1. Discuss Four Building Blocks for Achieving Competitive Advantage in an Organization.

PRINCIPLES OF MICROECONOMICS No: 12 PED 1113 1. | Name of Subject | PRINCIPLES OF MICROECONOMICS| 2. | Code of Subject| PED1113| 3. | Synopsis| This course will give students good exposure to basic economic concepts. They need to be able to understand, analyse and implement the theoretical conceptual into the existing economic situation. | 4. | Name of Teaching Staff | Rezal [email  protected] com| 5. | Semester and Year Offered| Year 1, Sem 1 | 6. | Credit Value | 3 credits (2 hours lecture and 1. 5 tutorial) | 7. | Prerequisite (if any) | Nil| 8. Rationale for the inclusion of the subject in the program | The need for economics knowledge in all fields of studies. | 9. | Mode of Delivery| Lecture and Tutorial| 10. | Subject Objectives| To equip students with basic economics knowledge so as to be able to apply in day to day tasks. Able to understand and analyse economics theories and conceptual. | 11. | Learning Outcomes| Upon completing this course, students will be able to: 1. Un derstand the basic concept of economics. 2. Apply the concepts demand and supply to identify how market reached its equilibrium position. 3.Identify various coefficients in elasticity and understand how rational consumers behave. 4. Identify the production process and how cost is determined. 5. Understand various market structures and its profit position both in the short and long run. | 12. | Transferable Skills| From this course, students will acquire additional transferable skills namely: * Analytical Skill – students were given questions and analyse the outcome that arises due to the situation given. * Research skills – Students are required to conduct assignment on selected topics either individually or in groups. Social skills – Students will develop basic social skills through class discussions and group assignments. * Time-management skills– Students will learn to practice and manage their time to balance between their academic and social responsi bilities. * Critical thinking skills– Students will develop critical thinking ability through coursework completion, problem solving exercises and class discussions. | 13. | Teaching Learning and Assessment Strategy | | Teaching & Learning Methods| Assessment Strategy | | Discussion| /| 1. Peer evaluation 2.Student assessment feedback| | Problem solving| | 3. | | Case study | /| | | Project | /| | | Lecture| /| | | Tutorial | | | 14. | Assessment Method and Types | Final Examination : 40%Course Work : 60%Course work comprises of the following items : – 2 Test : 30% – 4 Quizzes : 20% – Group Assignment : 10%| Content outline of the course/module and the SLT per topic| | TOPIC (S)| Lecture| Tutorial| Lab/ Practical| Independent Study| Student Learning Time (SLT)| | 1. 0 INTRODUCTION TO ECONOMICS 1. 1 Basic economic concepts: scarcity, choices and opportunity cost. 1. 2 Basic economic problems 1. 3 Economics system comprises free market, planned economy an d Mixed economy. | 2| 1. 5| | 5| 18| | 1. 0 Demand, Supply and Market Equilibrium. 1. 1 Demand 1. 2. 1 Definition of demand 1. 2. 2 Law of demand 1. . 3 Market demand curve 1. 2. 4 Determinants of demand 1. 2 Supply 1. 3. 5 Definition of supply 1. 3. 6 Law of supply 1. 3. 7 Market supply curve 1. 3. 8 Determinants of supply 1. 3 Market Equilibrium 1. 4. 9 Definition of equilibrium 1. 4. 10 Condition of equilibrium 1. 4. 11 Changes in demand and supply| 8| 6| | 20| 28| | 1. 0 Elasticity and Consumer Behavior 1. 1 Elasticity 1. 2. 1 Price elasticity of demand 1. 2. 2 Cross lasticity of demand 1. 2. 3 Income elasticity of demand 1. 2. 4 Elasticity of supply 1. 2 Consumer Behaviour 1. 3. 5 Ordinal Approach 1. 3. 6 Cardinal Approach| 6| 4. 5| | 16| 26| | 1. 0 Theory of Production and Costs of Production 1. 1 Theory of production 1. 2. 1 Definition of production 1. 2. 2 Variable input and fixed input 1. 2. 3 Short-run and long-run period 1. 2. 4 Total product, average product and marginal product 1. 2 Cost of production4. 2. Calculation of seven (7) types of cost of production the in the short-run period| 6| 4. 5| | 14| 24| | 6. 0 Market Structure 5. 1 Perfect competition5. 1. 1 Characteristics5. 1. 2 Profit maximization in the short-run5. 1. 3 Profit maximization in the long-run 5. 2 Monopolistic Competition5. 2. 1 Characteristics5. 2. 2 Profit maximization in the short-run5. 2. 3 Profit maximization in the long-run 5. 3 Monopoly5. 3. 1 Characteristics5. 3. 2 Profit maximization in the short-run5. 3. 3 Profit maximization in the long-run| 6| 4. | | 16| 24| | Total of Student Learning Time (SLT)| 28| 21| | 71| 120| | Main Reference supporting the course 1) Deviga, V and Karunagaran, M. (2007) Principles of Economics, 1st edition, Shah Alam: Oxford Fajar Sdn. Bhd. | 20. | Additional References: 1) David Begg, Stanley Fischer and Rudiger Dornbusch, 2003, Economics, 7th ed. , McGraw-Hill. 2) Baumol W. J and Blinder, 1998, A. S. Economics: Principles and Policy, Harcour t. 3) Sadono Sukirno, 1998, Mikroekonomi, Edisi ke-3. 