KWL on demand and supply

K             What I know	W           What I want to know	L                What I learned
Write the information about what you know in this space	Write the information about what you want to know in this space.	After the completion of the lesson or unit, write the information that you have learnt in this space.
-          The definition of complement and how being complements will affect the prices of both goods. -          Price affects demand indirectly. -          When price increases/decreases, there will be a movement in the demand/supply curve, NOT a shift.	-          How large the extent of effect that will happen when prices of complements affect each other. -          How price affects demand is shown.	-           I learned that being complements, one good will be affected by the other as the price, demand and supply of a good is affected. -          A change in the price leading to a change in the quantity demanded is shown by the movement along the demand curve, assuming ceteris paribus. -          Demand curve is affected by price and non-price factors. - Demand and supply can affect the movement/ shift in curves differently.

 

Demand and Supply

Product: Car
 
Demand for the product, in this case, the car, refers to the quantity of a good or service which consumers are willing and able to purchase at different price levels, over a specific time period, ceteris paribus. While supply for the product refers to the quantity of a good or service that sellers are willing and able to offer for sales at different price levels over a specific time period, ceteris paribus. Therefore in this case if the demand and supply of the car changes, it will lead to an effect on the new equilibrium price and quantity.

Price can affected directly to the quantity demanded of the car.


A, B and C are points on the demand curve. Each point on the curve reflects a inverse relationship between quantity demanded (Q) and price (P). So, at point A, the quantity demanded will be Q1 and the price will be P1, and so on. For example, when the price of the car falls from P1 to P2, the quantity demanded of the car will increase from Q1 to Q2. The demand relationship curve illustrates is illustrated by the downward movement of the graph, assuming ceteris paribus. However, if the price increase, quantity demanded of the car will decrease. To conclude, a change in the price leading to  a change in the quantity demanded is shown by the movement along the demand curve, assuming ceteris  paribus.

However, demand can also be affected by non-price factors. In this case, the non price factors expectations of future price of good and price of related goods will affect the demand of the cars.

Expectations of changes in income or price will cause changes in the demand for a good. For example, an expectation in an increase of a person's income may increase the person's current demand as the have more spending ability and thus able to consume more goods and services. Goods and services become more affordable and luxurious goods might also become a normal good because of the expectation of the raise in income. 

Similarly, if consumers think that the price of a good might rise in the near future, they will consume more goods right now at it's current price. This is because they will want to consume the good when it is still relatively cheaper. For example, behaviour in the market for financial assets such as stocks and bonds are influenced by such expectations. 

Thus, when incomes of consumers and future prices of goods are expected to rise, demand for the good will increase, shifting the demand curve to the right. 

For example, cars. Certain brands of cars would be considered to be luxurious goods. However, when there is an expectation of the income in a society to increase, this brand of cars that were once considered luxurious become affordable or in other words, it becomes a normal good. Hence, the consumption of the cars will increase due to the expectation of the increase in income.

 

Consumers will also consider the price of the related good before buying the good they are interested in. In this case, consumers will consider the price of the complement for cars which is petrol. An increase in the price of petrol will lead to a decrease in the demand of cars because complements(petrol) are needed to be consumed together in order to derive satisfaction.

Similarly, when the price of petrol falls, the quantity demanded of petrol and cars will increase which is illustrated in the figure above.

 

Article on price of related goods: https://sg.finance.yahoo.com/news/increase-petrol-taxes-to-ease-coe-prices-of-smaller-cars--economist-123004170.html

 

Also, price can be directly affected by quantity supplied.

 

A, B and C are points on the supply curve. Each point on the curve reflects a direct relationship between quantity supplied (Q) and price (P). At point B, the quantity supplied will be Q2 and the price will be P2, and so on.  This is illustrated by a downward movement along the supply curve from B to A. If the price increases, the quantity supplied of the good will increase, ceteris paribus, leading to an upward movement along the supply curve.

 

However, supply can also be affected by non-price factors. In this case, supply can be affected by the non-price factor, government policies. Rules and regulations set by the government will influence supply. For instance, when the government increase the price of the Certificate of Entitlement(COE) for the cars, the supply of cars will fall. Also, the most common policies set by the government that affect supply will be taxes (in this case road taxes).

 

Article of government policies: http://www.stcars.sg/guides-articles/coe-prices-set-to-rise-as-supply-dips-101101

 

A change in demand will cause a shift in the demand curve. Also, a change in supply will cause a shift in the supply curve.

 

 

For example in this figure above, an increase in both demand and supply will lead to a rightward shift of the demand and supply curves causing an indeterminate effect on the equilibrium price while equilibrium quantity will definitely increase causing a surplus.

 

In conclusion, both demand and supply will be affected by the price causing a movement of points in the demand/supply curve as well as the non price factors causing a leftward/rightward shift in the demand/supply curve(s).

