Analysis Of TV Market And Macroeconomic Indicators In Chinese Economy

Market for TV: Price and Quantity Analysis

1.a)

Price Of Tv($)	Quantity Demanded/Month	Quantity Supplied/Month
200 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	1000	2500
180	1200	2200
160	1400	1900
140	1600	1600
120	1800	1300
100	2000	1000

 (Source: Author)

From the given information about the price level of TVs and quantity demanded and supplied per month at each price level the demand and supply curve are derived after plotting the information. It can be seen that the equilibrium price is at $140 and equilibrium quantity is at 1600 unit in the market for television.

b)

Price Of Tv($)	Quantity Demanded/Month	New Quantity Demanded/Month	Quantity Supplied/Month
200	1000	1500	2500
180	1200	1700	2200
160	1400	1900	1900
140	1600	2100	1600
120	1800	2300	1300
100	2000	2500	1000

 (Source: Author) 

Television is normal good, which implies that for increase in income the quantity demanded would increase and fall for decrease in income. Since income has increased and as a result at each price level, 500 units of TVs are being sold in addition to the previous quantity. This indicates as rightward shift in the demand curve. Increase in income is considered one factor of demand that leads to shift in the curve. After plotting the new shifted demand, we find that the equilibrium price is at $160 and equilibrium quantity is at 1900 unit. From the analysis, it can be said that for increase in demand with supply remaining at previous level, the suppliers face more demand. This encourages more production and as result equilibrium quantity increases. Since demand increases more than the provision of increased supply the market equilibrium price increases. The reason behind such is that consumers face competition, those who have higher willingness to pay achieve the goods, and this let the suppliers charge higher price.

Banana is a normal good. If price of it goes up then demand falls and if price falls then demand increases. From the supply side, as price rises, more sellers would be interested to supply due to the higher price and reduce the supply if price falls (Sherman 2014). Income of the consumers is assumed to be constant here. Now if income goes up the consumers derives ability of purchasing more units at same price level. This creates a shift in market demand. More sellers enter the market, which implies more bananas are now available.  We can see three possible cases now with regards to equilibrium quantity and price in the market for banana.

The demand curve in the banana market is downward sloping and supply curve is upward sloping. The equilibrium is attained at point E. Now in the market supply increases due to more sellers enter the market for banana. This shifts the supply curve rightward. The demand is not at previous level but also increases due to increase in their income. Now what happens to the equilibrium price and quantity depend upon the quantum of the shift in demand and supply. If both demand and supply increases by same amount as in this case, then equilibrium price would remain same but quantity would rise.

Shift in Demand Curve: Impact on TV Market

Demand for banana rises due to increase in income. Supply rises due to the presence of more sellers of banana. If supply rises less than the increase in demand then the equilibrium quantity will rise substantially and the equilibrium price would rise too in this case. The reason behind this is again availability of more demand made by the consumer compared to the supply in the market. This leads to charging higher price amidst the competitive consumer demand

It might happen that supply increases more than demand in the market. In presence of more banana and less demand made by the consumers, there is the possibility that bananas remain unsold. This would lead to charge lower price by the sellers. Even though the equilibrium quantity would rise in the market, the equilibrium price would fall. The sellers would want clear the stock by charging lower price so that consumers buy more of it at that low price.

 a)

From the above sources overview of macroeconomic indicators like unemployment rate, inflation rate, export and business confidence are portrayed based on the macroeconomic data. Other essential indicators of Chinese economy are growth rate of GDP, interest rate, balance of trade, exchange rate and so on. Following the graph based on 2005-06 data, t can be seen that the unemployment rate remains constant and stable at 4.2% from January, 2005 till July 2006 (Gabisch and Lorenz 2013) At this point the unemployment rate declined continuously and reached 4.1%. Though the amount of fall is not that great in extent but it definitely depicts a recovery from the halted rate of unemployment for over a year. After stagnation the fall in the unemployment rate implies to recovery stage of the nation in terms of business cycle.

The export data of China shows an upward trend in the export from January 2005 to January, 2007. Though there are fluctuations but the overall trend shows smooth upward trend. Between Jan-06 to Jul-06 there can be seen presence of structural break in the export of the nation (Gabisch and Lorenz 2013). This might stem form the collapse of US capital market due to closing down of Lehman brothers that affected entire global economy with direct and higher impact on the nations directly linked with US (Bodie 2013). China is one of the largest exporter to US market and recession of US hit China’s economy very hard that is evident in the fall of the export demand. Less exports implies less income received. This impacts the overall GDP of the nation too.

