease, and vice versa. The value of XED will always stay negative.

(b) Discuss the usefulness to businesses of a knowledge of price elasticity of demand and income elasticity of demand. [12]

Price elasticity of demand, PED is defined as the responsiveness of the quantity demanded of a good to a change in its price. The formula for PED is the percentage of change in quantity demanded divide by the percentage change in price.

Knowing the price elasticity of demand is important for businesses because it helps to set pricing policies to earn more profits and also revenue. Producers or businessmen should always know the characteristics of their goods so the will charge the price accordingly.

If producers are selling normal goods, they must know that their goods are often elastic. This means when price falls, the quantity demanded for good X will increase. When the producers or businessmen have knowledge in price elasticity demand, they will know how to manipulate the price change. They can have attractive promotions in order to attract more customers. For example, shoes are normal goods that are elastic. There is a big increase in quantity demanded whenever there is a decrease in prices of shoes. Consumers who initially couldn't afford shoes, can now afford them. And as for consumers who already owned a pair of shoes can now own more.

As an example, when the prices of shoes is RM 10, the quantity demanded for shoes is 10 pairs. The total revenue for the producers would be RM 10 x 10 = RM 100. But, when the prices of shoes decrease to RM 5, the quantity demanded for shoes is 20 pairs. The total revenue for the producers now would be RM 5 x 20 = RM 200. This proves, when the producers decrease the prices of shoes, the quantity demanded for shoes increases. Thus, producers of elastic normal goods should decrease their prices to have a larger amount in total revenue.

If the producers are selling a normal good, a necessity with no substitute goods, the goods are inelastic. For example, school uniforms are normal goods that are inelastic. When the prices of the school uniforms increase, there may be only a small fall in the quantity demanded for it. This is because it is a must for consumers that have children that are still studying to buy this good. They have no other choices.

As an example, if the prices of school uniforms are at RM 10, the quantity demanded for that good is 10. The total revenue is RM 10 x 10 = RM 100. When the prices of the school uniforms increased to RM 15, the quantity demanded for that good decreases to 8. The total revenue is RM 15 x 8 = RM 120. There is a small decrease in quantity demanded when there is an increase in prices of the school uniforms that will still allow the producers to earn more profit. Thus, the producers should increase their prices of inelastic normal goods in order to increase their total revenue.

Income elasticity of demand, YED measures the responsiveness of demand to a change in income. The formula for YED is the percentage change in quantity demanded divided by the percentage change in income.

Producers can refer to the YED to decide whether they should expand their business or to cut back on certain expenses. When there is economic growth, there may be an increase in wages which will lead to an increase in one's income and because of that, consumers can afford better. For example, consumers who were driving Perodua can now afford Audi. They might buy an Audi compared to Perodua, which is now an inferior good. There will be an increase in quantity demanded for Audi and a decrease for Perodua.

During this period, the producers of Audi will know that this is a good time to increase their production as there are more demand from consumers. On the other hand, the producers of Perodua should either cut back on production or have more promotions or even launch a new car model to attract back their customers. So, from this, we know that normal, luxury goods should increase their production when the economy is doing well while the inferior goods should most probably cut back on production. 

During economy downfall, there may be a fall in consumers' income. This means they will cut back on buying luxury products as they are not necessary. For example, consumers who wanted to buy iPhones may just settle for Sony Ericsson instead. This will be a good time for producers of Sony Ericsson to increase their production and as for iPhones, they should cut down on production or even promote a cheaper, better phone plans. 

Whatever it is, some consumers, like really rich consumers are not affected by the rise or downfall of the economy at all. They might not be cutting back on spending and splurging on luxury goods. Because of this, producers of luxury goods may not need to cut back on their production.

Knowing well in price elasticity demand and income price elasticity demand is absolutely important in the business field. Every consumer has different demands and requests. The producers must be smart enough to get hold and know their target on which group of consumers they are aiming for. The producers have to know the way to manipulate the consumers' needs, wants and demands in order to increase their total revenue and profit.

Econs Essay

J10 23 (b) page 29.

DISCUSS WHY THE MIXED ECONOMY IS THE MOST COMMON ECONOMIC SYSTEM.

Mixed economy is an economic system where the factors of production ((FOP)) is partly owned by private individuals and partly owned by government. In other words, mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies A country's FOP that is entirely owned by private individuals is known as free market economy. A country's FOP that is entirely owned by government is known as planned economy, also known as command economy.

The economic structure of a nation is very important for the progress of the country. In mixed economy, The presence of private enterprise ensures that there is fair competition in the market, and also the quality of products and services are not compromised. Not only that, the market price are well standardized. This is because the government with its regulatory bodies ensure that the market price do not go beyond its actual price and is also reasonable for the citizens to purchase it.

Furthermore, in a mixed economy, the resources are utilized efficiently as both government and private enterprises are utilizing them. Therefore, the national resources are optimally utilized. Besides, in mixed economy, the people are given more power. This is because the general people have more say when it comes to the quality and the prices of products and services. 