4) Colanderm D. C. , 1995, Economics, Irwin. 5) Campbell R. Mc Connel & Stanley L.Brue, 1993, Economics, McGraw-Hill. 6) Lipsey, R. G. , 1992, The Fundamentals to Positive Economics, Harper and Row. 7) Hashim Ali (2003) Comprehensive Economics Guide, 2nd edition, Singapore: Oxford University Press. | Assignment topic. Choose one topic from the list below and form a group in which consists of minimum 4 students and maximum 6 students. Submission of assignment; first week after term break. 1. Economic system in the world 2. Government’s roles in the market 3. Demand and supply 4. Consumer behaviour 5. Production process and costs involve. . New product in the market. Introduction to economics -the word economy comes from the Greek word oikonomos, which means â€Å"one who manages a household -economics is the study of how society manages its scarce resources. -the management of society’s resources is important becaus e resources are scarce. -scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have. -opportunity cost of an item is what you give up in order to get another item. Ten principles of economics 1. People face trade-off to get one thing that we like, we usually have to give up another thing that we like. -for example parents deciding how to spend their family income. They can buy food, clothing, or a family vacation. -efficiency means that society is getting the maximum benefits from its scarce resources. -equality means that those benefits are distributed uniformly among society’s members. 2. The cost of something is what you give up to get it -making decisions require comparing the costs and benefits of alternative courses of a action 3. Rational people think at the margin. rational people are the people who systematically do the best they can to achieve their objectives, given the available opportunities. -mar ginal changes mean small incremental adjustments to an existing plan of action. 4. People respond to incentives -incentives is something that induces a person to act, such as the prospect of a punishment or a reward. -example, a higher price in a market provides an incentive for buyers to consume less and an incentive for sellers to produce more. 5. Trade can make everyone better off trade allows each person to specialize in the activities he or she does best -by trading with other, people can buy a greater variety of goods and services at lower lower cost. 6. Markets are usually a good way to organize economic activity -market economy is an economy that allocates resources through the decentralized decisions of many firms and household as they interact in markets for goods and services. 7. Government can sometimes improve market outcomes -market economies needs institution to enforce property rights so individuals can own and control scarce resources. market failure refers to a sit uation in which market on its own fails to produce an efficient allocation of resources. -market power refers to the ability of a single person or small group to have a substantial influence on a market prices. 8. A country’s standard of living depends on its ability to produce goods and services -productivity means the quantity of goods and services produced from each of labor input. 9. Prices rise when the government prints too much money -inflation refers to an increase in the overall level of prices in the economy. 0. Society faces a short-run trade-off between inflation and unemployment -short run effects of monetary injections are; increasing the amount of money in the economy stimulates the overall level of spending, firms to raise their prices hiring more workers, produce larger quantity of product and services and lower employment. Economic system comprises: 1. Free market economy: allocation for resources is determined only by their supply and demand for them with a little or no government control.It is also called as capitalist. Advantages; quick respond to the people’s wants, wide variety of goods and services and efficient use of resources encouraged. Disadvantages; unemployment, certain goods and services may not be provided, consumption of harmful goods and services may be encouraged, and ignorance of social cost.Examples, United State, Canada, United Kingdom, South Africa, Mexico Germany. Lassez-Faire economics; one of the guiding principles of capitalism, this doctrine claims that economic system should be free from government intervention or moderation and be driven only by the market forces. French word means allow to pass or let go.Invisible hand: a term coined by economist Adam Smith in his 1776 book â€Å"An Inquiry into the Nature and Causes of the Wealth of Nations†. Smith assumed that individuals try to maximize their own good (and become wealthier), and by doing so, through trade and entrepreneurship. Furthermore , any government intervention in the economy isn’t needed because the invisible hand is the best guide for the economy.Thus, the invisible hand is essentially a natural phenomenon that guides free markets capitalism through competition for scarce resources. 