This website uses cookies to ensure you have the best experience. Learn more

Economics Essay

1295 words - 6 pages

Final Analytical Application of Current Microeconomic events
The article ‘Financial crisis in the living room’ written by Renan Bourdeau on the 8th of September 2013 featured in the Khaleej Times. It questions the ramifications ascribed to the fact that the populace’s salaries are not increasing in congruence with housing costs. The article cites that the recovery of the residential estate in Dubai has featured in the news for quite some time and the prices of houses have soared, and have been accompanied by high rental costs for properties. As a result of the drastic increase in the housing prices which is bound to extend until the year ends, utility costs have flared up in ...view middle of the document...

Since the lender is only reliant on the borrower’s promise to repay the loan, there is a great risk, and consequently a higher interest rate Bourdeau, n.d).
As established by the economic domain, microeconomics focuses on consumer decisions and procedures employed to address conditions principal to bad customer decisions by the government. The economy has suffered a serious setback form the current global recession with the government taking on a nominal part in trying to address these issues. The most notable recent microeconomic event is the global credit crisis that has wrecked the current economy. Although there are other economy-crushing issues facing the current economy, the credit crisis seems to be a more eminent threat as we approach the third quarter of the year.
This paper explores the credit crisis ascribed to the emirates. The paper explains the underlying economics of this event and describes the main challenges involved, and in conclusion, proposes the appropriate role of government policy in relation to the event.
Credit Crisis
Contributions from micro-economists support the existence of market failures that influence the regulation of markets. In the current economy, the market failure that has generated a chain of other economic crises finds its roots in the swift augmentation of subprime mortgages and the inability of many buyers and investors to comprehend, and properly weight threats related to credit (Beck, 2008). This, in turn, leads to deleverage in the banking system, causing a crash in the entire system. Raising interest rates make cash more valuable, the system essentially leans towards necessitating and promoting lower rates. However, the instituted leverage eventually becomes farcical. The surplus credit compels an upward movement on the prices of asset until the risks of acquiring these assets are not justifiable from their earnings (Perlman, 2012).In the current economy, banks continue to misjudge the likelihood of a decline in the cost of housing, and trust that they can quantify the interconnection of the credit menace. Together with consumers, banks fail to account for any low-probability events, which may turn out to be adequately necessary. Subsequently, this leads to a wave of failures, hence, impairing the economy (Perlman, 2012).
Underlying Economics
To understand the underlying economics of the current credit crisis, one must consider the economic theories aimed at explaining economic problems in relation to products and resources. Microeconomic theories mainly focus on the premise of supply and demand, aggregating the quantity demanded to the quantity supplied at every achievable price per unit. As compared to other microeconomic theories, the classical school theory best explains the underlying economics of the impending credit crisis. The ideas proposed in this school of thought support the concept that an individual inadvertently facilitates the best possible outcome for all by looking out for...

Other Papers Like Economics

Economics Essay

2010 words - 9 pages situation. The case was written from published sources. © 2009, IBSCDC. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner. Background Reading: Chapter 3, “Basic Elements of Supply and Demand”, Economics (Paul A. Samuelson and William D. Nordhaus) License to use for the Class of 2015, Semester – I, IBS Hyderabad. Course: Managerial

Economics Essay

1150 words - 5 pages ECONOMICS OF INDUSTRY Companies of firms in the same industry are bound to fall along the same vertical chain, this is the chain wherein some bit of value is being added to the product at each step. Vertical integration means the firm has complete control over its inputs, production and outputs along the value chain. The different firms only differ in terms as in how many links are present in their vertical chain. Adopting vertical


4532 words - 19 pages Economics The UK Economy and Globalisation WHY COUNTRIES TRADE GLOBALISATION Globalisation | Expansion of world trade in goods and services leading to greater international interdependence | Globalisation usually leads to: * An increase in outsourcing * Large sums of money being transferred from country to country for financing When did Globalisation First Start? There are three major stages of globalisation

Urban Economics

415 words - 2 pages -deregulation-surplus of xvi. Decoupling of urbanization and manufacturing xvii. Typology of informal housing 6. Egypt-tombs as settlments 7. Peru-Catholic Church as “slumlords” 8. Rental tenements 9. Invisible renters-informal sector-no solidarity or organization Five Axioms of Urban Economics 1. Prices adjust to Locational Equilibium-when no one has the incentive to move

