Economic Essay Example | Topics and Well Written Essays - 2000 words

Economic - Essay Example For instance, oil products in global market are becoming scarce and volatile because of the continuing crisis in the Middle East, the primary suppliers of oil products. In lieu of this, oil prices rose to its highest point in just a very short period of time while demand is getting faster. Conversely, if this oil producing countries return in their normal business term, then the production of oil products will increase, thereby bringing a stability of price. This environment is one of the current examples of inflation and deflation that is happening in reality. The main thrust of this paper is to discuss the causes of inflation and deflation, and how these affect corporate decision-making. To have a better understanding on this anomaly, it is a requirement to study the complex movements of prices and their effects through current situations and events. Inflation and Its Causes Inflation is described by Mukherjee (2002, p.26) â€Å"as a process in which the price level is rising and money is losing its value.† As you can see in figure 1, if the aggregate demand (AD) is increasing faster than the rate of the aggregate supply (AS), the general price level also increases, and this phenomenon is known as inflation. Nowadays, many countries are suffering from higher rates of inflation and sometimes government had to compromise by paying the cost of the reduced productivity. However, many economists have argued that pouring too much money into the economy as a solution would only lead to a more serious inflation (McNeese, 2000, p.22). The main causes of this phenomenon include: Too much demand in the economy. If the demand is high and the available supply cannot meet the demand, general price level would eventually move upward, thereby bringing in inflation or particularly known as demand-pull inflation. This is a situation wherein the rate of demand is faster than the rate of supply leading to a shortage of supply which means that â€Å"an increase in demand will affect prices more than output because firms may not be able to recruit staff more easily or produce more...† (Gillespie, 2007, p.381). Cost-push, monetary, and supply shock inflation. This type of inflation occurred when the supply of money in the circulation is high, causing the purchasing power of people to increase and eventually lead to a demand-pull inflation. On the other hand, cost-push inflation happened when the level of productivity among workers is increasing, labour expenses are also increased and the rate will be added up to the general price level (Grant & Vidler, 2003, p.132). Lastly, supply shock is more or less interrelated with demand-pull inflation; however, this time the supply is generally scarce. For example, the steady increase in prices of oil products in the world market brought by subsequent events particularly in Libya have also contributed to the increase of prices in almost all of the basic commodities. Deflation and Its Causes â€Å"Deflati on is a sustained decrease in the average price level of the entire economy† (Saunders & Gilliard, 2000, p.32). The steady and continuous fall of prices sound interesting to those who are not fully aware of deflation, but this term is not good for the monetary economy because falling prices would adversely affect income that eventually to bankruptcy. As sale, profit and investment fall together, producers are forced to cut

The Market and Social Order Assignment Example | Topics and Well Written Essays - 3250 words

The Market and Social Order - Assignment Example As it is, a commonwealth or a civil society is imperatively necessary to administer any property regime. There must be collective national standards (Sen, 1996, pp. 148-163). As a matter of fact, the free market system necessitates an array of public institutions and standards to shore it up (Fried, 1998). From this standpoint, the free enterprise system is in itself a type of "commons regime," that is, a collaborative undertaking to improve and develop well-being founded on rights of private property, contracts and market exchange. The concept that some types of property are intrinsically public has its origin in Roman law (Lee, 1956, pp.109-110). Some forms of property, the Romans believed, due to its nature and character, should not be under individual ownership and control. These types of property were called res extra commercium, in contrast, properties that could only be used in common because they were indivisible (e.g. waterways, ocean, land) were known as res communes. Derived from this belief, courts came up with a unique line of "public trust" analysis to categorise certain forms of property, like natural r... nd" pertained to deep seabed minerals, human genetic structures, the global atmosphere and other resources that should not lawfully be appropriated by any one individual or state (Buck, 1998). The Enclosure Movement in England The allegory of market enclosure was taken from the enclosure movement in England, which took place several times beginning in the late 1400s, specifically in the 1500s and during the Industrial Revolution. All throughout the Middle Ages, the conventional use of land was known as the open-field system, wherein arable lands were not fenced and jointly managed by everyone in the community. Peasants communally held rights to sizeable sections of meadow, moorland and forests. The commons utilised these to feed geese/sheep/cows, grow crops, furnish firewood and peat, and cultivate beehives and fruit trees (Williams, 1973, pp.96-110). As a means of supervising and handling lands in stable, pre-modern communities, the common lands did not lend themselves to new, more productive processes of agriculture. With these lands being employed for survival and not market purposes, the incentives were visible. Nevertheless, the lands were an important communal resour ce for coping with daily needs in many communities - and a complementary resource in other villages. Likewise, these lands had emotional and psychological significance to the villagers because these were community resources of which they had some direct measure of control. As the landed classes of England realised that wealth could be had by developing common lands, they began to push Parliament to permit the seizure of the lands, on the pretext that there is a need of "improving" them. Basically, enclosure appealed to these proto-capitalists because fresh breeding procedures for sheep made