Research Topics: Economic Theory

Role of Population Size and Growth in Economic Performance

Role of Population Size and Growth in Economic Performance     Introduction The discipline of economics as we understand it today is a relatively recent development (Varian HR 1989). Economic theory provides an outlet for research in all areas of economics based on rigorous theoretical reasoning and on topics in mathematics that are supported by the analysis of economic problems (Varian HR 1989). Economic theory surveys for particular areas of research that clearly set forth the basic underlying concepts and ideas, the essential technical apparatuses, and the central open questions. The help of economic theory the economist have already a guide on how to manage and boost the economy. Modern economic thought emerged in the 17th and 18th centuries as the western world began its transformation from an agrarian to an industrial society (Varian HR 1989). In accordance to these theories, issues concerning economic growth and development become a hotly debated topic. Actually, the economic development and progress of most countries in world is most likely related to their agriculture but only few recognizes that modernization and population growth are part of it. From the statement of economy presented by Macfarlane, I (2002), it was shown that the 1930s depression, accompanied by social chaos in rural and mining areas that effectively forced the country into the import-replacing industrialization that became the basis for a post-war economic boom.  Different nations around the world experienced decline and success in the course of their history. Their success and decline in terms of their economic, political, and societal conditions have led many historians and economist to come up with theories and assumptions that would determine the chain of events. With this, we may say the population size and growth as well as technological development as part of modernization changes plays significant role in economic performance. This role could have both positive and negative impact to the economy.  Basically, the increase in population size could also mean increase of workforce that would help the economy to grow inevitably.  However, this increase in population in negative side would also hinder the nation or a certain economy to distribute its already scarce wealth.     Discussions             According to Krautkraemer JA (2005), the decline in population means less pressure on resource and it also means less labour for production in the economy but a developed economy will react differently from a developing country. Basically, most developed countries are on that stage of having more death than birth meaning their population is declining.  For example, Japan its economy is not at all declining despite the population decrease. In other words labour is being substituted because there is now intensive mechanization, modernization, automation and computerization of every production sector and this nullifies the fact that a decline in population will affect an economy in developed world. One of the benefits of modernization is it describes the ongoing global trend toward the freer flow of trade and investment across borders and the resulting integration of the international economy. Because it expands economic freedom and spurs competition, modernization raises the productivity and living standards of people in countries that open themselves to the global marketplace.  For less developed countries, the benefits of modernization are obvious. Modernization offers access to foreign capital, global export markets, and advanced technology while breaking the monopoly of inefficient and protected domestic producers. Faster growth, in turn, promotes poverty reduction, democratization, and higher labour and environmental standards.  Modernization has produced enormous benefits for very large numbers of people (Inglehart, 2005). One of the most important benefits of modernization is the major progress and growth of global trade. Through this, goods, services, labour, capital and technology are able to move freely across national borders. International trade expansion led to higher international capital flows, labour and technology. Universality in cultural, political, legal and institutional practices among neighboring countries was also made possible through this benefit. With international trade, countries are able to distribute their goods to a larger market. Aside from economic development, the ties shared by participating countries can also be a useful resource for less developed nations. This benefit was even more pronounced from 1980 to 1997 where volume of international trade had tripled. At the same rate, imports and exports have also grown. From 1990 to 1997, the volume of foreign direct investment has also doubled in volume (RAWOO, 2000). Changes in technology and communication have also supported this modernization effect as labour and business opportunities become more accessible. The economic benefit of modernization then resulted to higher standards of living among participating nations. As modernization enables open trade among foreign countries, media had also been enhanced through this concept; this in turn, resulted to the people’s increased accessibility to several forms of media including the radio, newspaper, telephones, televisions, computers via the internet. This access on the other hand was beneficial not only in making communication easier but also in increasing public awareness over several important issues like gender inequality, discrimination, democracy and human rights.  As business monopoly is gradually taken out by modernization, media monopoly is no longer observed as well. RAWOO (2000) stated that the increased access of people to communication, markets and information is among the important benefits of modernization as nations are able to optimize various resources and share the outcomes with others. Ultimately, this important benefit resulted to efficient allocations for the purposes of progress, poverty reduction and human development. National governments then improved though modernization as awareness led to active development.             However, we may say that economic growth is the expansion of productive capacity of an economy and it requires labour but quality labour (skilled and educated). It is very possible for a region to have a shrinking population but a growing economy so long the few are skilled. The other fact which is also very important to consider as far as economic growth is concerned is both capital widening and capital deepening in production.             Moreover, some of us may also state that economic growth depends on whether the economy makes a profit or not, and what proportion of the decline are revenue generating people. For example, when the birth rate goes down, less resources are used (schools, hospitals etc) as children, but then the problem of fewer tax payers when that generation starts working causes a decline. This is happening now as the baby-boomers of the 1950s reach retirement, we will have an ageing population, so fewer tax payers and more people drawing pensions will cause the certain economy big problems in a decade or so. With respect to the population issues, employment and unemployment concepts will come up in order to relate measures of economic growth and economic actions of the government of a certain country. For example, Australia initiated a bipartisan protection strategy till the early 1980s which allowed reasonably high wages, low unemployment and a diverse manufacturing sector while achieving reasonable import replacement. However, this strategy was abandoned in 1983-85 as the Labour government worked to bring Australia out of the era of protectionism and into a new era of open competition and manufacturing for global markets.  Basically, the development of the Australian economy over the past years has been excellent. Regardless of the crisis in Asia, Australia’s GDP has sustained to grow sturdily, with per capita income growth averaging just under 3 per cent a year since late 1991. There has also been stable growth in full-time service and even faster growth in the number of part-time jobs. The unemployment rate, while still higher than popular given this period of growth, had fallen to a near 10 year low of 6.4 per cent in August 2000 (Macfarlane, I 2002). As seen in this report, the theory of Keynesian seems to be true in which the emphasis is on the activist government policies to promote high employment, dominated economic policymaking. With regards to this theory, it clearly describes the participation of the government in which it plays a major role in managing the economy (Varian HR 1989). Government is important because they are the on who will control and finance the expenses in order to make the economy become progressive. For some business companies, the theory of monetarism seems to be apparent. In Monetarism theory it deals about the updates the Quantity Theory. In monetarism theory really concerned the numbers of products being produce for the reason that can immediately supply if ever the demand is high (Varian HR 1989). It emphasizes the critical role of monetary growth in determining inflation. From the evaluation presented by Macfarlane, I (2002), Rational Expectations Theory is not apparent since this theory provides a contemporary rationale for the pre-Keynesian tradition in which there is restrictions or limitations of government involvement in economy. It argues that the market’s ability to anticipate government policy actions limits their effectiveness (Varian HR 1989). Basically, these theories play an important role in order to make the economy become progressive because it provides concepts and ideas in analyzing the complicated situation and problems that deals with economic problems. The concepts and ideas being provided by the theories, it will serve as the guidance for the government on how to manage the economy with fewer expenses. With regards to population growth, it certainly creates significant impact to economic growth and progress. Most notably may be Japan as well as many developed Western countries. The U.S. however, has experienced population growth due primarily to immigration rather than births. In the case of Japan, population growth by births is rather stagnant, and there seems to be a high barrier for immigration. The fear is that the elderly population will overtake the working (which may already be the case), and Japan’s version of social security will inevitably fail. Thus, the Japanese government is promoting the birth rate through incentives and the media. There are a few factors that actually allow the economy of a country to grow while the population decreases. People who did not previously contribute to the economy may do so, e.g. retirees, students, women. For example, during World War II, females entered into the workforce in the U.S. (which was unprecedented at the time), while the men were sent overseas to fight. The simple facts is that generally half the population (male v. female), were only subjected to the home life, now were contributing to the creation of goods and services. Obviously, this was to continue after the war and to the present. Since it is no longer the case that such a large part of the population is not working, we may assume that there are other methods to increase productivity. Technology will play a key role in countries that are unable to grow, or even sustain its population. Hence, we would imagine computers and machines to take the place of humans in the future.   Conclusion Typically, there is a whole ‘growth’ component of the economy – housing construction and so forth, so that if there is no growth, then we have unemployment, and through the multiplier process, stagnation. Historically, part of growth has been the increase use of inputs such as labor, land, oil, forests and the selling off stocks. So, in this sense, population growth is necessary and play significant role to the economy. Thus, it is also necessary to pay for the old people to have young people around, so that you need to at least replace your population. In the US, there is a huge swell of baby boomers that did not save enough for, so there need lots of immigrants to help pay for them when they retire. But this is rather an exceptional case. If there is no population increase, then the ever increasing demand for construction and so on must be dealt with technological growth and modernization. As evidently discussed in this paper, Japan survived and continues to receive economic growth even though their population growth is too low and that is because they manage to have excellent modernization growth. But for most economies, they must have either population or technological growth with respect to the current composition of economic factors and outputs.   References: Inglehart, R (2005), Modernization, Cultural Change, and Democracy: The Human Development Sequence. Cambridge University Press. Krautkraemer JA (2005), Economics of Natural Resource Scarcity: The State of the Debate, Resources for the Future, Accessed: 14 January 2009, Available at: <http://www.rff.org/rff/Documents/RFF-DP-05-14.pdf> Macfarlane, I (2002),The Australian Economy:Past, Present and Future, Reserve Bank of Australia Bulletin. Accessed: 14 January 2009, Available at: <http://www.rba.gov.au/PublicationsAndResearch/Bulletin/bu_apr02/bu_0402_2.pdf> RAWOO (2000), Coping with globalisation: the need for research concerning the local response to globalisation in developing countries, Rawoo, The Hague. Varian HR (1989), What Use is Economic Theory? School of Information Management and Systems, University of California, Berkeley. Accessed: 14 January 2009 Available at: <http://people.ischool.berkeley.edu/~hal/Papers/theory.pdf> Credit:ivythesis.typepad.com

