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Economic Growth or Unemployment Rate or Discourage Workers - Admission/Application Essay Example

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An economic growth model can be made applicable in explaining and measuring the impacts caused on prices of goods and services in the market, due to changes in the price of one commodity. Through such an impact, the model can perfectly describe such an effect. As the prevailing…
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Economic Growth or Unemployment Rate or Discourage Workers
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Economic Growth An economic growth model can be made applicable in explaining and measuring the impacts causedon prices of goods and services in the market, due to changes in the price of one commodity. Through such an impact, the model can perfectly describe such an effect. As the prevailing prices of energy rises due to their reduction in the supply level, an economic growth model offers critical lessons in estimating the impacts of different factors, after which we determine the impacts of the market general price levels.
An increase in the price level of a commodity raises the price over which the suppliers can offer to sell their commodities. This, hence, induces them to produce and supply more to the economy. This increase in the price level of such a commodity can be seen to have a second effect of increasing the cost of inputs. With ceteris paribus, the suppliers will be forced to cut down on the supply of their out puts.
In their report, BBC (pp. 2) notes that like changes that cause variation in aggregate demand, on of substantial changes that caused a reduction in aggregate supply of oil in 1970s was due to efforts that came from leading oil producing countries. They restricted oil supply to the market. Most of the final products produced from industries depend entirely on oil and its products like crude oil; gas (BBC PP. 3). As its effect, the suppliers of outputs will face an increased cost of operations thus a resultant decrease in the level of supply.
Secondly, an economic growth of any economy will cause variation in demand of productive resources. BBC (pp. 5) shows that where there is increased demand of output goods, there will be a need to employ more of input resources like capital and labor. An increase in economic growth increases gross domestic product (GDP) hence supply curve shifts to causing a reduction in general prices of outputs.
Furthermore, an article according to BBC (pp. 1)notes that apart from well-known forces of demand takings part in driving up the prices of oil, but as proven in 2008, is that the overall supply in the market globally, surpassed demand and hence the prices were to shoot up. As the law of demand and supply states, there was an expectation in reduction in prices. An impact due to such increase price of oil was due to trading in commodity markets. In fear of drop of both real and stock markets, investors diverted owned funds into oil futures. Increased oil prices from the process increase the overall operating cost of production. This effect will cause managers to increase the commodity prices (BBC PP. 7).
An increased number of world contracts between countries are done in dollars. BBC (PP. 6) due to this effect, most of oil producing countries (OPEC) currencies is pegged to the dollar. In case, the value of the dollar reduces, the revenues earned from sales would go down with an increase in the value of operating costs. In order to increase their profits, OPEC agrees on increasing the prices of oil.
Works Cited
BBC, Oil price may hit $200 a barrel, 7 May 2008. Accessed from http://news.bbc.co.uk/2/hi/business/7387203.stm on 7 May 2012 Read More
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