BBA 1002

PRINCIPLES OF ECONOMICS AND MANAGEMENT SKILLS

GAN KAR YING
970714-01-5018
202748

MR. DOUGLAS

JUNE 2015

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Content
NO

TOPIC

PAGES

1
2
3

Task 1
Task 2
Task 3

2-4
5-6
7-9

Task 4

10-13

Task 5

14-16

Summary

17-19

Reference

20

Coursework

21-30

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Task 1
(a) The alternative or point A has 0 millions of unit of food and 8.5 thousands of units of
clothing. Besides that, the alternative or point has 1 millions of units of food and 7.5
thousands of units of clothing. On top of that, the alternative or point C has 2 millions of
unit of food and 6.5 thousands of units of clothing. On the other hand. The alternative or
point D has 3 millions of units of food and 5.0 thousands of units of clothing. In
addition, the alternative or point E has 4 millions of units of food and 3.0 thousands of
units of clothing. Moreover, the alternative or point F has 5 millions of units of food and
0.0 thousand of units of clothing.
(b) This economy can increase food production by 1 million units when there is no
change in technology or the quantity of economic resources by decreasing the units of
clothing. Besides that, we can decrease 2 thousands of units of clothing to increase 1
million of units of food.
(c) The opportunity cost of increasing food production 1 million units is decreasing 2
thousands of units of clothing.

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(d)The opportunity of producing additional units of food is presented in table

Alternative or

Units of Food

Units of Clothing

Point

(millions)
0
1
2
3
4
5

(thousand)
8.5
7.5
6.5
5.0
3.0
0.0

A
B
C
D
E
F

Opportunity Cost
8.5
1.0
1.0
1.5
2.0
3.0

(e) The reason that the food costs rising is the resources are not equally efficient. The
resources are not homogeneous is also the reason of food costs rising. The amount of
clothing given up to produce the first 1 million units of food is very little. The economy
uses those most efficient in food production. But as we continue to expand food
production by decreasing clothing problem, the economics resources must be utilized to
produce food are less productive.
Task 2
(a) The price of a cell phone falls decrease will increase the quantity of cell phone
demanded. Besides that, everyone expects the price of a cell phone to fall next month,
the demand of cell phone will decrease. In addition, the price of a call made for a cell
phone falls, the demand of cell phone increase. On top of that, the price of a call made
from a land-line phone increases, the demand of cell phone increase. Moreover, the
introduction of camera phones makes cell phone more popular, the demand of the
camera phones increase.

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(b)
Price

D2
0

Price

D0

Quantity
demande
d
increase

Deman
d
increas

D1
D
Demand
decreas
es

Quantity

Quantity
Figure 4

Figure 5

(c) A fall in the price of a cell price (other things remaining the same), illustrates the law
of demand. Figure 4 illustrates the law of demand. The other events change demand and
do not illustrate the law of demand.

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Task 3
Price of lobster (per pound)

Quantity of lobster supplied (pounds)

$25

800

20

700

15

600

10

500

400

Price of lobster (per pound)

Quantity of lobster demanded

(pounds)

(a)

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$25

200

20

400

15

600

10

800

1000

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Price (RM)
25
20
Equilibrium price

15
10
5
Quantity
200

400 600 800

1000

Equilibrium quantity
The point of intersection of demand and supply curve is the equilibrium point. The price
corresponding to equilibrium on y-axis is equilibrium price which is equal to RM 15
and the quantity corresponding to equilibrium on x-axis is equilibrium quantity which is
equal to 600.

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b)
1
Price of lobsters

2
Quantity of lobsters

3
Quantity of lobster

4=2+3
Total quantity

(per pound)

demand by U.S.

demanded by

demanded by U.S.

(pounds)

French (pounds)

& French

25
20
15
10
5

200
400
600
800
1000

100
300
500
700
900

(pounds)
300
700
1100
1500
1900

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Prices of lobster (per pound)

Quantity of lobster demanded (pounds)

25

300

20

700

15

1100

10

1500

1900

Price (RM)
25
20
Equilibrium price

15
10
5
Quantity
1900 1500 1100 700 300
Equilibrium quantity

The point of intersection of demand and supply curve is the equilibrium point. The
equilibrium price is RM15 and the equilibrium quantity is 1100.

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Price of hamburger
25
20
2

15

E
1

10

Quantity of
200 400 600 800 1000 1200 1400 1600 1800 2000

hamburger

Increase in demand from D1 to D2, the equilibrium point moves to get from E1 to
E2 caused an increase of the price of lobster from P1 to P2, that is the fisherman extra ,
because the increase in the price of lobster from RM 5 to RM 25. US consumers feel in
a bad mood because of the price increases from lobster RM 5 to RM 25. This will result
in reduction of U.S. consumption in the lobster. The quantity of lobster corresponding to
in the US demand schedule is 800. Hence US consumer who needs RM 5 pounds at 400
per lobster.