Role of Population Size and Growth in Economic Performance

Role of Population Size and Growth in Economic Performance Introduction The discipline of economics as we understand it today is...

Economic Theory Essay

Every nations and country has their own strategy on how to improve and enhance their economic status. In each country, economy is very important because this is where the survival of the country lies. The progress of the economy depends the abundant resources or source of natural products and those people who are running it or manipulating it. These two factors should work hand in hand in order to determine the weakness and strength of each so that it will immediately fix if there are any loop hole in the transactions. Many people give importance and discuss about the usage of the economy and what is the really purpose of this why is it exists. Economy is already exists, but the years go by it keeps upgraded and improve by some theorist and economist. Economics is actually the study of social science in which it deals and studies the production, distribution and consumption of goods and services. Basically the status of an economy is the signs if the investments and infrastructures in business world are doing well or not. Economics is about social science that deals with the production, distribution and consumption of goods and services. When it talks about the production it depends the sources or resources of certain place if it is abundant or not. Here the economist makes feasibility study the place and the resources in which they could determine what certain products they are to produce. Then the economist studies how to distribute this to the consumers in safer and fastest way. Distribution talks about the types of the services being offered by the certain company in which their aims are to meet the expectations and satisfaction of the consumers. When it talks to consumption of goods and services it deals with the evaluation of the products, goods and services in which they are easily determine which areas or section is not performing well or having poor performance. Through they can easily patch up the discrepancies and problems that arise in their company so that they can easily revised their systems and methods of their management. The terms economic comes from the Greek for oikos (house) and nomos (custom or law) which means the rules of the household. Economics is so called a social science for the reason that it studies the society as well as the human behavior as a relationship between ends and scarce means which have alternative uses. In economics we have term the scarcity which means the insufficient supply of the resources and the demand of that products which comes from that resources is very high in which the resources are no longer compensate and the needs and wants of the people. Scarcity happens when there are circumstances that cannot be stop such as the natural disasters. The demands on this time are very high for the reason that the suppliers are not able to supply.  The suppliers not able to supply for the reason that the resources are destroyed brings by natural disaster such as cyclones, hurricanes, earthquake and tsunamis. For instance, if a certain place is having a factory or companies that produce sea products, it can be altered if there is natural disasters such hurricane or tsunami for the reason that the workers are not able to go to the sea because of the risk. In this case they are not able get the supply as well as the demand is high for the reason that the consumers’ wants and need are not able to meet because they are also affected with the natural disasters. This situation is just only a sample why scarcity happens. Absent scarcity and alternative uses of available resources, the people can assure that they cannot experience the economic problem. The subject involves the study of choices as they are affected by incentives and resources. Furthermore, the other usage of economics that plays a significant role in developing of economy is that it explains how economies, as a economic systems, work and what the relations are between economic players which are the agents in the larger society. Methods of economic analysis have been increasingly applied to fields that involve people including the officials to make choices in a social context, such as a crime, education, the family, health, law, politics, religion and social institutions and war. With this information being given, these are the reasons why there are lots of theory evolves where there is only the same purpose which is to boost and enhance the economy. The discipline of economics as we understand it today is a relatively recent development. Economic theory provides an outlet for research in all areas of economics based on rigorous theoretical reasoning and on topics in mathematics that are supported by the analysis of economic problems. Economic theory surveys for particular areas of research that clearly set forth the basic underlying concepts and ideas, the essential technical apparatuses, and the central open questions. The help of economic theory the economist have already a guide on how to manage and boost the economy. Modern economic thought emerged in the 17th and 18th centuries as the western world began its transformation from an agrarian to an industrial society. With this economic thought there are many of theories emerge for the reason that in economic theories are constantly changing. The theory of Keynesian is emphasizing on the activist government policies to promote high employment, dominated economic policymaking in the early post war period. With regards of this theory it clearly describes here the participation of the government in which it plays a major role in managing the economy. Government is important because they are the on who will control and finance the expenses in order to make the economy become progressive. In Monetarism theory it deals about the updates the Quantity Theory. In monetarism theory really concerned the numbers of products being produce for the reason that can immediately supply if ever the demand is high. It emphasizes the critical role of monetary growth in determining inflation. Rational Expectations Theory provides a contemporary rationale for the pre-Keynesian tradition in which there is restrictions or limitations of government involvement in economy. It argues that the market’s ability to anticipate government policy actions limits their effectiveness. The third theory is Supply-side Economics concerns with economic growth as a fundamental prerequisite for improving society’s material well-being. It deals with the products in order to save and invest if the nation’s economy is to grow. These theories play an important role in order to make the economy become progressive because it provides concepts and ideas in analyzing the complicated situation and problems that deals with economic problems. The concepts and ideas being provided by the theories, it will serve as the guidance for the government on how to manage the economy with fewer expenses.      References:     
line-height:200%"> Alison Alexander, James Owers, Rod Carveth, C. Ann Hollifield, Albert N. Greco; Lawrence Erlbaum Associates, 2004   Ray Marshall, Vernon M. Briggs Jr.; Irwin, 1989   Terry Black, Lynn Gallagher; Australian Journal of Management, Vol. 24, 1999   
line-height:200%"> Mauricio G. Villena, Marcelo J. Villena; Journal of Economic Issues, Vol. 38, 2004 .               Credit:ivythesis.typepad.com