Economics Wto

543 words - 3 pages increase in economic dependence. Each country depends on each other for essential products such as raw materials,.. Dependence creates more disadvantage for most country, especially during the wartime. Furthermore, the free trade tends to be more harmful for the developing countries since the competition under free trade is unfair and plus, they don’t have the advance in economics as much as the developed countries do, therefore they will find it

Economics Assignment

4350 words - 18 pages control the economic policy well when the economic crises attack. . 2.4 Economics activities in Malaysia and Australia Economics activities 1980s (1980-1989) In 1980s, Malaysia had including in economics activities. One of the major economics activities was agriculture sector Agriculture sector has contributed significantly to the growth and development of the Malaysia economy at 1980s. Malaysia rely food imports, especially foodstuffs

Economics Ia

1664 words - 7 pages Internal Assessment Economics Article: Apple polishes forecast after selling 9 million new iPhones Apple-polishes forecast after selling 9 million new iPhones BY POORNIMA GUPTA AND JENNIFER SABA Mon Sep 23, 2013 6:10pm EDT 24 COMMENTS * 

This page has been shared 199 times. View these Tweets. 

 * in


 * Share this * 


 * Email * Prin | | | | 1

Managerial Economics

1283 words - 6 pages provider into a bargaining chip. Instead of remaining competitive and streamlined, the provider becomes bloated and slow. Conclusion: Two opportunities and challenges were outlined in the earlier section of the paper. One, poor economic conditions and two, affordable health insurance. As a student in economics, I believe that giving tax incentives through tax breaks can significantly increase the capacity of the economy to create jobs

International Economics

4658 words - 19 pages ECF5921 Introduction to International Economics Assignment Question 1 Based on the article and other related readings of your choice, discuss the economic and social factors that have caused individual behavior to shift towards the consumption of unhealthy foods and unhealthy lifestyles. Compare ‘fat taxes’ and other alternatives that can be used address the problem. Which one would you recommend? Why? Answer Based on the article

Bsb113 Economics

1491 words - 6 pages /SiteCollectionDocuments/Factsheet-Smoking.pdf Scollo, M. and Winstanley, M. (2012). 13.1 Price elasticity of demand for tobacco products - Tobacco In Australia. [online] Available at: Taylor, B. (2006). Price Floors - Economics. [online] Available at:

Managerial Economics

2901 words - 12 pages SEMESTER 2014 MANAGERIAL ECONOMICS – BMME5103 ASSIGNMENT (60%) Name: NGUYỄN THỊ MINH HIỀN Class: MBAOUM0514-K14A Question 1 a. What is (are) the main difference(s) between a monopolistically competitive market and a monopoly market? Their characteristics are different: |Monopolistically competitive market |Monopoly market | |Large number of

Related Essays

Economics Essay 414 Words

414 words - 2 pages The Game of Economics | 1.5.3 Test (TS): The Game of Economics | Test | | | | | U.S. and Global Economics (S3234837) | Jenna M. Snider | | | Points possible: 50 | Date: ____________ | | 1. Define each of the terms in the table below. Use the first six terms to define the seventh. (15 points) Term | Definition | Allocation | The action of distributing something | Resources | A stock or supply of money, materials, and other

Economics Essay 837 Words

837 words - 4 pages Economics Human beings are an ever changing species when it comes to what they desire and how they attempt to acquire those desires. Economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society (Colander, 2010 pg. 4). This is a broad study that encompasses entire cultures. Businesses are burdened to answer three basic questions when

Economics Essay 1310 Words

1310 words - 6 pages . Ceteris paribus - "all other things being equal". In economics and finance, the term is used as all else equal or a shorthand for indicating the effect of one economic variable on another, holding constant all other variables that may affect the second variable. For example, when discussing the laws of supply and demand, one could say that if demand for a given product outweighs supply, ceteris paribus, prices will rise. Here, the use of "ceteris

Economics Essay 976 Words

976 words - 4 pages Name Professor Course Date Economics The Federal Reserve Bank has been mandated by the Congress to execute monetary policies on behalf of the government in a meticulous manner such that the system remains liquid at all times. The FEDS has two specific mandates assigned by the Congress; one, to ensure that there is the sustainability of employment opportunities and output and two, to stabilize prices of commodities (or stabilize the rate of