Challenges for Business Start Ups

Economics for business

Introduction

In this assignment I have been asked to answer three questions related to economics for business.

Question 1

Why does choice arise in Economics? Use one example or more to discuss the concept of “rational choice” and opportunity cost.

Choice arises in economics because we are not getting everything that we expect and not enough of it. We need more choices of things that are out there for us so that we have a selection to choose from. The idea of opportunity cost is to consider something else when what we want is not available and this gives us the opportunity of something new.

Rational choice gives you the opportunity of seeing the advantages and disadvantages of a product and making you choose which ones better for you. An example of this is having a normal house phone and a cordless phone, the advantages of having a cordless phone is that it can be used in any part of the house, it can be taken round the house by yourself and the advantages of a normal house phone is it will be connected in the same place and wouldn't get lost in the house.

What do you understand by the law of demand? Pick a product and discuss two factors, which in my opinion, would case the demand curve to shift to the left. Can you think of two other factors which would shift the supply curve of your product to the right?

What I understand by law of demand is if supply is held constant an increase in demand leads to an increased market price, while a decrease in demand leads to a decreased market price. If there is an increase in demand people will be buying more whereas if there is a decrease in demand people wouldn’t buy as much because they wouldn't be able to afford it. However they may have an alternative of buying a similar product which is a bit cheaper than the other product.

My product is CDs and for it to shift to the left means there is a decrease in demand and this can be due to the fact people have started using iPods and no longer need to purchase CDs to listen to music because it is much easier carrying an iPod than a CD player.

The two reasons which make my product shift to the right and increase the demand would be those who do not download are buying all the latest singles out and spending their money on CDs. Another reason it may shift to the right is because during Christmas time special offers are on and sale and customers tend to purchase more CDs at that time as they are saving money.

Question 2

How is the price of oil determined? Discuss the factors that led to the surge in the price of oil in 2008 and its subsequent fall in 2009.

The price of oil is