Economic Theory Essay

Every nations and country has their own strategy on how to improve and enhance their economic status. In each country, economy is very...

The National Economic Country

Training and Development   Introduction             Small-Medium Enterprise (SAME) sector is recognized as a significant part of the national economics in each country. The importance of Somes to longer-term economic stability comes from their size and structure which, under adequate circumstances i.e. well developed factors market, allow them the flexibility and ability to withstand adverse economic conditions. Somes are more labor-intensive than larger firms and, therefore, have lower capital costs associated with the creation of jobs (William, 2003). Accordingly, Somes play a crucial role in raising income stability, growth, and employment. Modern economies are engage as complex networks of firms in which a firm’s competitive position depends, in part, on the efficiency of its suppliers. Therefore She’s competitiveness affects the competitive position of the economy as a whole. In addition, Somes improve the efficiency of domestic markets and make productive use of scarce resources, such as capital, facilitating long-term economic growth (Williams, 2003b). However, majority of these enterprises lack knowledge with current management tools, less established practices and resources for effective track keeping, analyzing and introducing regular changes into its business processes. Most She’s lag behind in updating its technologies, in systematically increasing skills of managements and personnel, and identifying new trends and customer requirements in time compared with bigger firms. With globalization, She’s are suspects in issues of competitiveness against multinational firm that operates in the same market with the She’s.               Most countries in the world are undergoing reforms that are opening their economies to greater international competition. However, domestic factor markets are not adequately developed to ensure the successful adaptation of Somes to this new competitive environment. Unlike larger firms, which can more easily absorb the transaction costs, Somes are at a disadvantage and require specific compensatory assistance. As an effect, She’s are left alone in their competitiveness for survival after the successful start-up with the globalization and the fast advancement of technology. As a result, consumers increased its demand for high quality of products and harsh competitiveness among firms grew. An arising gap in skills of locally available human resources follows with the stiff competition of firms follows. Most She’s also lack the capacity and readiness to introduce innovations. With the birth of e-business, there is also a big need for high qualifications for the personnel and a skill to learn and adapt to innovations. The SAME management faces steadily increasing gap between the feasible rate of their own progress compared to the major international producers and national corporations having the resources to meet the world of change. The Importance of Training and Development Many entrepreneurs seem to view employee training and development as more optional than essential. This kind of viewpoint that can be costly to both short-term profits and long-term progress. The primary reason training is considered optional by so many business owners is because it’s viewed more as an expense than an investment (Arvada, 2005). There are numerous reasons why businesses acquire fatal problems, including lack of investment, cash flow problems or disappointing sales. Yet there are less apparent factors which also lead to business failure, such as poor planning and a lack of business experience. In addition, failure to enforce a staff development program can seriously affect competitive advantage for small and medium-sized enterprises. The abilities and skills of managers and employees are crucial for the prosperity of Somes. There is extensive evidence showing a positive impact of management and employee training on small firm performance. (2000) claim that provision of management training enhances long term strategies and managerial competence of Somes. A Management Service’s study (2001) reports an increase in financial performance of Somes, employing less than 100 employees, following formal training. It also enhances human capital, which is a major source of sustained competitive advantage. Training, learning by doing and other measures of human resource management lead to better performance of employees at the firm level. Many studies propose a positive impact of training on employees wage growth and productivity (Bishop, 1994,1999a, 1999b, Barron et al). However, the positive correlation between training provision and better SAME performance remains debatable. Patton and Marlow (2000) question the nonlinear causal relationship between training provision and SAME performance. They show that such a relationship is shaped by other factors such as the external context, ownership structure and characteristics of management teams.   Impact of technology on Somes               Globalization has brought about a range of opportunities and challenges which have put additional pressures on Somes. In addition to having to cope with the effects of globalization, they need to adapt to new business conditions in terms of product positioning and product development facilitated by information technology, with all its potential benefits in terms of market access for Somes. The potential of Somes for achieving economies of scale is very limited and the use of computer reservation systems (Cress) has not spread significantly, quite apart from the fact that Somes are already disadvantaged because of their high average unit production costs. Somes are forced by market conditions to install new systems and train their staff to use tourism-related technology but find it difficult to invest in training or staff development, mainly because of limited investment resources and the fact that many Somes in the hotel, tourism and catering sector are managed by a generation of staff have had no formal training in the sector.             In developing countries, Somes play an important role in employment creation but are hampered by low productivity levels, poor product quality and lack of access to credit and training. The impact of capital outflows from developing countries resulting from e-commerce is another issue which needs attention. The need to develop competition policy-related disciplines in this area is also clearly felt, in view of the need to establish safeguards to prevent abuse by dominant suppliers.    Small Hotel Operation (Tourism and Hospitality Industry)             The conventional constraints of the hotel, catering and tourism industry, its long, antisocial working hours, low pay, unstable, seasonal employment, low job status, etc. make employment within the industry appear attempting to many. The prompt and most apparent consequences of such a situation are the difficulty of recruiting suitable staff and high staff turnover; both these effects are costly to the industry. There is therefore a perceived need for human resource development, to raise the profile of the industry, increase productivity and provide decent, sustainable employment within the sector.             The global hotel market encompasses a wide range of types of accommodation, full-service hotels, bed and breakfast inns, suites, self-catering short-term apartments and time-share properties. Distribution and intermediation are increasingly recognized as factors critical to the competitiveness and success of the tourism industry in general and of small and medium-sized tourism enterprises in particular. The latter need to develop effective distribution channels either to meet the needs of their independent clientele or to provide direct booking mechanisms to reduce their dependency on tour operators. Hospitality organizations and hotel chains already rely on customer bookings through the Internet. The challenge for tourism sector Somes is to be able to compete for their market shares and take advantage of emerging opportunities and associated benefits to enhance their profitability and viability in the global market-place. Somes in the tourism sector are constrained by the growing concentration and globalization of tourism supply. In addition, lack of professionalism and inadequate management and marketing skills, the absence of economies of scale and limited access to the necessary capital, human resources, marketing expertise and technology, over-reliance on a limited number of distribution partners and inadequate formal education or business training are among other deficiencies which put them at a competitive disadvantage. Overall, the inability to market their products adequately seriously affects their profitability and ability to survive in the globalize economy.             