2. Planned economy: market is controlled and determined by government. Give the government dictatorship type control over the resources of the country. It is also called as socialist.Advantages; the welfare of the citizen is the primary goal of the economic system, wasteful competition is avoided, wages are controlled by state and there is no industrial unrest, there is a greater emphasis on the quantity of life (health, education, elimination of poverty, moral direction) than on the quantity of production (output) in the country and can rovide stability. Disadvantages; can limit the growth and advancement of the country if the government does not allocate resources to the innovative enterprises, no freedom of choices for producers and or consumers and lack of incentives for workers results in low morale efficiency. Examples Cuba, Venezuela, China and Vietnam. 3.Mixed economy: includes a mixture of capitalism and socialism. The combination of private economic freedom and centralized economic planning and government regulation. Advantages; benefit from capitalist and socialist, still emphasis on welfare of society, less income inequality and monopolies exist but under close supervision of the government.Disadvantages; lower the optimum use of resources and enterprises face difficulties due to government favouritism and bureaucratic nature. Examples France, Spain Italy, South Korea and Brazil. Circular-flow diagram: a visual model of the economy that shows how dollars flows through markets among households and firms. MARKETS FOR GOODS AND SERVICES * Firms sell * Household buy FIRMS * Produce and sell goods and services * Hire and use factors of productionsMARKETS FOR FACTORS OF PRODUCTION * Hou seholds sell * Firms buy Revenue Spending HOUSEHOLDS * buy and consume goods and services * own and sell factors of production Goods and services sold Goods and services bought Factors of production Labor, land and capital Wages, rent and profit Income This diagram is a schematic representation of the organization of the economy.Decisions are made by households and firms. Household and firms interact in the markets for goods and services (where households are buyers and firms are sellers) and in the market for the factors of production (where firms are buyers and households are sellers). The outer set of arrows show the flow of dollars and the inner set of arrows show the corresponding flow of inputs and output. The Production Possibilities Frontier: shows the combination of output, in this case cars and computers that economy can possibly can produce.The economy can produce any combination on or inside the frontier . Points outside the frontier are not feasible given the economy ’s resources. A shift in the production Possibilities Frontier -a technological advance in the computer industry enables the economy to produces more computer for any given number of cars. As a result, the production possibilities frontier shifts outwards.Market Market: a group of buyer and sellers of a particular goods and services Competitive market: a market in which there are many buyers and sellers so that each has negligible impact on the market price. Perfectly competetive: must have 2 characteristics 1) the goods offered for sale are exactly the same 2) the buyers and sellers are so numerous that no single buyer or seller has any influence over the market price.Monopoly: only one seller offer for the specific goods and services and this seller sets the price. Demand Demand: goods and services that buyers are willing and able to purchase. Quantity demanded: the amount of goods that buyers are willing and able to purchase. The demand curve: The relationship between pric e and quantity demanded Law of demand: the claims that, other thing equal, the quantity demanded of a goods falls when the price of the goods rises. Demand schedule: a table shows the relationship between the price of good and the quantity demanded.Individual demand: the demands of one person for the particular goods and services Market demand: the sum of all the individual demands for the particular goods and services Price of ice-cream| Quantity of ice-cream demanded| | Nick| Mary| Market| $0. 00| 7| 5| 12| $0. 50| 6| 4| 10| $1. 00| 5| 3| 8| $1. 50| 4| 2| 6| $2. 00| 3| 1| 4| $2. 50| 1| 1| 2| $3. 