Economics

Economics

Question 1

The law of demand states that an increase in demand will result to an increase in supply. Similarly, if there is an increase in supply, the demand will decrease (Liu & Ye, 2001 p.45). In this case, the demand for this vehicle is more than expected. Therefore, there will be an automatic increase in supply to satisfy the demand. AMX Company will have to produce more cars for the new clients. According to Prasch (2008 P.94), If this does not happen, there will be surplus demand in the market for this vehicle. In normal circumstances, there is need for balance between the supply and demand of any commodity in the market (Loewen & Jensen, 2004 p.112).

The surplus demand in this market might be met by AMX Company or another vehicle company. If AMX is able to meet the full demand of the market, they will enjoy benefits of being an only producer in the market (Lai & Yu, 2003 p.14). Such a situation can lead to increase of price since there is no competition. However, this is not very likely since this is a new product and high prices might discourage potential clients. Palmatier & Crum (2003 p.100), states that the country’s legislation could also prohibit the company from increasing prices for no viable reason. This is considered as exploitation towards the consumers.

If another competitor company realizes the unsatisfied demand, it will also begin manufacturing this model. At this point, the full demand of this vehicle will be satisfied and there will be balance in the market (Mcmeekin, 2002 p.78). Introduction of another producer will bring competition. This is likely to lead to a decrease in the price of vehicle. One of the competitors might decide to decrease the price as a way of attracting more buyers. AMX will enjoy fewer profits and lose other benefits of being an only producer of the vehicle. Prices might even go lower if there will be more entrants in this market (Sloman, J., & Sutcliffe, 2002 p.118).

When competition becomes high in a market, the competitors can decide to agree on a mutual price (Wessels, 2000 p.95). This can be the same case with AMX and its future competitors. Instead of engaging in an unhealthy competition, they can agree on a common price for the vehicle (Krugman, 2006 p.71). The price can be determined by fair profit for every party. In case of changes in costs, they can decide to adjust the prices. Despite of this option, there is a possibility that AMX and its competitors can decide to engage in an unhealthy competition, which will lead to losses.

Question 2

Boosting the economy is certainly a viable way of reducing unemployment (Hubbard & O’Brien, 2008 p.84). Therefore, the Irish government should consider this option. By stimulating the economy, there will be a significant increase of demand for commodities. According to (2008 p.106) companies and businesses will be required to produce more commodities hence, demand for labour. This is where job opportunities will arise for the unemployed people. Stimulating the economy will not only provide jobs but also well- paying jobs. This will increase the population’s purchasing power for the goods and services in the market (O’Connor, 2011 p.211).

When the government stimulates the economy, it will enable entrepreneurship. Increase in goods and services create an opportunity for new businesses to join the market (Werding, 2006 p.37). The new businesses will need employees to produce the commodities. Thus, entrepreneurship will provide employment for the business owner and several other people. A performing economy supports business people by offering loans for capital. If there are entrepreneurs with no capital, once the Irish economy is stimulated, this facility will be readily available. Acquiring a loan in a good economy is not difficult because even the terms of repayment are favourable (Auer, 2000 p.80).

The Irish government can use measures such as reducing tax or tax holidays for existing businesses and companies. This will allow these entities to provide employment for more people (Pina, 2011). It would also stop them from retrenching employees due to increased expenses. One of the major reasons of why people have lost employment is due to poor economy. It has increased operational costs in businesses and companies. For these entities to remain operational, they retrench employees. If the government assisted businesses and companies to manage their costs, they will not have to lay off workers (Baldassarri, 2003 p.92).

Although stimulating the Irish economy will create employment, it could not be the most efficient way. The process of boosting the economy does not give immediate results. It might take the government a very long time before achieving this objective (Howell, 2005 p.5). A country’s economy is not only determined by its economic activities but also those from other countries. For instance, in 2008, the world experienced an economic crisis. This crisis began from a specific place and affected all other countries. Even if the Irish wanted to enhance their economy in such a crisis it would not be possible. Therefore, a country should not always depend on the government to reduce unemployment.

 

 

References

Auer, P 2000, Employment revival in Europe: labour market success in Austria, Denmark, Ireland and the Netherlands. Geneva, ILO.

Baldassarri, M 2003, How to reduce unemployment in Europe. New York, Palgrave Macmillan.

Howell, D. R 2005, Fighting unemployment the limits of free market orthodoxy. Oxford, Oxford University Press

Hubbard, R. G., & O’Brien, A. P 2008, Economics. Upper Saddle River, N.J., Pearson Prentice Hall.

Krugman, P. R., & Wells, R 2006, Economics. New York, Worth Publishers.

Lai, L. W.-C., & Yu, B. T 2003, The power of supply and demand thinking tools and case studies for students and professionals. Hong Kong, Hong Kong University Press.

Liu, J., & Ye, Y 2001, E-commerce agents: marketplace solutions, security issues, and supply and demand. Berlin, Springer.

Loewen, N., & Jensen, B 2004, Lemons and lemonade: a book about supply and demand. Minneapolis, Minn, Picture Window Books.

Mcmeekin, A 2002, Innovation by demand an interdisciplinary approach to the study of demand and its role in innovation. Manchester, Manchester University Press.

O’Connor, H 2011, Youth unemployment in Ireland: the forgotten generation ; the experience of young jobseekers & their interaction & engagement with key state support services. Dublin, National Youth Council of Ireland.

Palmatier, G. E., & Crum, C 2003, Enterprise sales and operations planning synchronizing demand, supply and resources for peak performance. Boca Raton, Fla, J. Ross Pub.

Pina, A 2011, Structural Reforms to Reduce Unemployment and Restore Competitiveness in Ireland. Paris, OECD.

Prasch, R. E 2008, How markets work supply, demand and the ‘real world’. Cheltenham, UK, Edward Elgar.

Sloman, J., & Sutcliffe, M 2002, Economics. Harlow, England, Prentice Hall/Financial Times.

Werding, M 2006, Structural unemployment in Western Europe reasons and remedies. Cambridge, Mass, MIT Press.

Wessels, W. J 2000, Economics. Hauppauge, NY, Barron’s.

 

 

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