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Factors in Economics


  1. Economics is the production of consumer goods and the transfer of wealth, production and research of goods received. Based on Economist’s Dictionary of Economics, economics is the study of the production, distribution and consumption of wealth in human society. Economy explain how people interact in the market to get what they are best scholars or to achieve certain goals. As the economy is the people and the government to act in a special way. The main purpose of economic is to determine whether the economic boost our economy, we need to know how the economy should do. The main purpose of economic activity is the production of products and services to meet the needs and requirements of the people thereby enhancing the economic well-being. The central purpose of economic activity is the Is the production of goods and services to meet customers’ needs in order to meet both as a way of life, but also to better meet the needs of their lifestyle or standard of living growing needs of citizens. The basic economic problem is about resources, scarcity and choice. A resource also is a means of support. A resource can be considered as feature of our environment that helps to support our well-being. There are three main types of resource such as physical or natural, human, and manmade resources. Scarcity can be broken down into four ingredients of factors of production as land, labour, capital and enterprise. Based on the choice, the highest-value option will be forgone and this is called “opportunity cost”. Economic problems basically revolves around the idea of ​​choice must ultimately answer. Due to limited resources, the manufacturer must first determine what is produced, in order to meet the demand. Consumers are considered the greatest impact of this option, but they also want the goods must comply with its own budget and purchasing power parity calculation.
Law of demand Law of supply
– state that the price of good rises, the quantity demanded of the good falls.

– states that there is a negative, or inverse, relationship between price and the quantity of a good demanded and its price.


– demand curves slope downward

– When the price of a good increases, its relative price makes consumers less willing to purchase this good.

– state that the price of good rises, the quantity supplied of the good rises.

– states that there is a positive relationship between price and quantity of a good supplied.


– supply curves typically have a positive

– the price increases, other things constant, a producer becomes more willing to supply the good. Prices act as signals to existing and potential suppliers about the rewards for producing various goods higher prices attract resources from lower-value uses.


Factor of Cost Benefit Analysis are measurement problem and time problem. Measurement problems difficulties encounter in measuring intangible costs such as foul atmosphere or intangible benefits such as a peaceful neighbourhood. Assuming several other cost and benefits associated with the activities and estimating the costs and benefits involves. Cost Benefit Analysis affects by Market condition, state of economy and the other. It was uneven distribution of benefit to community. Time problems tackling future time problems by discounting future costs and benefits. Or calculating the correct rate for future dollar value as well as accounting for additional benefits and costs associated. Human life is probably the most difficult thing to measure. In Western society, is the infinite value of life. However, some issues, such as safety procedures, speed limits, medicines, etc., may lead to the risk of death. In the production of food businesses must determine acceptable risk of death. In the production of food businesses must determine acceptable risk of death. Obviously, the lower the mortality rate is preferred, but is always a certain degree of risk. For example, companies put their eating beans know that some users will have a negative allergic reactions. Although the company may warn the package, it does not always stop people from consumer products. Pollution is difficult to measure the external economic cost-benefit analysis. There used to approximate the cost of pollution in several common ways. These methods include the cost to clean up the mess the cost of pollution and health problems caused by the treatment. In a smaller level, it is difficult to measure the dirty air and water, health and productivity of workers will take place in the office and how much damage costs.


Price mechanism is the system, the strength of demand and supply is determined by the price of its goods and change. It is the buyer and seller actually determines the price of goods. The price mechanism is a term used to describe the means by which the many millions of decisions taken each day by consumers and businesses interact to determine the allocation of scarce resources between competing uses. Price mechanism cause many changes in the economic environment. If demand increases, then the price will continue to rise in the cause of movement along the supply curve. Price mechanism refers to how the impact of commodity prices for goods and services in terms of economics of demand and supply. Price mechanism affects the buyers and sellers that who negotiate price of goods and services. Price mechanism refers to variety ways to match up buyers and seller through price rationing. For example, imagine that there is a sudden demand for light bulbs among the members of society. As the demand increases, the makers of the light bulbs will be able to raise the price of the light bulbs to reflect that demand. In turn, the company that makes the light bulbs will devote more of its production efforts to light bulbs, thus increasing the supply to meet the demand. With this example, the price mechanism has resulted in the initial rise of prices for the light bulbs. Since the initial demand for the light bulbs has been sated, and the increased production has resulted in more light bulbs being produced, the mechanism begins to shift back the other way. The price increase and the increased supply will result in less demand for the light bulbs. Once that occurs, the prices will drop back down, the companies will once again decrease their efforts to produce the light bulbs, and the cycle will revert back to somewhere near the original starting point.