00| 0| 0| 0| Variables/Determinants that shift the demand curve 1. Income 2. Price of related goods 3. Tastes 4. Expectation 5. Number of buyer Types of goods 1. Public goods: non rivalry and non excludability. National defence a. Free goods: goods with no opportunity cost.Air, sea b. Merit goods: people underestimate benefit. Education 2. Private goods: have rivalry and excludability a. D emerit goods: underestimate cost of consuming it. Drugs, cigarettes etc b. Normal goods: always use in a daily life. Income increases/demand increases. Clothes, shoes etc. c. Inferior goods: lower quality. Income increases/demand decreases. Bread, rice, bus service etc. d. Substitutes goods: have same functions. Price increases/demand for another brand increases. colgate, darlie, sensodyne etc. e. Complement goods: needs each other in using it. Price increases/demand for the other decreases. ar and gasoline. f. Luxury goods: very expensive goods. Price increases/demand increases. Supply Supply: goods and services that producers are willing and able to sell. Quantity supplied: the amount of a goods that sellers are willing and able to sell Law of supply: the claim that, other thing equal, the quantity supplied of a good rises when the price of a good rises. Supply schedule: a table that shows the relationship between the price of a good and the quantity supplied. Supply curve: a grap h of the relationship between the price of good and the quantity supplied.Market supply: the sum of all the individual supplies for the particular goods and services Price of ice-cream| Quantity of ice-cream supplied| | Mike| John| Market| $0. 00| 0| 0| 0| $0. 50| 1| 1| 2| $1. 00| 3| 1| 4| $1. 50| 4| 2| 6| $2. 00| 5| 3| 8| $2. 50| 6| 4| 10| $3. 00| 7| 5| 12| Variables/Determinants that shift the supply curve. 1. Input prices 2. Technology 3. Expectations 4. Number of sellers Equilibrium Equilibrium: a situation in which the market price has reached the level at which quantity supplied equals to quantity demanded.Equilibrium price: the price that balances quantity supplied and quantity demanded Equilibrium quantity: the quantity supplied and the quantity demanded at the equilibrium price. Surplus: a situation in which quantity supplied is greater than quantity demanded. Shortage: a situation in which quantity demanded is greater than quantity supplied Law of supply and demand: the cl aim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance.A Change in Market Equilibrium Due to a shift in Demand -A hot weather makes peoples want to eat more ice cream, the demand curve shifts to the right. A Change in Market Equilibrium Due to a shift in Supply -Increase in price of sugar will increase the cost of production, the supply curve shifts to the left. Shifts in both Supply and demand -A hot weather will increases the demand of ice cream and the hurricane will decreases the supply of ice cream 1. Discuss Four Building Blocks for Achieving Competitive Advantage in an Organization. PRINCIPLES OF MICROECONOMICS No: 12 PED 1113 1. | Name of Subject | PRINCIPLES OF MICROECONOMICS| 2. | Code of Subject| PED1113| 3. | Synopsis| This course will give students good exposure to basic economic concepts. They need to be able to understand, analyse and implement the theoretical conceptual into the existing economic situation. | 4. | Name of Teaching Staff | Rezal [email  protected] com| 5. | Semester and Year Offered| Year 1, Sem 1 | 6. | Credit Value | 3 credits (2 hours lecture and 1. 5 tutorial) | 7. | Prerequisite (if any) | Nil| 8. Rationale for the inclusion of the subject in the program | The need for economics knowledge in all fields of studies. | 9. | Mode of Delivery| Lecture and Tutorial| 10. | Subject Objectives| To equip students with basic economics knowledge so as to be able to apply in day to day tasks. Able to understand and analyse economics theories and conceptual. | 11. | Learning Outcomes| Upon completing this course, students will be able to: 1. Un derstand the basic concept of economics. 2. Apply the concepts demand and supply to identify how market reached its equilibrium position. 3.Identify various coefficients in elasticity and understand how rational consumers behave. 4. Identify the production process and how cost is determined. 5. Understand various market structures and its profit position both in the short and long run. | 12. | Transferable Skills| From this course, students will acquire additional transferable skills namely: * Analytical Skill – students were given questions and analyse the outcome that arises due to the situation given. * Research skills – Students are required to conduct assignment on selected topics either individually or in groups. Social skills – Students will develop basic social skills through class discussions and group assignments. * Time-management skills– Students will learn to practice and manage their time to balance between their academic and social responsi bilities. * Critical thinking skills– Students will develop critical thinking ability through coursework completion, problem solving exercises and class discussions. | 13. | Teaching Learning and Assessment Strategy | | Teaching & Learning Methods| Assessment Strategy | | Discussion| /| 1. Peer evaluation 2.Student assessment feedback| | Problem solving| | 3. | | Case study | /| | | Project | /| | | Lecture| /| | | Tutorial | | | 14. | Assessment Method and Types | Final Examination : 40%Course Work : 60%Course work comprises of the following items : – 2 Test : 30% – 4 Quizzes : 20% – Group Assignment : 10%| Content outline of the course/module and the SLT per topic| | TOPIC (S)| Lecture| Tutorial| Lab/ Practical| Independent Study| Student Learning Time (SLT)| | 1. 