Answer to Question #191832 in Microeconomics for Ndivhuwo Steven

Question

Assignment 01

Choose a recent article (published after January 2021) from any newspaper or online media with relevance to microeconomics. Write an essay analysing any single issue discussed in the article. Address the issue with the aid of a relevant theory or theories. Please attach a photocopy of the article as an appendix of your assignment. Answers without the article will not be assessed.

Maximum length excluding article: 3 A4 pages, 1.5 spacing, 12-pt Arial font (pages beyond the limit will not be marked).

Mark allocation:

a) Identification of article, summarising the article and identifying the main microeconomic issue discussed in the report/article. (10)

b) Discuss the relevant microeconomic theory which can enhance the understanding of the issue outlined in the article (report) and how business can apply such theories to improve the business performance. Use diagrams/graphs if necessary  (25)

Answer 1

(a)  a report by federal reserve published in consumer news and business channel(CNBC) 12TH MAY 2021.

Summary of the article: inflation accelerated in April at a fast pace as energy prices jumped high. The consumer price index increased by 4.2%. the main reason for the rising effects are due to the covid pandemic, which caused a widespread shutdown in the US economy; however, federal reserve officials said 

they won’t raise interest rates 

until inflation averages 2% over an extended period.

(b) The theory of mixed demand inflation enhance the understanding of this issue as it states that inflation arises from the demand of a good or supply of a good or both. Business people should take advantage of this situation to increase profits by emphasizing growth in equity investment and avoiding long-term fixed-income investment.