Somes are highly reliant on existing distribution channels, namely, intermediaries such as tour operators, travel agencies, travel information centers and tourist guides. It can be argued that the gradual reduction of Somes’ reliance on intermediaries will enable them to become more profitable, flexible and adaptable and to produce customized tourism products in order to satisfy niche markets. This will also require a rethink of all strategic and operational practices with regard to SAME development, as well as development of entrepreneurs’ managerial skills and professionalism, training in marketing and management and on the use of information technology.             Somes can benefit in a number of ways by applying information technology to develop their product, thereby enhancing their market position and increasing their profit margins. Information technology offers new management and business opportunities and can be applied strategically to gain competitive advantage, improve productivity and performance, facilitate new ways of managing and organizing, and develop new businesses. Although information technology entails risks and costs, its underutilization could increase the vulnerability of Somes and aggravate any competitive disadvantage as greater use is made of IT systems.             Although Somes play a major role in the international tourism and hotel industry, their vulnerability becomes quite obvious in the highly demanding business environment characterized by competition generated by globalization and the transformation of tourism demand. Globalization of the industry means that Somes in the tourism sector compete in a multinational environment where only organizations capable of providing exceptional value or cost advantage will survive. The opportunity of achieving economies of scale in distribution channels, reservations, marketing, advertising, administration, personnel management, technology adaptation, new product development, training and bulk purchasing of raw material and equipment, has been instrumental in the creation of major hotel chains, international consortia, management contracts and multinational franchising companies, and has placed the independent operator at a disadvantage. The overall trend in the hotel industry appears to be towards a gradual but steady switch from independently owned and operated hotels to hotel chains. Somes seem to be the weakest and most vulnerable members of the industry and will need to seek competitive advantages if they are to compete and maintain their market share in an increasingly globalize economy.   Employment and Working Conditions   Although tourism is a growth industry and a major creator of value added, the industry is vulnerable to a variety of economic, ecological, geopolitical and meteorological factors, and over-reliance on it can be dangerous for a country. Economic recession and the impact of natural disasters or terrorist attacks can devastate the sector in a country for several years. The tsunami that sweeps over many tourists spots in Asia greatly reduced and stalled the booming tourism industry of the affected countries. These factors shape the structure of the tourism labor force, making it difficult to maintain high permanent staffing levels. There is a generic tendency to operate on the basis of a core staff and to employ the labor needed for day-to-day operations under atypical contractual arrangements.             In an industry which employs a large proportion of young, mobile people, turnover is bound to be high, and recruitment is a habitual problem in the sector for this reasons. Best Inn (Training and Development)                Corona Del Mar is a medium sized hotel       with 60 rooms conveniently located on the fringe of the city central business district. Originally built in 1977, the hotel has recently undergone a major renovation programmed.                It is composed of 4 shifting front desk attendants. One operations manager and 15 staffs who acts a busboys and rooms service attendants. The median age for room service attendants is 23, and most of them finished high schools but with little or no experience at all in the hospitality service. The four front desk attendants have also little or no training at all with the industry. The operations manager is already the fifth replacement in 2 years, the four resigning after gaining enough experience and finding a better job. For almost five years, the hotel has been stagnant with its growth. With the recent renewed vigor of the city’s downtown, and the sudden influx of local tourists, the new management of Corona del Mar decided to train its staff to cater a good and quality service to its clients.                Before pursuing a training program, one has to first find out the “weakness” in the system where training must be targeted. With money constraints in SAME, the management cannot afford a holistic training program. Instead, the training program should focus on what is relevant and most pressing problem as of the moment.                Corona del Mar has a small yet still significant share in the hotel industry in the city. But with the recent activities and renewed vigor and tourist influx in the city’s downtown area, Corona del Mar enjoys a big advantage since it is conveniently located in the downtown area. Because of this the new management hired an independent firm to re assess and train the hotel’s staff to make them well-rounded with the industry. Focus of the Training Program <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%; text-autospace: none"> Technology orientation- A wide range of technological developments in service in hotels may be affecting productivity. Integrated management systems are enabling hotel companies to computerize day-to-day reception operations. Clients are thus able to make their own reservations via the Internet, while electronic in-room installations make it possible to settle accounts from the hotel room. This technology will also make it possible to monitor the productivity of personnel. The front desk attendants and the operations manager would be the beneficiaries of this training program. Computer hands-on training, internet usage tutorial and orientation of the basic software that would be used by booking clients through the internet would be the thrust of this program. The main objective is to familiarize the training recipients with the use of the technology that would increase their own productivity. The whole duration of the training to familiarize everything should last for 120 hours. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%; text-autospace: none"> Multiskilling – The employers argue that one way to create sustainable, realistic employment in the industry is to implement a policy of “multiskilling”. This is also viewed as a means of reducing the problems of recruitment. Multiskilling has always been practiced in small enterprises, but it is only recently that particular attention has been paid to it. As demand for general competencies in small enterprises as well as in major hotel and restaurant chains has grown, and as appropriate means of training for these competencies have been developed, awareness has grown of the importance of multiskilling in that segment. One person fulfilling several roles at different times of the day combines the tasks of several (part-time) jobs into one job. The recipient of this training program would be the staffs who already act as bus boys and room service attendants and the front desks attendants who would be oriented with booking and billing clients through the use of technology such as the internet and the computer. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%; text-autospace: none"> New Management Methods- Corporate organizations are downsizing and restructuring, which means that they are cutting back on layers of management. This means that less direction is being imparted to employees, who are more frequently required to accept a greater degree of responsibility and accountability. Increased use of technology in the workplace also means an added responsibility for individual workers. It is estimated that the “knowledge revolution”, by providing clear information via the Internet on all the industry’s tangible elements (illustrations of accommodation and hotel facilities) will make the intangible elements (those imparted by personal contact and service) all the more important. Lower levels of staff will be empowered to act autonomously. Command and control structures are thus largely giving way to a participatory teamwork approach. Human resources trained to fit in with new working methods will have to be regarded as an asset in which investment must be made, rather than merely as a cost, or employees will seek employment elsewhere. Management is developing ways in which to attract and retain employees.</li> </ul>             Credit:ivythesis.typepad.com

The National Economic Country

Training and Development Introduction Small-Medium Enterprise (SAME) sector is recognized as a significant part of the n...

