economics

A detailed Summary of economics

On the 14th of June Coca-Cola's soft drinks were banned from the markets in Belgium and later also in Luxemburg and France. Two failures in the bottling system were the cause for the nausea that the people suffered. According to the article it would have been better if they would have acted fast and told the whole truth. Coca- Cola is in an ologopolistic market and therefore branding plays a great role. It is possible that the company ha lost market shares, due to this accident. In the ologopolistic market the firms don't compete with price, but rather with advertising and other non-price strategies. Therefore one can predict that this scandal has shifted the demand curve to the left. This accident can be seen as a negative externality. The government should make Coca Cola increase their health controls (internalise their externalities), if scandals of this sort happen again. They can enforce this by either subsidies (reward) of in this case taxation (punishment). People who would usually only buy Coca Cola due to the heavy advertising might try a substitute during the time of the ban. This can be seen as a sort of free promotion for the others in the market. According to the zero sum game, the lose tha

The gap between the rich and the poor is widening. The poorest quintile of the population is shown to earn 9 % less in real terms than in 1977, while the rise in the income of the top 1 % since 1977 exceed the total income of the bottom 20 % this year. The economic theory predicts that the consumption of the household will rise. The marginal propensity to the consumer measures the proportion of a change in income that is spent or saved. Even though the poorest quintile might be spending more money they are getting less back in real value, due to inflation. The stockmarket boom in the 1990s has contributed a great deal to throwing the distribution of wealth of balance. One can predict that a rise in income will lead to more spending, but some saving too. Usually only the wealthier have a marginal propensity to save or to invest. The poor are the ones that put their money right back into the circular flow of the economy to buy the current G.N.P. Meaning that there are no withdrawals. When withdrawals exceed injections, output, employment and national income fall. Much of the income is going from the poor to the rich. Unlike the poor the rich aren't always injecting the money into the current circular flow. They are more likely to withdraw the money from the economy. When injections exceed withdrawals output, employment and national income rise. Injections and withdrawals produce a disequilibrium in the economy. If the rich would save a substantial amount of money and thereby withdraw a significant amount of money from the circular flow they could trigger a so called "ripple effect". It can be said that one person's spending becomes the others income. Due to this inequality it will be hard for the economy to grow. The poor will be limited to only buying necessities. The government could redistribute the incomes, by taxing the very few, extremely rich ext

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Approximate Word count = 1269
Approximate Pages = 5 (250 words per page double spaced)

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