DEMAND CURVE

1. Demand is the quantity of a good or service that consumers are willing and able to purchase at a given price and in a given time period. In the “Law of Demand” it states that as price of product falls, quantity demanded of the products will usually increase. Making this theory known as “ceteris parabus.”  The shift in the demand curve is cause by a different factor affecting the product not including the change in the price. This can also be referred as the increase or decrease in demand. Every time there is movement along the demand curve, this means that there has been a change in price, and when there is movement along the demand curve it's known as the quantity demanded. The “effective demand” can be shown on a graph as the demand curve, the Y axis being the price and X axis being the quantity demanded.

There are plenty of ways that the demand curve shifts, but one thing that does not effect it, is the price of the product. If the consumers stop buying a product because they don’t believe it’s useful anymore, the demand curve shifts to the left. Only meaning that if more consumers started buying a product at any price, the demand is greater than it was before making the demand curve shift to the right. For example, IPhones, these tend to be a very popular purchase that most people want to buy. Regardless of the price every time there’s an updated newer phone people buy it, making the demand curve shift to the right. The demand curve can also be affected by the “income effect” being the real income, reflecting on how much a person can buy with their income. When the price of a product goes down, this makes the person’s income rise. And also the “substitution effect” meaning that when the price of product does down more people buy it, making it cheaper to buy.

The reason you buy the product is all dependant on your income. For “normal goods” is when your income increases, you’re going to buy more of that product, therefore the demand curve will shift to the right. There is also “substitution” which is if one product increases, then the other one decrease. For example, if the price of Nike running shoes were to decrease in price the amount of people buying adidas running shoes goes down, making the demand curve also shift to the left. The “compliments” are when two products complement each other, making one decrease and the other one increase, causing the demand curve to shift to the right. Also another important factor is the preference of certain people. If the prices don’t really change yet the demand shifts to the right it’s because this is a very popular product that more people are buying because they like it. Also other factors can be the size of population, the change in age structure, the change in income distribution, the government policy changed and also if there happens to be a seasonal change.

2. One way the demand of the bicycle can shift to the right is if there happens to be a change in the size of the population. If the population were to unexpectedly double the demand would also double shifting the demand curve to the right, but this example is something more unrealistic then others, but could also be possible. If the population of the amount of little children goes up, this could also mean the amount of bicycles being bought. This could only be proven by "ceteris parabus" and also it being an ideal situation. As economist, this is something that we could predict would happen.

The same thing will happen also if there is a change in income distribution, lets say for examples everyone’s income decreases and at the same time the gas prices triple. Since people have now lost some of their income they're going to start finding a cheaper way of transportation, a bike. This would also cause the demand curve of the bike to shift right. These are two different determinants of demand that can cause the demand curve to shift right for bicycles. But with different products there are also different factors that can cause the product to either have a demand curve that shifts to the left of right.

http://www.bized.co.uk/notes/2012/02/shifts-versus-movements-along-demand-curve

http://centralmacro.blogspot.com/2013_01_01_archive.html  

Planned Economies vs. Free Market Economies

There are two main known types of economies, which are planning economies and also free market economies. Both of these both have their positive but also negative effects for ruling a country.

In the “Planned Economy” it’s something that has commands and is centrally planned. All of the planned economies is handled by the government. The government dictates production levels, how much they’re going to pay the workers, how much people are going to pay for the product they’re buying, they try to make everything for the better interest for the people. All the resources are owned by the state, this kind of economy is efficient because only one person has power for decisions that are going to be made. About ⅓ of the world has planned economies, including North Korea, Cuba and Laus. Most people tend to confuse planned economies with communism, however communism is more political.

In the “Free Market Economy” or otherwise known as “Capitalism” it’s a private Enterprise Economy. Everything is privately owned, and handled privately. This also forces demand and supply which dictate production type, levels and also all the price wages. Since this is individually based, the leader of the company decides on how they’re going to make money and also how they’re going to wisely use their resources. The word “free- market” it’s a self righting system meaning that everyone gets what they want with no government intervention.

Even though in reality, the majority of the world has mixed economies, which both of them have a mixed of free-market and planned economic characteristics. Countries such as China have a higher proportion of planned input compared to countries such as the U.S.A.

In my opinion I believe that a planned economy is more efficient because that way people  are earning money without the risk of losing their whole company. In capitalism each person is responsible for their own company, and yes every though people get what they ask for, planned economies seem a lot less chaotic to me. Since it’s all up to the government, it might not be fair, but there are less chances of losing your job. Also with planned economies you are able to limit on your working hours, while making a good amount of money.