 

 

 

KWL on consumer goods and capital goods

K                   What I know	W           What I want to know	L                What I learned
Write the information about what you know in this space	Write the information about what you want to know in this space.	After the completion of the lesson or unit, write the information that you have learnt in this space.
-          If want consumer goods, one have to sacrifice capital goods, vice versa. -          PPC is a curve showing the various combinations of the maximum quantity of 2 outputs that an economy can produce within a specified period of time with all its resources fully and efficiently employed, assuming  a particular state of technology.	-          What are consumer goods and capital goods meant for? -          How a PPC does shows scarcity?	-          Consumer goods are meant for final consumption while capital goods are used to produce consumption goods in the future. -          The PPC is a boundary: it is a curve that shows the limit of what an economy can produce with a given amount of scarce resources. Anything beyond the boundary cannot be produced because there are not enough resources available. This is how it shows scarcity. -          Choosing to produce capital goods or consumer goods would have a different effect on the economy, as capital goods would benefit the economy in the long run, as it will shift the PPC to the right, allowing for more goods to be produced in the future. However, consumer goods would satisfy consumers for now, but would not have a long term effect on the economy which means that it would not benefit us in the long run.    -

 

Capital goods VS consumer goods

Question: The choice between investing in capital goods and producing consumer goods now affects the ability of an economy to produce in the future. Using at least one example of such economics, explain this statement.

A choice is when an economy has to decide how to use its scarce resources to attain the maximum possible satisfaction of the consumers. In economics, we suppose that a decision maker is rational/knowledgeable economic rationality of decision maker implies the following: what to produce, how to produce and for whom to produce.

What to produce: This is the decision on the type of good and how much of each good to produce. This depends on what the society wishes to consume.

Capital goods: They are man-made aid to production. They are used to produce consumption goods in the future but not bought for immediate or final consumption. For example, machines. But, they ultimately produce consumer goods.

Consumer goods: They are bought for final consumption.

How to produce: This is a decision on the technology or method of production. For example, the producers can decide on whether to use labour-intensive or capital-intensive methods to produce a good. The main aim is to use the least cost method and to maximise the profits of the producers.

For whom to produce: This is a decision on the distribution the produced goods and services among groups within the society once they have made. But generally, the choice to decide who to produce for is basically seen by the one that pays the highest price.

An example of a consumer good is a pizza because it is sold directly to the customer and it is then consumed. Capital goods, on the other hand, are products that are not directly consumed, but are used to create other products. Businesses and individuals use capital goods to help with the production of other consumer products

From this PPC, we can see how the various points represents the various combinations that can be produced with efficient use of all the resources. A decision to produce at any of these points would represent a choice. The point chosen will depends on the economy's priorities and/or preferences.

 

 

 

Avendus, Zodius team up to invest $500 million in tech companies

The investments will be made in India-centric digital and SMAC firms in late stage or before an IPO over the next 3-4 years

 

 

 

 

       

                

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The fund, to be called as Zodius Capital II, follows an earlier fund called Zodius Capital I which is focused on early-stage investments, a statement said. Photo: Mint

Mumbai: Domestic merchant banker Avendus Capital on Monday partnered with private equity fund Zodius Capital to invest up to $500 million in late-stage technology companies.

The investments will be made in India-centric digital and SMAC (social, mobile, analytics and cloud) companies in late stage or before an initial public offering (IPO) over the next three-four years, a statement said.

The fund, to be called as Zodius Capital II, follows an earlier fund called Zodius Capital I which is focused on early-stage investments, it said.

The new fund will focus exclusively on the technology sector for a shorter investment period of up to two years, it said, adding that investments will be done in three tranches of up to $150 million each.

Courtesy its focus on investing in companies from which it can exit soon, it is also offering a shorter investment cycle of under seven years for the investors as against the normal practice of over ten years.

“We have joined hands at a time when digital and SMAC businesses across the world are eliciting exceptional and rightly deserved investment interest,” Avendus’ co-founder Ranu Vohra said.

Avendus is entering the partnership through its subsidiary Alternate Asset Management. Zodius, which typically ‘develops’ one company every six months, has previously invested in companies like Group FMG, ZyFin, Antuit and Enki Professional, the statement said. PTI

 

From this article, I can see that the basic difference between consumer goods and capital goods is that consumer goods are meant to be bought by consumers and capital goods are bought by companies. Specific differences include the types of items in each category. Capital goods often include machinery and equipment used to produce consumer goods. Capital goods can also include raw materials rather than manufactured items. What I have learnt is that some certain companies or organisations do invest on certain technology which they see potential in them. Some other certain companies invest a lump sum of money to invest on certain technology, which in this case is the capital good in order to have to earn more of the products which is the consumer goods in the future. Whether to invest more of their money on consumer or capital goods, it is definitely up to the companies leaders along with the company's financial state at that time also. What we do know is that in order to invest more on the capital good, we do have to invest little on the consumer goods and vice versa

 

 

 

 

 

In conclusion, investing in capital goods or consumer goods will solely depend on what the consumers want. This is because for example, if we produce more capital goods now will result in less capital goods now. However, having more capital goods will result is lesser capital goods produced. Therefore in the long run, investing in capital goods will be better as it will ultimately produce consumer goods.