Discuss doubts: P1 and P2 Economics AS

[Samad]

No it doesn't .. it only depends on the price elasticity of demand. When demand is inelastic price increases will cause revenue increases.. price decreases cause revenue decreases. When demand is elastic price increases cause revenue decreases, price decreases cause revenue increases.

but ur forgetting abt how much ur supplying aswell
it doesnt matter if the demand is elastic or inelastic if ur not supplying enough

 

[Samad]

No it doesn't .. it only depends on the price elasticity of demand. When demand is inelastic price increases will cause revenue increases.. price decreases cause revenue decreases. When demand is elastic price increases cause revenue decreases, price decreases cause revenue increases.

hence my friend ur only half right

 

[Agassi Cazaubon]

hence my friend ur only half right

when we say price we mean equilibrium price

 

[Samad]

m

when we say price we mean equilibrium price

if u say so

 

[missy121]

I have requested the paper..[/quo

Could you send me the areas to revise? Thanks!

could you tell me what to revise for tomorrow?? THANK YOU!

 

[Muhammad Alam]

So, u may use elimination method. Aggasi. If u take higher unemployment then it means resources are there but they not used. So, there will be a point inside the PPC and there will be no shift. An increase in price of energy will also lead to unemployment of some of the resources and again there will be no shift. And fall in innovation mean that innovation is there but its intensity has decreases. again there be no shift. Further more decrease in innovation may shift it to the left in future but not today if there is really a negative change in innovtion. Dear you must also keep in mind that production of agricultural and manufactured goods is physical demanding work due to which older workers will be less productive. I mean to say Retirement age is 100% confirm.

Sir, the question was not this. an inward (left) shift of PPC was shown, and the retirement age option was related to 'increase' in retirement age as far as i remember. And, i guess left shift is caused by decrease in the labor force, so increase in retirement age must have caused a right shift. however, decrease in innovation is pretty much similar to decrease in technology. If resource employment is assumed to be the same, less innovation means lesser production possibility, hence, the left shift.

 

[Usman17]

If their demand is inelastic, a general rise in prices will generate more export revenues.

Won't the export revenue only increase if the cost of production has not increased ? :\ I mean inflation cause real rate of return to decrease so how come export revenue increases :|

 

[Muhammad Alam]

But what if the demand for the imported goods is price elastic?..Then it would not benefit the importer because at higher prices the quantity demanded will decrease by a greater extent?

No, the price is higher, but cost is same, so, profit is higher for the seller of the imports. as quota decreases supply, price is raised.however, it cannot be said whether 'net profit', i.e: total revenue minus total cost, will increase or decrease. but, that was not what the question asked, as this is unpredictable.

 

[Usman17]

what ? rephrase that

Does Inflation cause an increase in export revenue if exports are inelastic!! ?

 

[Usman17]

Can help firms to reduce costs if they can keep nominal wage rates constant or increase it at a rate slower than inflation..so the real wage rate decreases.

It can increase consumption because real interest rates may be low as nominal interest rates don't tend to rise in line with inflation. So with lower interest rates we'd see an increase in monetary demand, namely increase in demand for loans for consumption and investment.

Also firms stand to benefit if the increase in prices of their goods is lower than their increase in cost of production incurred, essentially raising profit margins.

Low rates of inflation like that could also increase a country's price competitiveness if their rate of inflation is lower than that of their trading partners ( so, in the cost of their goods become lower for their trading partner(s).

Also for firms whose exported goods has inelastic demand, the increase in the price of their exports might actually lead to an increase in revenue for them.

Can you please also tell me the ways in which inflation is NOT harmful apart from inflation in the country that is a trading partner? Will the increase in export revenue due to inelastic demand of products be valid here?

 

[Agassi Cazaubon]

Can you please also tell me the ways in which inflation is NOT harmful apart from inflation in the country that is a trading partner? Will the increase in export revenue due to inelastic demand of products be valid here?

Yea that'd be one.. but all those reasons I gave you are ways its not harmful

 

[Agassi Cazaubon]

Sir, the question was not this. an inward (left) shift of PPC was shown, and the retirement age option was related to 'increase' in retirement age as far as i remember. And, i guess left shift is caused by decrease in the labor force, so increase in retirement age must have caused a right shift. however, decrease in innovation is pretty much similar to decrease in technology. If resource employment is assumed to be the same, less innovation means lesser production possibility, hence, the left shift.

really ? but decrease in innovation means that there is still innovation just that it is less than before. The word innovation implies new technology/ production methods.. even if there are less new ideas/technology there should still be growth just at a rate lower than before. Even if there was no innovation wouldn't existing technology and methods still be available ? ..allowing the country to maintain its production possibilities

 

[ecowhiz]

Does Inflation cause an increase in export revenue if exports are inelastic!! ?

Yes, it causes an increase in the nominal revenue received from exports if export elasticity is inelastic. This is because, under such conditions, decline in quantity is less than increase in price, so the Total Outlay = P * Q increases.

Whether the real revenue increases or decreases depends on the level of inflation.

 

[Khalifa]

Can someone please briefly explain the relationship between unemployment and inflation?

 

[Agassi Cazaubon]

Can someone please briefly explain the relationship between unemployment and inflation?

http://en.wikipedia.org/wiki/Phillips_curve

 

[Khalifa]

http://en.wikipedia.org/wiki/Phillips_curve

Thankyou Found a better link though. Wiki has too much irrelevant stuff

For the relationship between unemployment and inflation:
http://www.xtremepapers.com/revision/a-level/economics/managing_the_economy/the_phillips_curve.php

 

[Usman17]

Yes, it causes an increase in the nominal revenue received from exports if export elasticity is inelastic. This is because, under such conditions, decline in quantity is less than increase in price, so the Total Outlay = P * Q increases.

Whether the real revenue increases or decreases depends on the level of inflation.

ohhhhhhhh so when they say revenue rises they are talking about the nominal revenue!! Thankss!!!

 

[Usman17]

Can help firms to reduce costs if they can keep nominal wage rates constant or increase it at a rate slower than inflation..so the real wage rate decreases.

It can increase consumption because real interest rates may be low as nominal interest rates don't tend to rise in line with inflation. So with lower interest rates we'd see an increase in monetary demand, namely increase in demand for loans for consumption and investment.

Also firms stand to benefit if the increase in prices of their goods is lower than their increase in cost of production incurred, essentially raising profit margins.

Low rates of inflation like that could also increase a country's price competitiveness if their rate of inflation is lower than that of their trading partners ( so, in the cost of their goods become lower for their trading partner(s).

Also for firms whose exported goods has inelastic demand, the increase in the price of their exports might actually lead to an increase in revenue for them.

Thanks alot once again I got them

 

[Paradoxical]

Guys, is there anything we should be focusing on more for the paper tomorrow?

 

[Samad]

Guys, is there anything we should be focusing on more for the paper tomorrow?

chapter 6 ...

 

[Paradoxical]

chapter 6 ...

I hate that chapter. :/