Economic Theory Term Paper

Economic Theory Every nations and country has their own strategy on how to improve and enhance their economic status. In each country, economy is very important because this is where the survival of the country lies. The progress of the economy depends the abundant resources or source of natural products and those people who are running it or manipulating it. These two factors should work hand in hand in order to determine the weakness and strength of each so that it will immediately fix if there are any loop hole in the transactions. Many people give importance and discuss about the usage of the economy and what is the really purpose of this why is it exists. Economy is already exists, but the years go by it keeps upgraded and improve by some theorist and economist. Economics is actually the study of social science in which it deals and studies the production, distribution and consumption of goods and services. Basically the status of an economy is the signs if the investments and infrastructures in business world are doing well or not. Economics is about social science that deals with the production, distribution and consumption of goods and services. When it talks about the production it depends the sources or resources of certain place if it is abundant or not. Here the economist makes feasibility study the place and the resources in which they could determine what certain products they are to produce. Then the economist studies how to distribute this to the consumers in safer and fastest way. Distribution talks about the types of the services being offered by the certain company in which their aims are to meet the expectations and satisfaction of the consumers. When it talks to consumption of goods and services it deals with the evaluation of the products, goods and services in which they are easily determine which areas or section is not performing well or having poor performance. Through they can easily patch up the discrepancies and problems that arise in their company so that they can easily revised their systems and methods of their management. The terms economic comes from the Greek for oikos (house) and nomos (custom or law) which means the rules of the household. Economics is so called a social science for the reason that it studies the society as well as the human behavior as a relationship between ends and scarce means which have alternative uses. In economics we have term the scarcity which means the insufficient supply of the resources and the demand of that products which comes from that resources is very high in which the resources are no longer compensate and the needs and wants of the people. Scarcity happens when there are circumstances that cannot be stop such as the natural disasters. The demands on this time are very high for the reason that the suppliers are not able to supply.  The suppliers not able to supply for the reason that the resources are destroyed brings by natural disaster such as cyclones, hurricanes, earthquake and tsunamis. For instance, if a certain place is having a factory or companies that produce sea products, it can be altered if there is natural disasters such hurricane or tsunami for the reason that the workers are not able to go to the sea because of the risk. In this case they are not able get the supply as well as the demand is high for the reason that the consumers’ wants and need are not able to meet because they are also affected with the natural disasters. This situation is just only a sample why scarcity happens. Absent scarcity and alternative uses of available resources, the people can assure that they cannot experience the economic problem. The subject involves the study of choices as they are affected by incentives and resources. Furthermore, the other usage of economics that plays a significant role in developing of economy is that it explains how economies, as a economic systems, work and what the relations are between economic players which are the agents in the larger society. Methods of economic analysis have been increasingly applied to fields that involve people including the officials to make choices in a social context, such as a crime, education, the family, health, law, politics, religion and social institutions and war. With this information being given, these are the reasons why there are lots of theory evolves where there is only the same purpose which is to boost and enhance the economy. The discipline of economics as we understand it today is a relatively recent development. Economic theory provides an outlet for research in all areas of economics based on rigorous theoretical reasoning and on topics in mathematics that are supported by the analysis of economic problems. Economic theory surveys for particular areas of research that clearly set forth the basic underlying concepts and ideas, the essential technical apparatuses, and the central open questions. The help of economic theory the economist have already a guide on how to manage and boost the economy. Modern economic thought emerged in the 17th and 18th centuries as the western world began its transformation from an agrarian to an industrial society. With this economic thought there are many of theories emerge for the reason that in economic theories are constantly changing. The theory of Keynesian is emphasizing on the activist government policies to promote high employment, dominated economic policymaking in the early post war period. With regards of this theory it clearly describes here the participation of the government in which it plays a major role in managing the economy. Government is important because they are the on who will control and finance the expenses in order to make the economy become progressive. In Monetarism theory it deals about the updates the Quantity Theory. In monetarism theory really concerned the numbers of products being produce for the reason that can immediately supply if ever the demand is high. It emphasizes the critical role of monetary growth in determining inflation. Rational Expectations Theory provides a contemporary rationale for the pre-Keynesian tradition in which there is restrictions or limitations of government involvement in economy. It argues that the market’s ability to anticipate government policy actions limits their effectiveness. The third theory is Supply-side Economics concerns with economic growth as a fundamental prerequisite for improving society’s material well-being. It deals with the products in order to save and invest if the nation’s economy is to grow. These theories play an important role in order to make the economy become progressive because it provides concepts and ideas in analyzing the complicated situation and problems that deals with economic problems. The concepts and ideas being provided by the theories, it will serve as the guidance for the government on how to manage the economy with fewer expenses.      References:     Alison Alexander, James Owers, Rod Carveth, C. Ann Hollifield, Albert N. Greco; Lawrence Erlbaum Associates, 2004   Ray Marshall, Vernon M. Briggs Jr.; Irwin, 1989   Terry Black, Lynn Gallagher; Australian Journal of Management, Vol. 24, 1999   Mauricio G. Villena, Marcelo J. Villena; Journal of Economic Issues, Vol. 38, 2004 .               Credit:ivythesis.typepad.com

Economic Theory Term Paper

Economic Theory Every nations and country has their own strategy on how to improve and enhance their economic status. In each country, ec...