  1. Competition is the rivalry among sellers trying to achieve such goals as increasing profits, market share, and sales volume by varying the elements of the marketing mix: price, product, distribution, and promotion. Merriam-Webster defines competition in business as “the effort of two or more parties acting independently to secure the business of a third party by offering the most favourable terms.” It was described by Adam Smith in The Wealth of Nations (1776) and later economists as allocating productive resources to their most highly-valued uses and encouraging efficiency. Smith and other classical economists before Cournot were referring to price and non-price rivalry among producers to sell their goods on best terms by bidding of buyers, not necessarily to a large number of sellers nor to a market in final equilibrium.
  1. The factor affecting the economics of an organization is built on internal communication. This includes interpersonal relationships, training materials, newsletters, philosophical statements and policies. Structure is an internal factor that impacts company’s day-to-day operations. The structure impacts the number of employees hire, the levels of hierarchy, the extent of employee and department collaboration and the roles of your employees. he economy is an external factor that effects the success of your business. The ability of your clients to pay directly impacts your bottom line, regardless of whether you sell a product or service. You can offer sales and promotions, and you can tout the value of your company’s offerings, but during rough financial times your clients might prefer to allocate their resources elsewhere. Economics might be specific to your clients’ industries, and it might be a global issue impacting supply and demand.
  1. Retained profits are only available to businesses, has been trading for more than a year. This is when the profits earned by the business will be reversed. This is a medium or long-term source of finance.

Sale of stock is the funds from the sale of unsold stock. This is what happens in the January sales. It is when the profits made are ploughed back into the business. This is a short-term source of finance.

Bank loan is borrowed money within the stipulated time agreed upon interest rate. This is a medium or long-term source of finance. The advantages are determined in time for the budget refund the difference.

Bank overdraft is the business is allowed to overdraw his account. This means they can still write cheques, even if they do not have enough money in the account. This is a short-term source of finance. This is a good way to cover the period between money going out of and coming into a business.

Additional partner is source of finance suitable for a partnership business. The new partners can contribute extra capital. The advantage of additional partner is it doesn’t have to be repaid.

Share issue is sources of finance suitable for a limited company. And that involve issuing more shares. This is a long-term source of finance.


  1. A partnership is a form of business where there are two or more owners. From a legal perspective, the use of the partnership agreement, which outlines the responsibility of each partner enterprise formed. Part of the partnership can contribute by personal money each partner to obtain commercial loans sharing.

Overdraft is available, when the company’s business current account exceed the available cash balance. Overdraft allowing companies to obtain short-term financing, even in theory, the amount lent by the bank needs to repay. Overdraft amount depends on the company’s cash flow, income and expenditure of time, seasonal trends, sales at any one time.

Loan is a fixed amount for a fixed term with regular fixed repayments. The interest on a loan tends to be lower than an overdraft.

Share issue is source of finance suitable for limited company. And that involve issuing more shares. This is a long-term source of finance. The advantages is doesn’t have to be repaid and no interest is payable. The disadvantages are profits will be paid out as dividends to more shareholders. Ownership of the company could change hands.

  1. The financing source that suitable for this project is loan. Loans are explained by a known entity, among other things, the amount of principle, interest rates and repayment dates to the hike in another entity, and prove the debt. Assets covered by the loan period of time between the re-allocation, the lender and the borrower. In loans, borrowers began to accept or borrow and the amount, called the master, from the lender, the money and the obligation to repay the same amount to the lender at a later time. The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. Each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restriction known as loan covenants. The interest on a loan tends to be lower than an overdraft.


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