IB examination questions for economy (page 33)

Distinguish between a shift of the demand curve for a product and a movement.

It is important to identify the differences between a movement along a demand curve and a shift in the demand curve. When there is a change in price, it would  have a significant effect like a change in movement along a demand curve. It is also changes the Qd (quantity in  demanded). Say, for example, there’s an increase in car prices from $40 to $50. What happens is that it decreases the quantity demanded from 50 units to 40 units instead, its inversely proportional .As you can see, the price change results in a movement just along a given demand curve.  If there is any change from the variables that may act upon the quantity demanded, it creates a shift in the demand curve in other words a change .

A way to differentiate the movement and shift in the demand curve is by identifying the actions of the population that affect the change in the movement and shift in the demand.

There are four different factors that affect the change in movement of demand.  The first consumers income, expectations, population change, tastes , and fashion . If the movement works towards the right, it could mean that there is a boost in the  income that is not refundable .

On the other hand, there are four factors that shift in the demand curve. First, it could be the changes in consumer earnings. The demand for products will be less if there’s a recession. Next would be the population change. If the population will increase, the demand shifts to the left and will go higher. The demand would be less if there are limited numbers in the populations. Third would be the preferences of consumers. if the preference for a specific product levels up, the demand curve will have to shift to the good. Lastly, the prices of related goods matter. Once the related products changes, the demand curve will have to change as well. It could be suggested as two. It could either be a substitute or a complement. Substitutes are the ones that can be considered as a replacement. On the other hand, complements are products that are consumed together.

In conclusion  movement in the demand curve depends on consumer income, expectations, population change, tastes, and trends (for movement) while a shift relies on consumer earnings, population change, preference of consumers, and the prices of related goods.

2) Several factors should be taken into account when economist /people refer to the causes of an increase in a product´s demand. There are two specific ways to represent the effects these factors can have on the demand curve.

1) A shift to the right may occur due to external factors.

2) The rise of demand along the curve, these may occur because increase in population

In this text I am referring to a bicycle specifically, it is possible to create and see a variation in a demand curve due to many factors, I am going to focus primarily in competition. If the productions of mediums of transport increase in price, this will affect the investment of consumers because generally the go with the cheaper one in these case bicycles. If this where to happen, then the more economic alternative the bicycles will become more “popular” this will make the demand rise. Sense this makes an increase in demand; the demand curve would shift to the right.

It is possible to see a positive effect, a movement to the right in a demand curve of bicycles, if the population of young people (kids, mid age adults) were to double the demand consequently would double or increase shifting the demand, this example is  unrealistic, but could also be possible.  This could only happen under the ideal situation. Economists could not make an affirmation they could only predict it happens.

In conclusion, many possible factors can affect in different ways the demand curve for common  product such bicycles.

sources: 

www. wikipedia.org/economia.13124./positivo=demanda

ib economics course companion 

Private Enterprise V.S Planned (command) Economics

private enterprises :

What It Is Not

•   Private enterprises do not include government organizations or business units that are not  owned by governments. Nevertheless, there are private/public partnerships in which private companies partner together in a business with a government or a government agency.  A private enterprise can be as simple as a employed individual or as large as a multinational corporation.



Definition of 'Centrally Planned Economy'

An economic system in which decisions are made by the state or government rather than by the interaction between consumers and businesses. Unlike a market economy in which production decisions are made by private citizens and business owners.

Example

Assume that the market does not work in the best interest of the people, and that in order for social and national objectives to be met a central authority needs to make decisions. The state can set prices  and determine how much is produced.

There are many disadvantages of planned economies. One of them is  It is almost impossible to plan everything, so when something goes wrong that hasn't been taken into account; the entire system begins to malfunction. Historically, planned economies don't efficiently consider breakdowns of machines or equipment. Planned economies don't handle details tat  well.

Another major problem of a planned economy is the inability of the government  to predict the consumer’s behaviour. Economic planning is conducted with the goal of accomplishing social goals, but it cannot assure that consumers will respond as they expected.

Planned economies haven't been very successful in terms of  long-term economic growth and consumer satisfaction. Those nations that still employ economic planning are generally small and struggling.

Although planned economies have not been very successful, no major nation has a completely private enterprise economy. Instead, they employ a system of government influence of the economy, sometimes called an mixed economic system. These systems are characterized by the use of government influence. The government creates tax policy to affect economic decisions.

While all governments try to influence their economies for a variety of reasons, those attempts have been most successful when they leave the ultimate choices to individual economic enterprises. Planned economies have sometimes been successful in the short term they’ve have managed to accomplish stability .

 In theory a planned economy is much better than a private enterprise economy. This is because it has many things in common with communism.  Like communism, planned economy is perfect in THEORY. The problem with this system is, when you give  so much power to a person  over an n economy he starts to violate  your personal liberties, they become  fringed. That person becomes corrupt.

The best economy is a mixture of both planned economy and private enterprise economy. This is would be perfect because the government would  control certain  aspects of the economy and the private control others. Since there are many people in power corruption is no longer an option. With out corruption an economy of a country would progress.