Investment in Human Capital

Investment in human capital such as formal education and on the job-experience is a way by which a country can increase the skill level of the labour force. In view of contemporary economy, more and more jobs require skill labour instead of unskilled as technologies replace the need for unskilled labour force. Therefore a country should investment in formal education of its population, to increase their skill level. This investment can take various forms, however, should included the provision for education at secondary and university level. The can be achieve through providing free education at primary, secondary and university level.

In addition, investment human capital can also be derived through on the job training, for school secondary school leavers. The government can offer incentive, to companies to encourage this type of training.The benefits to be derived from investment in human capital not only will result in a skill labour force, but also increase in research and development that can result in new technologies and expertise, which facilitate job creation and new technological.

Investment in Physical Capital

To increase the production of output of country, considerable amount of investment should be made in physical capital such as factories, machines, transportation, roads and telecommunications facilities. Governments are primarily responsible for investments in roads, and telecommunications. However, an increasing characteristic of contemporary economy is that the private sectors are playing a role in investment, not just in new factories but also in transportation and telecommunications facilities that were synonymous with government responsibility. If the country operates a free market economy, then investment in physical capital can be achieved from both the private and public sector organizations, where by the government can offer incentive to attract the private sector to investment in physical capital outright or through a joint venture. These investments are need to fuelled employment creation in the economy that would increase overall production output of the country.

Technological Change

Investment in human capital and research and development will brought about innovation that introduces new products and new ways of producing existing products, and new forms of business organisation. Technology change is intrinsically linked to the investment in human capital and research and development, of which would give a country the comparative edge in manufacturing a product, and the technological know-how of new technologies.

(b) The Pursuit of economic growth is not a people’s long-term interest

The idea that the pursuit of economic growth is not in peoples’ long-term interest, is a concept being advocated by economist and academics. In examining the merit of this arguments, first let look at the impact of economic growth on people in general.

First, the benefit of economic growth on the ordinary people is that, economic growth is an effective means to fight against poverty. This has contributed to the increase of family earnings that helps to transform the living standards or ordinary individuals, it has been argued that the advancement of the industrial nations over the last centuries shows the massive improvements in living standards and quality of life that economic growth make possible. Family life-style often experience growth and change, as increase in their household income leads to significant change in the pattern of their consumptions, for examples they have more extra cash to buy luxury items that they would not normally afford. In a broader context, the increase income has fuelled the demand for luxury goods such as motor cars. This in turn caused the government to build more roads to meet the demand for cars, this resulted in traffic congestion, and environmental pollution cause by Co2 emission by the motor cars, of which is not good for environment and endanger the health and safety of people.

Second, Technological changes in how goods are produce, available and consumed, has change the entire way of life of people compared to the Victoria era, whilst one peoples income and standard of living changes can be considered as much better than the Victorian, the technological changes brought about by economic growth impact on family life that affects the social fabrics of society.

Third, economic growth has help to re-distribute wealth, to those that are less well off in society through the welfare systems. Rapidly growing economy fines it easier to this because of revenue income generated from employment and profits of the economy. However, some people standard of living has to be lower to fund the less fortunate citizens of the country because of the rate of tax implement on their high earnings.

There are cost, that economic growth has a negative impact on peoples lives, which adversely affect individuals and family life of the masses. The opportunity cost of the growth, which promises more good tomorrow, if people consume less goods today, and for the economy as a whole this is a sacrifice of current consumptions. There are social and personal cost of economic growth, stem from the changes in the economy from manual labour to automated due to technological development. People fines themselves unemployed for because technologies has replaced their job, of which have an impact of these individuals ability to maintain their families. Moreover, growth rate creates fewer manually new jobs compared to old jobs destroyed because of technologies. The costs of technological changes are borne immediately compared to the benefits to be derived that are takes much longer to be realised. These cost includes, job lost, cost for training people in the old technologies that lost their jobs and the cost of old skill that has become outdated. It would be better for people to achieve the economic benefits of the old technologies now, instead of waiting for the benefits of the new technologies in the future. Economic growth has contributes to external externalities such as continuous environment damages, that will affect the livelihood of people in the present and future. These includes global warming and over mining of natural resources,

4.

Price elasticity of demand can be defined as a measurement of the responsiveness in the quantity demanded to change in price, with the assumptions that all other factors remains constant. The measurement assesses the percentage change in quantity demand divided by the percentages change in price that brought it about.

The elasticity of demand Ed = Q2-Q1 x 100

(Q1+Q2)/2

P2-P1 x 100

(P1+P2)/2

(a) Elastic

Price is elastic, when the quantity demanded and supplied changes by a larger percentage than price. This numerical measurement of price elasticity of demand is greater than one, but less than infinity,

-    1.

(b) Unit elastic

Price is unit elastic, when quantity demanded and supplied changes by the exact same percentage as the price. The numerical measurement of price elasticity of demand is one,  = -1.

(c) Perfect inelastic

Price is perfectly or completely inelastic, when the quantity demanded and supplied does not change as price changes. The numerical measurement of price elasticity of demand is zero,  = 0.

(d) Inelastic

Price is inelastic, when the quantity demanded and supplied changes by a smaller percentage than of price. The numerical measurement of price elasticity of demand is grater than zero, less than one, -1   0.

(e) Perfectly elastic

Price is perfectly, completely, or infinitely elastic, when purchasers and sellers are prepared to buy and sell all they can at some price, and none at all at a higher or lower price. The numerical measurement of price elasticity of demand is infinity,  = -.

5.

Figure 5.1 Fur Coat Market

Price

S

E1

P1

P0 E0

D1

D0

Q0 Q1

The demand and supply theory can be used to explain the changes in the fur coast and woolen and angora coat markets. Using the diagram in figure 5.1 above to represent the market of fur coast, before the harassment of people wearing fur curs by environmentalist, the demand curve for fur coast is represented by D1, and supply of fur coast is represented by S. The market achieves equilibrium at E1, where the price of fur coast is at P1 and the quantity demand and supply is at Q1. Changes in the consumer demands cause by environmentalist ant-fur group harassment of people wearing the fur would see demand decrease from D1 to D0, a shift to the left. When this happens, the price of fur coast will decrease from P1 to P0 and supply of fur coast would decrease from Q1 to Q0, that reflected by the new market equilibrium at E0. Therefore, the tumble in the price and sales of fur coat is caused by the decrease in consumer demand of the fur coasts, of which affects the price and sales quantity.

At the same time, since there is a substitute market for natural fur coats that is luxury woolen and angora coats, the demand for luxury woolen and angora would rise to reflect this change. This is the exact opposite of what took place in the natural fur coat markets. Using the diagram in figure 5.2 below to represent the market of luxury woolen and angora coats before the changes has occurred; the demand curve for luxury woolen and angora coat is represented by D0, and supply of fur coast is represented by S. The market achieves equilibrium at E0, where the price of fur coast is at P0 and the quantity demand and supply is at Q0. Changes in the consumer demands for natural fur coats, has seen the consumer switching to a substitute of luxury woolen and angora coat, and would have demand for luxury woolen and angora increase from D0 to D1, a shift to the right. At this point, the price of luxury woolen and angora has increase from P0 to P1, and supply increase from Q0 to Q1, that achieve a new market equilibrium at E1. Thus, increase the price and sales of quantity of the luxury woolen and angora coast.

Figure 5.2 Woolen and Angora Coat Market

Price

S

E1

P1

P0 E0

D1

D0

Q0 Q1

6. a)