0 INTRODUCTION TO ECONOMICS 1. 1 Basic economic concepts: scarcity, choices and opportunity cost. 1. 2 Basic economic problems 1. 3 Economics system comprises free market, planned economy an d Mixed economy. | 2| 1. 5| | 5| 18| | 1. 0 Demand, Supply and Market Equilibrium. 1. 1 Demand 1. 2. 1 Definition of demand 1. 2. 2 Law of demand 1. . 3 Market demand curve 1. 2. 4 Determinants of demand 1. 2 Supply 1. 3. 5 Definition of supply 1. 3. 6 Law of supply 1. 3. 7 Market supply curve 1. 3. 8 Determinants of supply 1. 3 Market Equilibrium 1. 4. 9 Definition of equilibrium 1. 4. 10 Condition of equilibrium 1. 4. 11 Changes in demand and supply| 8| 6| | 20| 28| | 1. 0 Elasticity and Consumer Behavior 1. 1 Elasticity 1. 2. 1 Price elasticity of demand 1. 2. 2 Cross lasticity of demand 1. 2. 3 Income elasticity of demand 1. 2. 4 Elasticity of supply 1. 2 Consumer Behaviour 1. 3. 5 Ordinal Approach 1. 3. 6 Cardinal Approach| 6| 4. 5| | 16| 26| | 1. 0 Theory of Production and Costs of Production 1. 1 Theory of production 1. 2. 1 Definition of production 1. 2. 2 Variable input and fixed input 1. 2. 3 Short-run and long-run period 1. 2. 4 Total product, average product and marginal product 1. 2 Cost of production4. 2. Calculation of seven (7) types of cost of production the in the short-run period| 6| 4. 5| | 14| 24| | 6. 0 Market Structure 5. 1 Perfect competition5. 1. 1 Characteristics5. 1. 2 Profit maximization in the short-run5. 1. 3 Profit maximization in the long-run 5. 2 Monopolistic Competition5. 2. 1 Characteristics5. 2. 2 Profit maximization in the short-run5. 2. 3 Profit maximization in the long-run 5. 3 Monopoly5. 3. 1 Characteristics5. 3. 2 Profit maximization in the short-run5. 3. 3 Profit maximization in the long-run| 6| 4. | | 16| 24| | Total of Student Learning Time (SLT)| 28| 21| | 71| 120| | Main Reference supporting the course 1) Deviga, V and Karunagaran, M. (2007) Principles of Economics, 1st edition, Shah Alam: Oxford Fajar Sdn. Bhd. | 20. | Additional References: 1) David Begg, Stanley Fischer and Rudiger Dornbusch, 2003, Economics, 7th ed. , McGraw-Hill. 2) Baumol W. J and Blinder, 1998, A. S. Economics: Principles and Policy, Harcour t. 3) Sadono Sukirno, 1998, Mikroekonomi, Edisi ke-3. 4) Colanderm D. C. , 1995, Economics, Irwin. 5) Campbell R. Mc Connel & Stanley L.Brue, 1993, Economics, McGraw-Hill. 6) Lipsey, R. G. , 1992, The Fundamentals to Positive Economics, Harper and Row. 7) Hashim Ali (2003) Comprehensive Economics Guide, 2nd edition, Singapore: Oxford University Press. | Assignment topic. Choose one topic from the list below and form a group in which consists of minimum 4 students and maximum 6 students. Submission of assignment; first week after term break. 1. Economic system in the world 2. Government’s roles in the market 3. Demand and supply 4. Consumer behaviour 5. Production process and costs involve. . New product in the market. Introduction to economics -the word economy comes from the Greek word oikonomos, which means â€Å"one who manages a household -economics is the study of how society manages its scarce resources. -the management of society’s resources is important becaus e resources are scarce. -scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have. -opportunity cost of an item is what you give up in order to get another item. Ten principles of economics 1. People face trade-off to get one thing that we like, we usually have to give up another thing that we like. -for example parents deciding how to spend their family income. They can buy food, clothing, or a family vacation. -efficiency means that society is getting the maximum benefits from its scarce resources. -equality means that those benefits are distributed uniformly among society’s members. 2. The cost of something is what you give up to get it -making decisions require comparing the costs and benefits of alternative courses of a action 3. Rational people think at the margin. rational people are the people who systematically do the best they can to achieve their objectives, given the available opportunities. -mar ginal changes mean small incremental adjustments to an existing plan of action. 4. People respond to incentives -incentives is something that induces a person to act, such as the prospect of a punishment or a reward. -example, a higher price in a market provides an incentive for buyers to consume less and an incentive for sellers to produce more. 5. Trade can make everyone better off trade allows each person to specialize in the activities he or she does best -by trading with other, people can buy a greater variety of goods and services at lower lower cost. 6. Markets are usually a good way to organize economic activity -market economy is an economy that allocates resources through the decentralized decisions of many firms and household as they interact in markets for goods and services. 