Skills for Economic Enquiry Example

Essays on Skills for Economic Enquiry Essay Introduction Economics is considered as one of the most interesting s but it is also called dismal science. The underlying principles of economics are really interesting due to the fact that they describe the human nature when we make our buying and selling decisions. Considering all consumers as rational individuals, economics put forward certain laws and principles which are aimed at determining our behavior in a market. There is one basic law in economics which defines most of the economic behavior of individuals and firms in terms of buying and selling in an open market. The law of supply and demand is one of the basic laws which according to economics properly define our economic choices. These economic choices are based upon what we chose to buy and at what price and same are also true for the firms as they have also to decide what and how much they want to produce at a given price. There are two proposals to be reviewed in this paper and both of them are about the coca market at the global level. The underlying principles discussed in both of these proposals deal about the supply and demand dynamics of coca in international market. Both the proposals discuss as to what are some of the factors which affect the prices of coca in international market and why these factors are important enough to have an impact on the prices in global market. This paper will therefore discuss the strengths and weaknesses of both the proposals and present them in a manner which is understandable by common persons. Strengths and Weaknesses of the proposals The major strength of first proposal is based upon the fact that it is focused upon traditional economic reasons for changes in the prices of any commodity. Law of demand and supply suggest that consumers will buy more of a thing if the prices of that particular good are decreasing whereas firms or businesses will produce more of thing whose prices are increasing. (Estrin, and David, 2008) This proposal suggests as to where the actual production of coca takes places and which the key markets are. This proposal clearly outlined as to who are the major producers and who are the major buyers of coca in international market. This proposal also discusses as to how coca is produced and sold in the international market by the producers who are mostly located in African countries. One of the key strengths of this proposal is that it outlines factors such as weather conditions, war, and increase in income as some of the factors which can actually influence the supply and demand of a good in any market. Issues such as bad weather and war has been described as the key factors which are affecting the output level and hence are resulting into an increase in the coca prices at the international level. It is because of this cyclical nature of the coca production which has increased the prices of coca in the international market. The second proposal is comprehensive in the sense that it has gone one step further by discussing some of the factors which have not been discussed in the first proposal. This proposal outlines factors such as speculation as one of the key variables which may have an impact on the prices of coca in the international market. By describing who the speculators are, this proposal discusses as to how the future buying by these speculators can increase the prices of coca in the international market. The second proposal has also been able to provide the views of public as to how the prices of chocolate are increasing in the local market. This proposal has also discussed some of the factors which can actually have an impact on the supply of coca in the market. For example, this video has discussed as to how the changes in the weather can really affect the supply of coca and increase its prices. Bad weather can have an impact on the prices as it can drastically reduce the supply. (Mankiw, 1998) One of the major weaknesses of the first video is based upon the fact that it has not been able to comprehensively cover other factors which can affect the demand and supply. It also failed to outline as to how the increase in cost of production can actually decrease the production of coca and hence increase its prices in the international market. It is also critical to understand that the first proposal also mentioned as to how the production of coca can affect the health but it failed to provide an answer as to how this concern can have an impact on the prices. The second proposal is stronger than first proposal however; it also fails to cover some of the important factors which can directly affect the prices of coca in the international market. The issue of speculation has not been projected correctly as the speculation in markets can also result into favorable outcomes and the prices can come down as a result of speculative activity in the market. Economic principles clearly outline that the speculative activity may also be positive and can result into positive outcomes for the consumers by increasing their overall welfare. The second proposal also fails to distinguish as to how factors such as stronger seasonal demand of coca can also increase its prices without any speculative activity within the market. (Nellis and Paker, 2006) Conclusion This report has outlined as to how the dynamics of demand and supply can have an impact on the prices of coca in international market. The first proposal outlined as to how the changes in weather, war conditions as well as increase in income in countries like Brazil can actually decrease the supply of coca and increase its prices in international market. The second proposal mainly focuses on the role of speculative activity in increasing the prices at the international level. Further, the proposal has also discussed the role of other factors which can have an impact on the prices of coca market. Second proposal however, failed to discuss the positive impact of speculative activity on the prices of coca. References Estrin, S. and David, L. (2008) Microeconomics, 5th ed. London: Pearson Education. Mankiw, N. (1998) Microeconomics, New York: Elsevier. Nellis, J. and Paker, D. (2006) Principles of Business Economics, London: Pearson Education.