ICL Post-graduate Diploma in Business

8220 Economics and Quantitative Analysis

Programme: WPG2102, Assessment number: 1

Name of the student:

Student ID number:

Report-1: Fundamental Economic Problems and Decision Making

Selected Product:
Selected Country:

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Report-1: Fundamental Economic Problems and Decision Making

1. Executive summary of the report

2. Introduction-
Economic problems are the problems which is face by the all the societies. It is the problem of
how they can make the best possible use of their limited resources. This economic problems
arise because people have endless needs and wants. This problem is also know as the central
problem of an economy which every economy has to face. In order to solve the problem there
are always three questions which people must make every effort to answer – How to Produce?,
What to Produce? and For Whom to produce?

3. Application of economic concepts and decision making

(a) Consumer behaviour

(i) Application of fundamental economic problems
The fundamental economic problem is a problem which have a four important concepts which
are scarcity, supply and demand, costs and benefits and incentives which can help the humans
to make a decisions.
Scarcity is understand by everyone which means a shortage of resources. Everybody has
experienced the impacts of scarcity. The fundamental problem that the world has limited is
described by the scarcity. This reality powers forces the people to make the decision according
to the limitation of resources so that they can use in most proficient way so that as numerous of
their most elevated needs as conceivable are met.
Supply and Demand drives the market system for example of beer, the demand of beer will be
automatically high if a lot of people want to purchase the beer. As a result people will be able to
make more money on average by charging high for beer. Hypothetically, this would make the
situation where the people start more production of beer, then the beer supply will increase
due to the production cycle and then the beer price will drop.
The cost and benefits concept is related to the rational choice theory which is based on the
rational expectations. If it is said by the economists the people are behaving rationally. It means
the people attempt to maximize the proportion of benefits to costs in their choices.
Economic incentives clarify the supply and demand operation to empowers the produces for
supply the goods that can satisfy the customers want and customers to preserve on scarce
resources. [ CITATION AND21 \l 1033 ]

(ii) Application of demand concept

Table 1: Demand for my selected product – TIM0TAM COOKIE

Price ($) Quantity bought (Packets)
6.0 0
5.0 2

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 4.0 3
3.0 4
4.0 6
0.0 8
Source:Author’s hypothetical data based on actual price bought
Law of demand:

Factors affect your demand:

Price elasticity of demand:

(b) Business/firm’s behaviour in producing the selected product

(i) Application of fundamental economic problems

(ii) Application of supply concept

Table 2: Supply of selected product – TIM-TAM COOKIE

Price ($) Quantity supplied (Packet)
0 0
2.0 2
3.0 3
4.0 4
5.0 6
6.0 8
Source: Author’s Hypothetical data based on Table 1
Law of supply:

Factors affect supply of your selected product:

Price elasticity of supply

(c) Buyer and seller interaction: market equilibrium

Graph

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 Consumer and producer curve
7
6
5
4
Price $
3
2
1
0
0 1 2 3 4 5 6 7 8 9
Cookies (Packets)

Demand Curve Supply Curve

Equilibrium

Technological change: impact on market equilibrium

Consumer and producer surplus

(d) Economy/government’s behavior

Table 3: Basic economic indicators of Australia in 2020

Population (millions) 25687041
Land area (sq. km.) 7692020
GDP (current USD, millions) 1330900925056
GNI per capita (current USD) 1380167803129
Gross capital formation (USD, millions) 296199222415
Sectoral share of GDP (%)
(a) Agriculture 1.89
(b) Manufacturing 25
(c) Service 66

Source: World Development Indicator 2021, the world bank

(i) Application of fundamental economic problems

(ii) PPF model and fundamental economic problems

4. Conclusion

5. References

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