7. Government can sometimes improve market outcomes -market economies needs institution to enforce property rights so individuals can own and control scarce resources. market failure refers to a sit uation in which market on its own fails to produce an efficient allocation of resources. -market power refers to the ability of a single person or small group to have a substantial influence on a market prices. 8. A country’s standard of living depends on its ability to produce goods and services -productivity means the quantity of goods and services produced from each of labor input. 9. Prices rise when the government prints too much money -inflation refers to an increase in the overall level of prices in the economy. 0. Society faces a short-run trade-off between inflation and unemployment -short run effects of monetary injections are; increasing the amount of money in the economy stimulates the overall level of spending, firms to raise their prices hiring more workers, produce larger quantity of product and services and lower employment. Economic system comprises: 1. Free market economy: allocation for resources is determined only by their supply and demand for them with a little or no government control.It is also called as capitalist. Advantages; quick respond to the people’s wants, wide variety of goods and services and efficient use of resources encouraged. Disadvantages; unemployment, certain goods and services may not be provided, consumption of harmful goods and services may be encouraged, and ignorance of social cost.Examples, United State, Canada, United Kingdom, South Africa, Mexico Germany. Lassez-Faire economics; one of the guiding principles of capitalism, this doctrine claims that economic system should be free from government intervention or moderation and be driven only by the market forces. French word means allow to pass or let go.Invisible hand: a term coined by economist Adam Smith in his 1776 book â€Å"An Inquiry into the Nature and Causes of the Wealth of Nations†. Smith assumed that individuals try to maximize their own good (and become wealthier), and by doing so, through trade and entrepreneurship. Furthermore , any government intervention in the economy isn’t needed because the invisible hand is the best guide for the economy.Thus, the invisible hand is essentially a natural phenomenon that guides free markets capitalism through competition for scarce resources. 2. Planned economy: market is controlled and determined by government. Give the government dictatorship type control over the resources of the country. It is also called as socialist.Advantages; the welfare of the citizen is the primary goal of the economic system, wasteful competition is avoided, wages are controlled by state and there is no industrial unrest, there is a greater emphasis on the quantity of life (health, education, elimination of poverty, moral direction) than on the quantity of production (output) in the country and can rovide stability. Disadvantages; can limit the growth and advancement of the country if the government does not allocate resources to the innovative enterprises, no freedom of choices for producers and or consumers and lack of incentives for workers results in low morale efficiency. Examples Cuba, Venezuela, China and Vietnam. 3.Mixed economy: includes a mixture of capitalism and socialism. The combination of private economic freedom and centralized economic planning and government regulation. Advantages; benefit from capitalist and socialist, still emphasis on welfare of society, less income inequality and monopolies exist but under close supervision of the government.Disadvantages; lower the optimum use of resources and enterprises face difficulties due to government favouritism and bureaucratic nature. Examples France, Spain Italy, South Korea and Brazil. Circular-flow diagram: a visual model of the economy that shows how dollars flows through markets among households and firms. MARKETS FOR GOODS AND SERVICES * Firms sell * Household buy FIRMS * Produce and sell goods and services * Hire and use factors of productionsMARKETS FOR FACTORS OF PRODUCTION * Hou seholds sell * Firms buy Revenue Spending HOUSEHOLDS * buy and consume goods and services * own and sell factors of production Goods and services sold Goods and services bought Factors of production Labor, land and capital Wages, rent and profit Income This diagram is a schematic representation of the organization of the economy.Decisions are made by households and firms. Household and firms interact in the markets for goods and services (where households are buyers and firms are sellers) and in the market for the factors of