We begun the lecture speaking the simple theory of sales and demand. We talked about the fluctuation of the demand line which can be described as elastic or inelastic. When it comes to supply, the higher the price the less people want to supply it and the cheaper the price the more people want to. This is opposite of the demand line in normal circumstances.
HOWEVER
- Distortion of markets occur
- Taxes/ levies
- Interest rates
- Nature of product
- nature of markets
- Global / International markets
All if these things can effect / distort demand.
Government use taxes / suty to raise money to spend on what is needed;
- Police
- NHS
- Armed forces
- School System etc.
Tax up (Insert diagram from powerpoint)
Interest rates are also important to the management of an economy. The interest rate is the cost of borrowing money. Government also have to borrow money therefore have interest rates.
Interest rate increase - Cost of money up. - return on investment - better savings return.
Corporate - cost of running rises - Productivity increases?
Personal - increase in cost of borrowing reduce expenditure - pay increase demand? Reduced demand - reduction in inflation.
US Issues Economics (Diagram)
Money - a medium for smoothing trade in all things. A measurement method of value.
Money has several different definitions -
1. Cash you have
2. The cash you have + the cash you can get (e.g. from savings)
3. The cash you have + the cash you can get + loan credit
4. Loan credit (short term) Long term
Some basics -
Cost - what you have to give, to get something you want now normally described in a monetary value.
Price - What an item is actually sold for
If you'e buying, cost = price
Profit - The positive difference between cost and price
Loss - the negative difference cost and price
Income - Money coming in, may be cash or credit.
Expenditure - Often refered ro as spending, money going out.
Debt - How much money is owed TO you.
or
How much money you owe. Often regarded as negative element.
Credit - How much money beyond that which you have. you may use.
Variable costs - A cost that varies with output.
Fixed Costs - a cost that does not vary with output.
Example - The more t-shirts you have to buy - varies directly with production.
Business rates are fairly static - You pay them irrespective of sales.
A: Costs of running the business.
General costs the can not directly appointed to the client. E.g. heating, lighting, building repairs, management costs etc.
B: Costs of undertaking particular projects.
Specific costs that can be allocated directly to a client.
E.g. Product cost, design cost, etc.
Taxation issues -
Income tax bands:
£10,600 - £31,785 20%
£31,786 - £150,00 40%
£150,000 + 45%