Mixed economy does not allow monopolies. It bars a few sectors, a mixed economy does not allow any monopoly as both government and private enterprises enter every sector for business.

Resolutions

in this whole A Levels course, I hope I will:

1- spend more time on my studies, at least 3-4 hours a day of studies ((all subjects))

> seems impossible for a person like me but I shall try in order to score good grades.

2- have to cut down on meeting my bestfriends :'( and also cut down on TV! but football matches are no-no. I will still watch them. 

3- no clubbing, smoking, drinking.

Day Five

Every setback is a learning opportunity.

as I wrote in my "Day Two" post, I will do a blog post on Reflection, as asked by Ms. Chian. I will do this short, informative and brief so it's easy to be read. but, yet again, as Ms. Chian said, this is for me to read back later on and it should be from the bottom of my heart, yup because why would I wanna lie to myself haha.

this REFLECTIONS that I will be talking about is strictly relating to my Econs class.

• I would say I am doing pretty good/well in Econs right now, although it's only the first lesson. I know nothing about Econs as I didn't take that subject during high school.
• this evaluation is based on how well I am answering/responding to Ms. Chian's questions in class. my answers may not be right all the time but, at least I try and be outspoken in class :)

• in Econs, I think am best at understanding & selecting + copying the useful and right notes for my own reading.
• hmm I am better at these aspects is because I would say that I take the initiative to go through Ms. Chian's notes & downloading them from Dropbox into my phone & making short notes before class the following day, just to be prepared.
• well, looking back at high school, I used to get praises for having complete, informative notes for most of the subjects, so I would say that from there, I know I am best at copying useful notes and understanding them.

• to do better in Econs, I would need to improve my reading and researching skills. I tend to be a little lazy when it comes to reading articles regarding business and I do realise that!
• I could do better but, what is stopping me from doing so? my laziness and my non-stop procrastination. it's so frustrating because I know I am procrastinating yet, I still continue doing so. but  I am glad that I do know when it's time to be serious :)
• to improve, I definitely need to keep in mind that I have entered college already and A Levels is a short course and that there is no time for me to fool around and procrastinate. I have gotta always remember my goal and how much my parents have paid for me to study here. the first steps to improve are to sacrifice my leisure time ((lepak with friends, watch TV, surf the net etc.)), spend more time reading on useful articles/notes and also always have enough time to rest. I am giving myself a timescale for improvement, I have to show and prove to myself that I have improved by next week ((2nd week of college)) as first semester exam is just a few months away. TIME FLIES.

• I have learnt quite a bit, more than I expected since starting Econs. not only about Econs but also about general things, I have gained quite a lot of general knowledge as teacher provide us a lot with general knowledge :) I believe I have improved my asking skills. I realised I have threw away my shyness and begin to ask questions in class, but sometimes I am afraid to ask as I am scared I will annoy my classmates and lecturers.. :-/
• I can't measure what I have learnt because well, knowledge can't be measured. but I can tell you that ever since class started, knowledge have been overflowing into my brain, my brain has been absorbing quite efficiently, I supposed! it takes time to get used to Econs as it's a brand new subject for me but, I guess with all the useful notes given by Ms. Chian, I have already gotten used to it within 2 days and I have learnt + understood a lot. right now, my level of confidence is still low, to be honest. I have to stand on my own feet now, without having any close friends ((yet)). so I am still afraid, actually. but I guess this all take time. but I think my level of understanding is pretty high, maybe because it's not that tough yet but, I will be sure to ask whenever I do not understand something. level of enjoyment? oh I am starting to enjoy this whole new subject as it's pretty interesting having a fun lecturer. but, reading articles on business section is...pretty boring hahah! but I will have to do so in order to score :)

Day Four

some of the people I miss :(

hello! lessons officially start today! got Econs and Maths notes from Ms. Chian and Ms. Tee last night from via Dropbox. read up some Econs notes just to be prepared for class this morning. and I'm so proud of myself that I actually read those notes and downloaded them on my phone haha because I don't know anything about Econs and when Ms. Chian was explaining and asking questions, I was able to answer some of them :) within the first two periods, I got used to the learning style and copying notes by ourselves. I am glad to be so pumped up to do my own revision and all. but, I hope this goes on til the end of the course!! Yan Er has been a great help too and I hope I have helped her a lot also :D somehow, we both feel extremely isolated among everyone in class hahaha. but oh well, I guess we are doing good interacting with the fellow classmates. I am actually really looking forward to study and know more about Sociology and Law. and also Econs seems interesting but some of my friends said the graph part is difficult. well, I like something challenging sometimes ;)

