Economic Theory

Table of contents

Article summary3

Introduction3

Analysis3

Demand and Supply Curves3

Factors of Production5

Economic Growth & Development5

Stakeholders6

Conclusion8

Economic Theory

Name of the Articles

The belation between unemployment and the rate of change of money wage rates in the united kingdom, 1861-1957.

Economics for Policymaking

Article summary

This article talks about how the Shellfish industry in Louisiana and Mississippi was affected by Hurricane Katrina. The article discusses how most of the of the oysters and shellfish in the affected area did not survive, the companies in those areas lost most of their assets and the majority of the infrastructure in the areas affected was destroyed.

Introduction

This can be related to the economic theory we have learnt about Demand and Supply Curves, factors of production, economic growth and development and stakeholders.

Analysis

Demand and Supply Curves

 

The above diagram displays how we can relate the economic theory we have learnt about Demand and Supply Curves to the subject of this article. Because there is a decrease in several factors of production, i.e. natural resources (Oysters and Shellfish), labour (Workers would have moved to other areas of the country and so less labour will be available for the same price) and capital (the article states that “extensive damage occurred to the whole seafood industry's infrastructure, including harvesting vessels, docks and processing facilities”), there will be a shift in the supply curve towards the left (on the diagram, from the 'Original Supply Curve' to the 'New Supply Curve'). Another result of these changes will be that demand will contract. As a result, the equilibrium price will shift up and along the demand curve (on the diagram, from 'x' to 'y').[1]

The price may also rise further as there will now be an increase in the relative scarcity of shellfish. As the hurricane may have lead to unemployment in the areas affected, there may also be a further drop in demand for shellfish. Because of the damage to infrastructure, there will be an increase in the cost of production therefore, a further increase in price.

All of these factors and the production possibility curve indicate that the shellfish industry is going to incur severe losses as a result of this hurricane.

 

Factors of Production

Economic theory we have learnt about the Factors of Production is also relevant to the subject of this article. There will be a drop in availability of 3 of the factors of production (Land, Labour & Capital) and so there is going to be a significant increase in relative scarcity.

Land will become scarce because the natural resources required for the shellfish industry (oysters and other shellfish) have become scarce, and shellfish companies which were located in that area may have had their premises and the area around them damaged and so there will be a drop in the value of their land.

Labour will become scarce because companies will no longer be able to pay for expensive labour due to the losses they are already incurring and secondly large amounts of workers and fishermen may have moved to other parts of the country ...