Macroeconomic Indicators in Chinese Economy

Analyzing the data on inflation rate, it can be said enough fluctuation existed between tJan-05 to Jan-07. Initially it rises then steeply falls until the end of the year 2005. From the beginning of the 2006, the inflation rate captures upward trend and follows s cyclical pattern till the end of the period in graph (Fidrmuc, Korhonen and Bátorová 2012). This indicates a recession followed by recovery in the economic activity as reflected in the price in terms of business cycle analysis.

From the data business confidence graph of China has been drawn which clearly depicts the negative sign of the economic situation of the country. The confidence fell till last quarter of 2005 but captured drastic upward trend from the advent of 2006. This also reinstates the fact that China has been facing a recovery stage of business cycle in 2006.

b)

Components of aggregate demand of a nation consist of consumption, investment, expenditure of government and net export. From the sources provided clearly the unemployment rate falls, inflation rate shows a fluctuation, export rises and business confidence rises after facing a downfall. Interpreting all of these would imply that GDP of the nation was rising as falling employment means more employment or creation of job that further reflects into more GDP backed by increased consumption and expenditure (Harvi and Van Hoa 2016). Falling inflation rate imp-lies contarctionary monetary policy, which can further reinstate that government incurring less expenditures and keeping interest high to control money supply in the market. In contrast to that, increase in inflation rate implies expansionary monetary policy channelized through less interest rate. This situation also faces positive business confidence in China. The more is the business confidence the greater is the investment expenditure incurred by the external financial institutions as well as national government. Increase in export also implies increase in GDP stemming from increased local as well as international demand for Chinese goods and services. These facts coupled with the condition of the economic recovery paves path for the expansion of the economy in 2006. The Chinese economy can be expected to see rise in GDP and overall aggregate demand that would lead to expanded growth.

c) As per the economic theory, business cycle has four evident phases. Expansion, Boom, Recession and Recovery. The Chinese economy being second largest in terms of nominal GDP faced much of the difficulties since the Asian Financial crisis and Greta Financial Crisis (Kollmann 2013). The country is largely linked to the world market through huge amount of trade. The recent figures of major macroeconomic indicators are discussed below:

The GDP growth rate of the nation is recorded to be at 1.7% compared to 1.3% previously. This implies increase in the economic activity (Kose, Otrok and Prasad 2012) . Unemployment rate has fallen to 3.95% from 3.975. It shows very less fall, which indicates limitation of the expansion of the economy in recent year. Inflation rate has risen to 1.8% from 1,4% from previous year. This also clearly indicates expansion of the economy in recent years that is reflected in the higher price level of the country. Rate of interest has managed to remain same at 4.35%. The balance of trade has fallen to 420 USD HML from 467 USD HML (Galí 2015). This implies increase in import demand over export supply of the nation which has fallen recently. Moreover debt of the Chinese government has increased from 42.6% to 46.2% of the GDP. The currency rate of Yuan is also stable at previous level. These facts gives a combined picture of the Chinese economy which is lying on the expansion stage of the business cycle. This can be concluded from the fact that there has been growth in GDP through growing exports, imports, consumption. The business confidence increases to 51.7% from 51.4% reflecting slightest yet significant increase that allows more investment in the country. Growing GDP, price level, falling unemployment, increasing consumption, investment are the sign  of expansionary stage of the economy in the business cycle hence China is rightly in this stage recently.

Reference

Bodie, Z., 2013. Investments. McGraw-Hill.

Fidrmuc, J., Korhonen, I. and Bátorová, I., 2012. China in the world economy: Dynamic correlation analysis of business cycles. CESifo Economic Studies, 59(2), pp.392-411.

Gabisch, G. and Lorenz, H.W., 2013. Business cycle theory: a survey of methods and concepts. Springer Science & Business Media.

Galí, J., 2015. Monetary policy, inflation, and the business cycle: an introduction to the new Keynesian framework and its applications. Princeton University Press.

Harvie, C. and Van Hoa, T., 2016. The causes and impact of the Asian financial crisis. Springer.

Kollmann, R., 2013. Global banks, financial shocks, and international business cycles: Evidence from an estimated model. Journal of Money, Credit and Banking, 45(s2), pp.159-195.

Kose, M.A., Otrok, C. and Prasad, E., 2012. Global business cycles: convergence or decoupling?. International Economic Review, 53(2), pp.511-538.

Sherman, H.J., 2014. The business cycle: growth and crisis under capitalism. Princeton University Press.