Principles In Economics

PRINCIPLES IN ECONOMICS 1. Explain the division of fields in economic principles a. Understanding Economic Principles The economic principle is that a sacrifice takes the form of the smallest possible result which then produces the greatest possible result. Then, in another form, it is a business activity which uses relatively minimal tools to obtain maximum results. In an economy there are several types of economic actors which are then divided into several fields such as producers, consumers and distributors. 1) Principles of Producer Economics Producers have an understanding that they have the ability to produce goods or services. The principles of the manufacturer are: • Using raw materials which have cheap prices with good product quality. • Have an analysis and also learn from the market needs. • Carry out activities to produce goods and services that are deemed to be in accordance with what consumers want and the consumers' own tastes. • Have offers of goods and services which have competitive prices 2) Principles of Consumer Economics Consumers in economic activities are every human being on earth who has carried out economic activities such as making transactions. An example of the consumer economic principle itself is when someone decides on an action of not buying a new school uniform because he still has his old clothes and then that person is more concerned with buying shoes. 3) Distributor/Trader Economic Principles Here, a distributor is someone who has the ability to distribute goods and services. An example of this is a trader where the trader looks at the market's wants and needs for the goods they own and the goods they sell. Then, he will choose goods that come from producers who have the ability to provide the cheapest prices. 2. List the characteristics of economic principles Economic principles are actions or efforts in economic activities to obtain goods or services with maximum results but at low prices. The application of economic principles has several objectives, including: To prevent waste, to maximize available capital, to minimize losses. The characteristics of economic principles include: • Have good planning for revenues and expenditures • Apply the principle of economy, meaning that expenses must be in line with income • Always prioritize important needs first • Always act rationally 3. Briefly explain the characteristics of the division of economic principles Economic principles are divided into 3, namely: a) Economic Principles in Production Activities Economic principles in production activities are the basis for producing as many goods and services as possible with certain production costs and sacrifices. Economic principles in Production Activities relate to how to obtain the highest possible profit with set production costs, or obtain profits in a predetermined amount with affordable production costs. • Open a business location close to raw materials, labor or marketing areas • Use skilled labor • Using the best quality raw materials, but at the cheapest prices • Use resources such as capital, labor and time efficiently. • Using modern machines with high productivity but at low costs • Determine a profitable selling price. Determine the goods and services to be produced b) Economic Principles in Distribution Activities Economic principles in distribution activities are the distribution of goods and services from producers to consumers. In principle, the application of economic principles for distributors is to be able to distribute goods from producers to consumers accurately, quickly and at low costs but still get maximum profits. • Improve service quality • Timely distribution of goods • Use distribution facilities at low prices • Buy goods from manufacturers directly • Provide goods and services that are popular with consumers • Buy goods from the right manufacturer • Determine the location of the company between producers and consumers a) Economic Principles in Consumption Activities Economic Principles in Consumption Activities are efforts to obtain maximum satisfaction from a good or service with sacrifice and use of a certain budget. • Buy quality goods • Buy goods at affordable or cheap prices • Make a list of items needed • Choose items before buying them • Haggle before buying goods • Able to control expenses by paying attention to our income 4. Explain the concept of demand and supply A. Definition of Demand and Supply Demand is the total amount of goods/services that consumers want to buy at various price levels. The law of demand states that when the price of a good increases, ceteris paribus (other factors held constant), the quantity demanded of that good will decrease (inversely/negatively proportional). Offer is the seller's willingness to deliver various goods at a certain price level within a certain time and under certain circumstances. The law of supply states that when the price of a good increases, ceteris paribus (other factors assuming no change), the quantity supplied of that good will also increase (directly proportional/positive). B. Factors that influence demand and supply a. Request : a) The price of the item itself If the price of an item becomes cheaper, the tendency for demand for that item will increase and this also applies vice versa. b) Prices of other related goods • If the price of a substitute good falls, the demand for that good will decrease. However, if the price of substitute goods rises, then demand for those goods will increase. (the relationship is positive/directly proportional) • If the price of a complementary good falls, then the demand for that good will also decrease. Conversely, if the price of a complementary good rises, then demand for that good will also increase. (the relationship is negative/inversely proportional) c) Income Level The consumer's income level will indicate the consumer's purchasing power. The higher the income level, the greater the demand for a good. For example, at a night market where there is a bazaar for cheap clothes, Caca decides to only buy one shirt for IDR 80,000 because Caca only has an income of IDR 500,000/month. In contrast to Amed, who earns IDR 1,000,000/month, he buys 2 clothes at the bazaar. d) Public tastes Tastes or habits will also influence the demand for an item. If people's appetite for an item increases, demand for that item will also increase. For example, trousers are becoming a trend now, as a result the number of requests for trousers models tends to increase. e) Number of Population The greater the population of an area or country, the higher the demand for a good for a certain price. f) Consumer Predictions about Future Conditions If we predict that the price of a good will rise, it is better to buy that good now, thereby encouraging people to buy more now to save on future purchases. b. Offer : a) Price The price of the item itself. Producers or companies will offer more goods if prices rise. Likewise, the opposite applies. Prices of other related goods. For example, a farmer has land that can be planted with corn or beans. When corn prices rise, farmers will reduce planting of beans and replace them with corn because it is more profitable. b) Production Costs Producers need/buy various production factors to be able to produce goods and services. Therefore, if production costs increase, the price of goods will tend to rise. Producers tend to reduce the amount of production, as a result the quantity supplied will decrease. This happens the other way around. c) Technology Level Companies that use technology at a higher level can increase their production output quickly. Apart from that, the use of high technology will also cause production costs to become cheaper. Increasing production output and cheaper production costs will cause the quantity of goods offered to increase at a certain price level. d) Number of Producers The greater the number of producers, the greater the number of goods offered. For example, if several ice cream producers decide to stop selling and leave the market, then of course the amount of ice cream sold/offered in the market will also decrease. e) Government Policy • Tax. The assumption is that taxes are a burden on the seller (adding to the price offered) and reducing profits. So the greater the tax, the quantity of goods offered will decrease, and vice versa. • Subsidies. Able to reduce production costs, thereby reducing the price offered and increasing profits. Therefore, the greater the subsidy, the quantity of goods offered will increase. f) Natural Factors Natural influences will affect the supply of agricultural and fishery products. For example, for rice farmers, an uncertain climate can cause crop failure. Therefore, the amount of rice offered will decrease. g) Producer Predictions about Future Conditions For example, if a producer predicts that there will be an increase in rice prices next month. So, at this time producers will reduce their sales stock and wait until next month to exploit the profits that may be obtained due to rising prices.