production (where firms are buyers and households are sellers). The outer set of arrows show the flow of dollars and the inner set of arrows show the corresponding flow of inputs and output. The Production Possibilities Frontier: shows the combination of output, in this case cars and computers that economy can possibly can produce.The economy can produce any combination on or inside the frontier . Points outside the frontier are not feasible given the economy ’s resources. A shift in the production Possibilities Frontier -a technological advance in the computer industry enables the economy to produces more computer for any given number of cars. As a result, the production possibilities frontier shifts outwards.Market Market: a group of buyer and sellers of a particular goods and services Competitive market: a market in which there are many buyers and sellers so that each has negligible impact on the market price. Perfectly competetive: must have 2 characteristics 1) the goods offered for sale are exactly the same 2) the buyers and sellers are so numerous that no single buyer or seller has any influence over the market price.Monopoly: only one seller offer for the specific goods and services and this seller sets the price. Demand Demand: goods and services that buyers are willing and able to purchase. Quantity demanded: the amount of goods that buyers are willing and able to purchase. The demand curve: The relationship between pric e and quantity demanded Law of demand: the claims that, other thing equal, the quantity demanded of a goods falls when the price of the goods rises. Demand schedule: a table shows the relationship between the price of good and the quantity demanded.Individual demand: the demands of one person for the particular goods and services Market demand: the sum of all the individual demands for the particular goods and services Price of ice-cream| Quantity of ice-cream demanded| | Nick| Mary| Market| $0. 00| 7| 5| 12| $0. 50| 6| 4| 10| $1. 00| 5| 3| 8| $1. 50| 4| 2| 6| $2. 00| 3| 1| 4| $2. 50| 1| 1| 2| $3. 00| 0| 0| 0| Variables/Determinants that shift the demand curve 1. Income 2. Price of related goods 3. Tastes 4. Expectation 5. Number of buyer Types of goods 1. Public goods: non rivalry and non excludability. National defence a. Free goods: goods with no opportunity cost.Air, sea b. Merit goods: people underestimate benefit. Education 2. Private goods: have rivalry and excludability a. D emerit goods: underestimate cost of consuming it. Drugs, cigarettes etc b. Normal goods: always use in a daily life. Income increases/demand increases. Clothes, shoes etc. c. Inferior goods: lower quality. Income increases/demand decreases. Bread, rice, bus service etc. d. Substitutes goods: have same functions. Price increases/demand for another brand increases. colgate, darlie, sensodyne etc. e. Complement goods: needs each other in using it. Price increases/demand for the other decreases. ar and gasoline. f. Luxury goods: very expensive goods. Price increases/demand increases. Supply Supply: goods and services that producers are willing and able to sell. Quantity supplied: the amount of a goods that sellers are willing and able to sell Law of supply: the claim that, other thing equal, the quantity supplied of a good rises when the price of a good rises. Supply schedule: a table that shows the relationship between the price of a good and the quantity supplied. Supply curve: a grap h of the relationship between the price of good and the quantity supplied.Market supply: the sum of all the individual supplies for the particular goods and services Price of ice-cream| Quantity of ice-cream supplied| | Mike| John| Market| $0. 00| 0| 0| 0| $0. 50| 1| 1| 2| $1. 00| 3| 1| 4| $1. 50| 4| 2| 6| $2. 00| 5| 3| 8| $2. 50| 6| 4| 10| $3. 00| 7| 5| 12| Variables/Determinants that shift the supply curve. 1. Input prices 2. Technology 3. Expectations 4. Number of sellers Equilibrium Equilibrium: a situation in which the market price has reached the level at which quantity supplied equals to quantity demanded.Equilibrium price: the price that balances quantity supplied and quantity demanded Equilibrium quantity: the quantity supplied and the quantity demanded at the equilibrium price. Surplus: a situation in which quantity supplied is greater than quantity demanded. Shortage: a situation in which quantity demanded is greater than quantity supplied Law of supply and demand: the cl aim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance.A Change in Market Equilibrium Due to a shift in Demand -A hot weather makes peoples want to eat more ice cream, the demand curve shifts to the right. A Change in Market Equilibrium Due to a shift in Supply -Increase in price of sugar will increase the cost of production, the supply curve shifts to the left. Shifts in both Supply and demand -A hot weather will increases the demand of ice cream and the hurricane will decreases the supply of ice cream