Innovation and Entrepreneurship

Table of Contents  6. Introduction  7.  Entrepreneurial Opportunities: Definition and its Key Role in Advancement           7.1. Catching Opportunity 7.1.1.          Making and reviewing Vision, Mission & Goals 7.1.2.          Risk Taker 7.1.3.          Encourage Innovation  8. How could the ability of the entrepreneur be captured within an existing company to provide higher growth potential? 8.1.   Inspire 8.2.   Create 8.3.   Connect  9. How do entrepreneurs operate so that their ventures survive and prosper? 9.1. Capture of resources that funds and launches new businesses 9.2. Identification of Attractive Industries           9.2. Review of potential growth rate           9.3. Review of past revenues and sales rate  10.    Conclusions  Introduction             Innovation and entrepreneurship are some of the most highly valued skills of today. While some may rely on their talents in other fields, entrepreneurship is slowly making its way as a highly valued ability. Entrepreneurship cannot be learned. One is born with the ability of being an entrepreneur. But just what exactly is an entrepreneur? In a definition taken from Wikipedia, an entrepreneur is someone who has an eye for unheard of, new, risky and possibly profitable undertakings. This person capitalizes on these endeavors and seems to be able to profit from it. In another definition, this person seemingly is able to keep a positive outlook, despite fallbacks on chosen businesses. The following excerpt from a reference essay talks about the person behind IBM, Steve Jobs.             From the minimum wage worker playing a costumed character from Alice in Wonderland at a shopping mall, Steve Jobs parlayed his parents’ good humour and a VW microbus into Apple Computer P/L and half a billion dollars in under five years. And less than five years after that he was fired from Apple, by his own Board; In leaving Apple he sold more than six million shares of Apple stock at a ridiculously low price for reasons that made no business sense at all. In between these high and low points were all the grand product intros, the screaming, the huge houses without furniture, the posing, seducing, and general acting-out that is Steve Jobs, according to some that claim to know him. He used the cover of Time magazine to try for a date with Diane Keaton. Joan Baez used Steve’s ego to extract Mac after Mac after Mac from his Woodside garage, each of which she gave away to some friend. Those were the days of Armani suits and stiff collars, the days when Apple didn’t even have a budget because the company couldn’t imagine how it could ever spend all the money coming in. Those were the days. Steve Jobs was then asked to return to Apple as CEO and in a couple of years Apple was profitable once more after nearly billion in losses. Some of the history of the between years included the founding of NeXT Inc. First, Steve seduced and abandoned the education market, then the hardware market, then his own employees, and then his investors, causing so much damage that Canon, which lost 0 million in the NeXT debacle, has sworn it will never again build computers. In a time when families are fashionable again, Steve is a family man, doing the dishes some evenings. When greed is no longer good, he has been generous with some of the loyalists from NeXT. When efficiency has become a way to measure business success, he talks about turning Pixar into a machine for making cartoons, rather than the haven for artists he liked to describe a decade ago.              The above excerpt was taken from a reference article about the business entrepreneur, Steve Jobs. But this paper generally focuses on entrepreneurial opportunities, keeping and seemingly nurturing the chosen business’s growth. But for reference and example purposes, I shall choose to retain Steve Jobs as my main reference and example. 7. Entrepreneurial Opportunities: Definition and its Key Role in Advancement             Entrepreneurial knowledge is important, not only academically speaking, but also economically, since entrepreneurs acts as pivots, pushing our economy forward (Ketchen, 2003; Venkataraman, 1997). Likewise, entrepreneurial knowledge is vital in harboring entrepreneurial opportunities and exploitation. Some researchers even incorporated the definition of entrepreneurial opportunities into research by stating, “… the scholarly examination of how, by whom, and with what effects opportunities to create future goods and services are discovered and evaluated” (Shane and Venkataraman , 2000, p. 218). But just what are entrepreneurial opportunities? In some definitions, it is described as “… situations in which new goods, services, raw materials, markets and organizing methods can be introduced through the formation of new means, ends, or means-ends relationships” (Eckhardt and Shane, 2003, p. 336).  But in another article, it is broadly defined as, “…as being a set of environmental conditions that lead to the introduction of one or more new products or services in the marketplace by an entrepreneur or by an entrepreneurial team through either an existing venture or a newly created one.” (Crussan and Dutta, 2005). 7.1. Catching Opportunity             In the following numbers, there would be a number of discussions on how entrepreneurs capture opportunity.              7.1.1. In accordance with previous reports and essays regarding Innovation and Entrepreneurship, I would once again recommend making and reviewing Vision, Mission and Goals. Vision, Mission and Goals can give one a sense of direction. One can be able to keep track of what he is doing, whether he is moving forward or not. Mission, Vision and Goals can help shape a person’s future, depending on how he perceives it. But having mission and vision statements, as well as goals are not only limited to large organizations. One can also have goals and mission and vision statements. As was mentioned, these things help define one’s personal journey into advancement. Also, by doing such, a person can be able to know what his intended undertakings are. In the context of entrepreneurship, these can help point out profitable and possible good business undertakings. The following tips are taken from the article entitled, “Mission and Vision Statements: Envision your Business, Realize your Goals” by Carly Foster: Convey your company values;   Inspire and motivate your organization toward objectives that are fundamentally key to the culture that you wish to establish;   Use long-lasting ideals, not fashionable statements based on current business or market trends; and   Keep your statements clear and easy to understand for anyone coming on to your organization.              7.1.2. Risk-Taker. According to the article, 10 Mindset Web Entrepreneurs Must Have to Succeed by Sheri McConnell, one must able to take risks. “Web entrepreneurs must understand that one of the keys to accomplishing our goals is to be willing to take risks. This “active” mindset means there will definitely be failures. But failures are just indicators of which direction to go next.” (McConnell, 10 Mindset Web Entrepreneurs Must Have to Succeed). It is definitely a good trait of a good entrepreneur when he is able to take risks. When a potentially profitable endeavor may come into play, it may have with it certain downsides. But a good entrepreneur would be able to identify the shortcomings and if ever, would encounter failure; one can get up easily and would once again take the risk, if opportune moments call for it.             7.1.3. Encourage Innovation.  In an article, “Creating an Environment for Innovation”, written by Dana Baldwin, mention was made of nurturing an environment that encouraged innovation. In the following excerpt, specifically the conclusion, mention of the effects of innovation is made. “Setting an atmosphere in which innovation is encouraged is often highly correlated with the long term success of a company. Each of the elements explained above is critical to the effective innovation process. Challenge yourself and your senior management team to develop the skills and the atmosphere in which effective innovation becomes a part of your ongoing strategic planning. It is highly probable that your long term survival and viability depend on it.” (Baldwin, 2003).   Time Horizon 1-2 years 3-6 years 7-20 years Type of Innovation Incremental Step function – longer term platform for annual features and options Breakthrough Incentive individual basis this year’s profits team basis medium term options with matched vesting period personal security, salary, tenure, fame, secure retirement, sabbaticals, long vesting stock Team Size small (1-3) bigger (10-100) very large Mgt. Style fast, decisive, ego driven team based, consensus bureaucratic, nurturing Pricing/Marketing skim pricing with mark downs tprice for volume to get down experience curve first, target price price for long term profits, defensive- keep others out, monopoly prices if protected (source: Leader-Values.com)               The table above demonstrates the different aspects in innovation. As was explained in the article, Time Horizons differ, depending on the different aspects that make up the innovation process.             Encouraging innovations in the company can well mean that the company is on the verge of a major shift, positively. In the context of entrepreneurship, innovation can help make the entrepreneur get his wanted business opportunities.  8. Utilizing the Entrepreneurs Abilities: Secret to Increasing a Company’s Growth Potential             An entrepreneur’s ability can be harnessed into making a better company by these three aspects: Inspire, Create, Connect. In the following paragraphs, detailed explanation of these three aspects will be provided Credit:ivythesis.typepad.com

Innovation and Entrepreneurship

Table of Contents 6. Introduction 7. Entrepreneurial Opportunities: Definition and its Key Role in Advancement 7.1. Ca...