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Task 4
(a) When the income of households in Metropolitan New York and Washington, D.C.
increase 20%, the demand of air transportation increase. The demand curve shifts up
and to the right.
(b) When the U.S. government subsidizes Amtrak and the cost of a train ticket between
New York City and Washington, D.C. reduce 50%, the demand of air transportation
decrease. The demand curve move down and to the left.
(c) When the number of business with offices in both New York City and Washington,
D.D. increase, the demand of the air transportation increase. The demand curve shifts up
and to the right.
(d) The prices of an airline ticket decrease 20%, the demand of air transportation
increase. The demand curve move up and to the right.

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Task 5
(a) When the price of oil increase, the airline industrys market supply increase. The
market supply curve shift up and to the left.
(b) Airline worker demand and receive a 20% increase in their wage, the market supply
curve move up and to the left.
(c) Pratt & Whitney develops an airplanes engine which is 50% more fuel-efficient, the
market curve supply shift down and to the right.
(d) U.S. manufacturers of airplanes are subsidized by U.S. government, the market
supply curve shift down and to the right.

Summary
Economics is a study of man in the ordinary business of life. It enquires how he gets his
income and how he uses it. Thus, it is on the one side, the study of wealth and on the other
and more important side, a part of the study of man.

The problem of economics include scarcity. Scarcity is the basic economic problem
that exists because we as humans have unlimited wants that cannot be met by the
limited amount of resources our world has. Any good or service that has a non-zero
price is considered scarce - it will cost you something to consume that good or service.
Without scarcity, there would be no reason to study economics. People would consume
everything they could possibly consume and not have to make choices or trade-offs
between goods and services.
On top of that, all choices have an opportunity cost: Every time an investor, saver,
consumer, or producer makes a decision, there is an alternative course of action that
could be taken. Economists refer to the best-forgone alternative as the opportunity cost
of a decision. It is very important that students recognize the importance of considering
the opportunity cost when making a decision.
There have Fayol's 14 Principles of Management. The principle include division of
work, authority, discipline, unity of command and unity of direction. Besides that,
subordination of individual interests to the general interest, remuneration, centralization
and scalar chain. In addition, the principle include order, equity, stability of tenure of
personnel, initiative and esprit de corps

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It is important to distinguish between economic principles, such as

those outlined by Mankiw, and principles of economics. The latter refer
to a set of concepts and methods that economists use in conducting
economic analysis. These principles apply to the academic field of
economics, while economic principles relate to
the economy.

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Reference
1. http://www.ehow.com/about_5340126_definition-economic-principles.html
2. http://study.com/academy/lesson/what-is-economics-definition-principles-quiz.html
3. https://en.wikipedia.org/wiki/Economics
4. http://www.mindtools.com/pages/article/henri-fayol.htm
5. http://www.kidseconposters.com/posters/financial-literacy/basic-principles-ofeconomics/

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Coursework
The effect of income on the demand of a good is determined by the types of good as
follows:
Normal Goods
1 There is a positive relationship between consumer's income and the quantity demand
for normal goods.
2 When a consumer's income increases, the demand for normal goods will increase, and
vice versa. Examples of normal goods are clothes, furniture, televisions, and shoes. This
situation occurs because the increased income enables consumers to purchase more
goods. Therefore, the demand curve for normal goods will shift to the right, as shown in
Figure 2.8.
3 From Figure 2.8, at the original income level 0Y0, the quantity demand for normal
goods is 0Q0. When a consumer's income increases to 0Y1, the quantity demand for
normal goods will increase to 0Q1.

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Figure 2.8 Effect of increased consumer's income on demand for normal goods

Inferior Goods
1 Inferior or Geffen goods are normally of poor quantity and they constitute a large part
of the poor man's expenditure. Examples of inferior goods are potatoes, salted fish,
margarine and broken rice.

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2 There is an inverse relationship between consumer's income and quantity demand for
inferior goods.
3 When a consumer's income increases, the consumer tends to replace inferior goods
with goods of a higher quality. As a result, the demand for inferior goods will decrease.
4 Therefore, the demand curve for inferior goods will shift to the left as shown in Figure
2.9.
5 From Figure 2.9, at the original income level 0Y0, the quantity demand for inferior
goods is 0Q0. When a consumer's income increases to 0Y1, the quantity demand for
inferior goods will decrease to 0Q1.

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Figure 2.9 Effect of increased consumers income on demand for interior goods

Essential Goods
1 Demand for essential goods is not affected by changes in the consumer's income.
Therefore, the relationship between consumer income and essential goods is inelastic. In
other words, there is absolutely no relationship exists between consumer's income and
essential goods.

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2 This is because everyone needs food to survive, regardless of whether, the consumer is
wealthy or poor.
3 This situation occurs because expenditure on essential goods only involves a small
part of consumer's income. Therefore, changes in income levels will not affect the
quantity demand for essential goods. This is shown in Figure 2.10.
4 From Figure 2.10, at the original income level 0Y0, the quantity demand for essential
goods is 0Q0. When the consumer's income increases to 0Y1, the quantity demand for
essential goods remains at 0Q0

Figure 2.10 Effect of increased consumers income on demand for essential goods

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