Malaysian Studies will only start next week, so we can leave early today. met up with one of my high school seniors, Irvin, who is also studying A Levels at Taylor's. he gave me Maths, Statistics and Moral Studies books for free. yay, God bless that handsome boy :)

ah I gotta read up and do some Law and Socio notes now for tomorrow! laters! x

Day Three

day three already? wow, time flies. I felt like it was just 2 days back where I hung out with my bestfriends. today, we had our final orientation. we had it in Lecture Theater 2 together with some of the pre-engineering and pre-business classes. A Levels only have 2 pre-law classes. not to say what, but PE and PB classes people are so much livelier and interesting I would say. or yet again, it's just me?! hahaha I don't know but I made a few PE friends during group work that was organised by the people. the talks were about transition from high school to college and how we should cope and fit in and what we should give up and work hard to achieve our goals. it really got me thinking. hmm, honestly I don't go a day without thinking about my high school memories with my classmates and my schoolmates. we were all so super close as the seniors of SMK USJ 4 Year of 2012. I am really having a hard time letting go off the past and move on. but I have already realised that I am on my own now and that I have to get on my own feet. and education is not cheap at all. my parents paid so much for me to get into Taylor's and for me to study A Levels, I do know what my priorities are. my priorities are to study well, get as many A* as I can ((hopefully all 4)) and get into Taylor's Law school and also get into a good UK university. well, I guess it takes time for me to get used to these drastic changes I would say. I guess I relied to much on my close friends and teachers in school. hahaha well,  we were all a really close batch of seniors :')

anyway, my classmate, Yi Ting and I joined a few boys from a PE class. oh damn, they were so noisy and naughty hahaha but they were funny and friendly. well, at least I made a few new friends! :) I know a lot of them cut this orientation and went home too lol, but nahhh I try my best not to skip anything in college. I got really excited and am so interested when the seniors talked about what clubs we should join. I really want to join a few clubs and be active in it. at least to make a name for myself in college, I hope :) 

Day Two

Day two in college and it is.. getting better I would say. today we went to class according to our timetables to get to know our lecturers and to understand our subjects. first was Econs. my classmate, Yan Er and I got lost hahahah finally after asking a lecturer, we found where our class is. our class teacher, Ms. Chian is our Econs teacher as well, so Yan Er is the class rep. while I am the assistant class rep. next class was Sociology, our teacher was absent so Mr. Murali took charge of the class and he really enlightened us about the subjects that we took, whether it is suitable or not. well, wow it really got me thinking. honestly, I do miss the pure science subjects that I took in high school. I know it's a huge difference compared to the A Levels standard but, I do miss Biology :( 5 years ago, I actually have pictured myself doing lab works with my college-mates. but haha oh well, I am determined to be a lawyer so I gotta be focused and determined and of course disciplined! I was told that top UK universities do not really like students that take Law as a subject during A Levels as they want their students to start fresh but sigh, I don't like to take English Literature or Accounts or Business. so I have decided to just stick back in PL 1. 2 of our classmates already have decided to leave and change their options. right now, there's only 12 girls in class. lol. oh and remember I said we have one boy in our class only, turns out, he went into the wrong class yesterday OMG *FACEPALM. lol. to be honest, I miss having guy classmates. to be honest, I miss high school so much. Ms. Chian told us to do a blog about 'Reflection'. I will do it on Friday night, my freest time. anyway, our class are combined with pre-business class people, it's a class of around 30 I guess. I don't know if it's just me but everyone is just unusually quiet!! so not used to this atmosphere hahah. had break with my favourite bunch again as usual :-D we had Law after that! man, that teacher, Mrs. Ong is just hilarious and she's like so motherly! hahaha, we had to fill up a form about how we are like and our hobbies and things like that, I think I just mostly crapped a lot about me loving football hahaha. oh well. I am pumped up to study, but pumped up about meeting new people? not yet, I would say. I think I have changed a lot, I used to be the friendly, cheerful and cheeky one in school but, in college now? I have just been outspoken in terms of answering questions in class, instead of interacting with new people. damn, I have gotta change for the better, and be myself.

NOTE TO SELF: BE YOURSELF AND DON'T CHANGE JUST TO 'FIT IN'. in other words, please don't be a bitch hahahaha.

Day One

 Asha, Kean Hoong and I :)

so I've finally reached a new chapter in my life, a phase in life where everyone would say it's one of their best moments in their lives. maybe it hasn't hit me yet since it's just my first day here at Taylor's College. I've enrolled in A Levels here at the Subang Jaya campus. I've got a few of my classmates and schoolmates that also enrolled in A Levels but, with different subjects. all my friends have signed up in the Science subjects while I'm in the Humanity stream ((pre-law)). ah to be honest, I miss high school so much. first day and I was late to class cause I kinda got lost hahaha. class teacher, Ms. Chian looks so petite and cute! and she's nice too, she reminds me of my high school teacher. we had our ice-breaking session with our classmates and 3 seniors ((mentors)). lovely people. we have one a guy in our class, who happens to be my tuition mate, last year. hahaha! I had break with my ex schoolmates who's studying at INTI, ah miss them so much. well, today ended pretty quick since it's only 9am to 2pm. I'd say it's an...awkward day, maybe because I am still new to all these. well, it takes time right? :)