Macroeconomics: theory and applications

Introduction Economics studies the allocation of scarce productive resources that includes workers, machines, and land to different productive activities particularly factories, offices, farms, labor, and machinery whose purpose is to generate commodities that will satisfy consumers’ needs. In the economists’ own language, economics examines how scarce, or limited, factors of production usually defined as land, labor and capital can be used wisely when there are many competing uses. In brief, economics is hailed as the science of rational choice under conditions of scarcity (1998). Economics is the study of how people choose to allocate its scarce resources to meet unlimited wants in order to maximize benefits to the society and distribute benefits according to effort exerted. It is concerned with the production, distribution, exchange, and consumption of goods and services.   Economists focus on the way in which individuals, groups, business enterprises, and governments seek to achieve efficiently any economic objective they select. Other fields of study also contribute to this knowledge: Psychology and ethics try to explain how objectives are formed; history records changes in human objectives; sociology interprets human behavior in social contexts (1999). It tries to explain the behavior of the economy by building hypotheses or theories. Specific versions of these theories are sometimes referred to as economic models. These models are simplifications of the real world that are potentially useful in illustrating some key feature of how the world works. Theories are tested by their internal consistency, by their conformity with established principles, and against available data. The latter is the ultimate test of how useful economics is to non-economists. It tries to give answers to questions like does it help explain or predict things that are going on in the real world (1997).   Poor nations desperately need aid from the rich nations in the form of capital and of technological and organizational expertise. They also need easy access to the markets of the industrialized nations for their manufactures and raw materials. However, the political capacity of rich nations to respond to these needs depends greatly on their own success in coping with inflation, unemployment, and lagging growth rates. In democratic communities, it is exceedingly difficult to generate public support for assistance to foreign countries when average wage earners are themselves under serious financial pressure. It is no easier politically to permit cheap foreign merchandise and materials to freely enter American and European markets when they are viewed as the cause of unemployment among domestic workers (1997). Opinions differ as to how long sustained economic growth can continue. Optimists pin their hopes on the ability to improve crop yields and enhance industrial productivity through technological innovation. Pessimists point to diminishing resources, unchecked population growth, excessive military spending, and the reluctance of rich countries to share their wealth and expertise with less fortunate nations. Government instability, endemic corruption, and wide swings in economic policy make the Third World’s economic prospects seem even less auspicious in the 1990s (1997). The paper will discuss about macroeconomics. It will also discuss about oil prices and how it affects recessions and the increases in the rate of inflations. The paper will compare and contrast the impact that recent increases in oil prices have had on the world economy with the impact of the significant increases in the 1970s.   Macroeconomics Macroeconomics, in contrast, looks at the output of the economy as a whole and is concerned with aggregate questions relating to inflation, unemployment, the balance of payments, and business cycles. In macroeconomics the value of cornflakes, beer, cars, strawberries, haircuts, and restaurant meals, along with the value of all other goods and services produced is averaged together. This results into studying the movement of aggregate national product. The prices of all goods and services consumed are also averaged together and discuss the general price level for the entire economy. It is usually just called the price level (1997). Macroeconomics deals with economic factors such as total national output and income, unemployment, balance of payments, and the rate of inflation.   It is distinct from microeconomics, which is the study of the composition of output such as the supply and demand for individual goods and services, the way they are traded in markets, and the pattern of their relative prices. At the basis of macroeconomics is an understanding of what constitutes national output, or national income, and the related concept of gross national product (GNP). The GNP is the total value of goods and services produced in an economy during a given period of time, usually a year. The measure of what a country’s economic activity produces in the end is called final demand. The main determinants of final demand are consumption, investment, government spending, and net exports (1997).Macroeconomic theory is largely concerned with what determines the size of GNP, its stability, and its relationship to variables such as unemployment and inflation. The size of a country’s potential GNP at any moment in time depends on its factors of production labor and capital and its technology. Over time the country’s labor force, capital stock, and technology will change, and the determination of long-run changes in a country’s productive potential is the subject matter of one branch of macroeconomic theory known as growth theory.    Unemployment causes a great deal of social distress and concern; as a result, the causes and consequences of unemployment have received the most attention in macroeconomic theory. During the last few decades there have been numerous refinements of the Keynesian theory of unemployment. For example, although there is still much disagreement as to the importance of wage rigidity, significant progress has been made in explaining it without recourse to trade union behavior or government regulation (1997). At first it seemed difficult to reconcile the notion of wage rigidity with the usual economist’s assumption that people seek to maximize utility or satisfaction and would be willing to accept a lower wage in order to get a job. However, by widening the range of variables over which individuals optimize to include variables such as loyalty and self-respect, it has become easier to reconcile labor market disequilibrium with the usual assumptions of optimizing behavior. Macroeconomic theories regarding the way that the determinants of total final demand operate form the basis of large macroeconomic models of the economy that are used in economic forecasting to make predictions of output and employment and related variables. During the last few years, the record of most such predictions has been poor, and an analysis of the errors has led to continual revisions of the basic models and refinements of the theory (1997).  Macroeconomics deals with a wider range. It assesses a country’s situation and what can be done to improve it.   Oil pricing Economics has focused on natural resource availability since its inception. Early writings on the possibility of world resource production being unable to keep pace with a growing population led to economics’ designation as the dismal science. However, despite centuries of predictions that we are running out, most natural resources, including oil, are still in plentiful supply. Real prices for extractive natural resources have, almost uniformly, declined with time as improvements in the technology of mining, refining, and utilization have occurred. Market prices for any commodity represent the product of two forces particularly supply and demand. Supply is a function that describes how much of a good or service will be provided by producers, given certain conditions. Similarly, demand is a function describing how much of a good or service will be desired by consumers, under specified conditions. In their most simple formulation, both relationships can be expressed as functions of the price of the instant good or service (1995).     The supply function is almost always upward sloping in price-quantity space. It illustrates the fact that firms are willing to supply more of a good or service as price increases. Conversely, the demand function is almost always downward sloping when charted in price-quantity space, reflecting consumers’ desire to purchase increasing quantities as price falls. For a hypothetical oil market the intersection of the supply and demand schedules, known as the equilibrium point, is the only price-quantity combination that satisfies both buyers’ and sellers’ desires and clears the market. If price is higher than the equilibrium price, sellers want to sell more oil than buyers want to buy, and the lack of buyers will cause sellers to lower prices. If price is lower than the equilibrium, buyers want to buy more oil than sellers want to sell and, as a consequence, price is bid upward (1995).   