Economics for Business and Management Assignment

Economics for Business and Management - Assignment Example securities industry forces generally are not controlled by any external forces and depend entirely upon the buying and selling traits of the producers and consumers. Scarce goods are associated with an inelastic supply so that a slight change in demand could result to a huge change in the price of the trade good. Moreover, their break-even price is set at a high level which automatically makes adjustments at the consumer base. Usually, scarce resources are found to be the ones associated with a high measurement of demand which is why it is wrongful to leave off buyers from consuming the same. In many cases the consumers are found to be prepared for paying a high price for acquiring a marginal amount of the commodity. If the distribution of such commodities are rationed and controlled by some external factor, the society is unlikely of reaching the optimum level of efficiency. In fact, in give to restore efficiency in com mercialize mechanisms, it is highly essential to incorporate competition in the field. The greater the competition is, higher will be the thirst among sellers to deduce ways done which they might be able to distribute a particular good at reasonable rates (Buigues & Rey, 2004, p. 183). However, maintaining such a stance in case of a scarce good might turn out to be detrimental for the society in the long pass if the commodity is exhaustible in nature. Hence, some amount of restriction must be present to specify the level of price floor, which automatically curtails the aggregate market demand. On the other hand, if the commodity in question is not an exhaustible one, i.e., gets replenished over time, then an unrestricted market mechanism could be regarded as the top hat option to instil efficiency and eventually, a good investment climate in the economy. Scarcity of a good often leads to innovation and greater productivity in order to invent substitute commodities of the said i tem. A successful innovation is thus, often triggered by excess demand in the market. The substitute commodity is quite often associated with a lower price level so that even the poorer consumers are able to afford the same. Furthermore, the scarce good is deployed as petty(a) as possible which drives its supply schedule leftwards thus lowering the equilibrium market price. An effective innovation is likely to rouse demands which could be beneficial for the economy. high the prospects of innovation and productivity is, better are the employment prospects and thus, of output generation. Answer to Question 2 Although efficient allocation of resources could be accomplished best through the introduction of market system in the society, there are some exceptions where government intervention could turn out to be beneficial for the society as a whole. In situations where the commodity in question is a scarce good, it being exposed to market forces might lead to excessive deployment of t he same. If the good is an exhaustible one like fossil fuels, the ultimate consequence could turn out to be quite damaging. Even if the commodity is inexhaustible in nature, too often use of the same could lead to exigent situations when the good is unavailable. In such situations, it is necessary for the government body to intervene in market