Changes in factors such as consumers’ incomes and preferences, weather, population, price, and the availability of substitute goods or goods that are used in association with oil can cause the demand curve to shift. The supply curve can also shift due to cost-lowering technological innovations, changes in the prices of inputs, altering of producers’ expectations regarding the future, the discovery of additional oil reserves, and other factors. An important concept is how responsive the quantities demanded and supplied are to changes in market prices. This effect is measured in economics by a term known as elasticity. If demand is very responsive to changes in the price of the instant good, then it is known as elastic. Alternatively, if demand does not change very much with a price change, it is known as inelastic (1995).     The process for supply is the same. Elasticity is different for each point along the demand and supply curves. Thus, people can observe little response due to price changes within a particular range; say at the lower end of the price spectrum, and significant response in another range, possibly at the higher end of the price spectrum. Both demand and supply are more elastic in the long term than in the short term, as buyers and sellers are better able to make price-driven adjustments over a longer time period. If markets are competitive then each market participant takes the price determined by the market equilibrium as a given. They can do nothing, acting unilaterally, to impact the price. A single buyer can refuse to purchase and exercise some control over the market price Thus, the price of oil will be influenced by all the factors that influence either demand or supply and determine equilibrium (1995).  Different things contribute to the prices of oil The rise or fall of oil prices affects not only the economy but people’s daily living activities. Inflation Inflation is the pervasive and sustained rise in the aggregate level of prices measured by an index of the cost of various goods and services. Repetitive price increases erode the purchasing power of money and other financial assets with fixed values, creating serious economic distortions and uncertainty. Inflation results when actual economic pressures and anticipation of future developments cause the demand for goods and services to exceed the supply available at existing prices or when available output is restricted by faltering productivity and marketplace constraints. Sustained price increases were historically directly linked to wars, poor harvests, political upheavals, or other unique events. Deflation involves a sustained decline in the aggregate level of prices, such as occurred during the Great Depression of the 1930s; it is usually associated with a prolonged erosion of economic activity and high unemployment. Widespread price declines have become rare, however, and inflation is now the dominant variable affecting public and private economic planning (1996).   When the upward trend of prices is gradual and irregular, averaging only a few percentage points each year, such creeping inflation is not considered a serious threat to economic and social progress. It may even stimulate economic activity: The illusion of personal income growth beyond actual productivity may encourage consumption; housing investment may increase in anticipation of future price appreciation; business investment in plants and equipment may accelerate as prices rise more rapidly than costs; and personal, business, and government borrowers realize that loans will be repaid with money that has potentially less purchasing power (1996).   A greater concern is the growing pattern of chronic inflation characterized by much higher price increases. Chronic inflation tends to become permanent and ratchets upward to even higher levels as economic distortions and negative expectations accumulate. To accommodate chronic inflation, normal economic activities are disrupted: Consumers buy goods and services to avoid even higher prices; real estate speculation increases; businesses concentrate on short-term investments; incentives to acquire savings, insurance policies, pensions, and long-term bonds are reduced because inflation erodes their future purchasing power; governments rapidly expand spending in anticipation of inflated revenues; and exporting nations suffer competitive trade disadvantages forcing them to turn to protectionism and arbitrary currency controls. Demand-pull inflation occurs when aggregate demand exceeds existing supplies, forcing price increases and pulling up wages, materials, and operating and financing costs (1996).   Cost-push inflation occurs when prices rise to cover total expenses and preserve profit margins. A pervasive cost-price spiral eventually develops as groups and institutions respond to each new round of increases. The specific effects of inflation and deflation are mixed and fluctuate over time. Inflation initially increases business profits, as wages and other costs lag behind price increases, leading to more capital investment and payments of dividends and interest. Domestic inflation may temporarily improve the balance of trade if the same volume of exports can be sold at higher prices. Government spending rises because many programs are explicitly indexed to inflation rates to preserve the real value of government services and transfers of income (1996). Inflation is something that concerns governments. When it happens countries tries to find out what causes such and they find probable solutions.   The impact of oil prices The international oil security problem has two components. The first is the exercise of market power by international oil exporters to raise petroleum prices. While beneficial to U.S. oil producers, higher prices raise the real cost of domestic and imported oil for U.S. businesses and households, thereby crowding out other opportunities for consumption and saving (2002). The second component is macroeconomic disruptions arising from oil price instability. These disruptions became a concern during the 1970s, when oil price shocks were followed by economic downturns and inflation in the industrialized countries. Among the causes of oil price shocks are unexpected supply reductions by individual oil suppliers or suppliers as a group, unexpected surges in demand, or destabilizing inventory adjustments. Oil price shocks appear to have consequences for the economy beyond the direct effects of an increase in energy costs (2002). The dramatic oil price increase of the 1970s, which coincided with escalating rates of inflation and unemployment and decelerating rates of economic growth worldwide, was more coincidental than causal. The extent to which oil price fluctuations affect national economies is limited to the proportion of expenditures on oil to GDP, initial price levels, and the strength of the relationship between the demand for capital goods and labor and final demand. For developed countries such as the United States, Japan, and Germany from 1973 to 1989, only a small fraction of the fall in GDP growth was the result of high oil prices (1997).  The real culprits were declining investments and the stifling of development and technological diffusion brought about by fiscal and taxation policies which exerted inflationary pressure and squeezed profits and salaries.   For developing countries the decelerating growth rates they experienced were primarily caused by declines in the level and quality of investments, the availability of foreign capital, and the pattern of inflation which was related more to interest rates and public debt levels than to oil prices (1997). The increase in oil prices in the 70’s was said to be the reason for the economic problems and low GDP the world encountered during those times.  In these times oil price increases are also blamed as the cause of economic problems for a country. Unlike in the current era; the oil price hikes was blamed but is not the cause of the economic problems. There are certain instances wherein the hikes did not affect the economic development.  Credit:ivythesis.typepad.com

Macroeconomics: theory and applications

Introduction Economics studies the allocation of scarce productive resources that includes workers, machines, and land to different prod...