Explain the following economic principles and assess them Assignment

Explain the following economic principles and assess them Assignment Words: 3305

Professional career of a quantity surveyor is depended on the cost controlling of the project. Main professional characteristic of the quantity surveyor is cost estimating to analyze the project cost of a project correctly whether it is a contractor’s point of view or client’s point of view. Therefore, being a professional quantity surveyor, knowledge in basic economic principles is very important feature. Economics is related to any industry in the word.

Construction industry is a head one among those industries because development of a country is mainly depended on constructions and it is erectly connected to the national economic of that country. If there are no implementations that country will not be able to bear their economic positions also. Therefore behavior of the economics relative to the construction industry should be known as a construction professional. I am indeed grateful to Mr.. M. R.

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Economics is also done the same thing. Economics is analyzed the behavior of the human in the society and make the decision based on that behavior. As a quantity surveyor to have the good practice, while occurring the problems of ‘Scarcity also one of important volume. And it is an important subject to gain the knowledge of economic of the current construction field, to planning, design, and deciding of a project at the planning and forecasting. Quantity surveyors play a vital role in the construction industry and the subject giving the good knowledge of thinking in an economical way.

The assignment’s tasks are given to exercise and make familiar with the economic theories and practices. Through the assignment the followings are discussed some deeply. Knowledge in principles of economics and how they are related to the construction industry. Knowledge about opportunity cost and its measurements. Knowledge in Economic system. Knowledge in basic concepts of consumer behavior and equilibrium. Factors which influence elasticity of demand. About monopoly market structure. Knowledge in macroeconomic environment and its relation to the construction industry.

Knowledge in element of the monetary and fiscal policies. 1. 1 Explain the following economic principles and assess them in relater to Sir Lankan Construction Industry Economic theory serves as a useful guideline for understanding the inner workings of a particular industry. In a study of construction operations, theory can be akin to a blueprint, providing direction and instruction on how diverse elements fit together. Similar to the blueprint that carries the engineer’s initialed revisions, theory is capable of denoting changes and shifts in the economy.

The free market, a system of emergent capitalism replete with small units of capital and nascent technological developments. This analysis drew heavily on assumptions about unfettered markets and the internal strength of a balanced system. These principles can explain much about the workings of the modern construction market. Supply and demand equalities, the division of labor, and expectations of stable growth are all consistent with the economics of the construction industry. Equally important, the same analytical framework can be applied to the markets that interact with the construction industry.

From this perspective, construction is viewed as part of a unified system of production, consumption, and distribution. Limited resources A basic condition of nature which means that the quantities of available labor, capital, land and entrepreneurship used for the production of goods and services are finite. It means that the economy has only so many resources that can be used AT ANY GIVEN TIME to produce goods and services. Limited resources are one half of the fundamental problem of scarcity that has plagued humanity since the beginning of time.

The other half of the scarcity problem is unlimited wants and needs. The phrase limited resources means that the quantities of productive resources available to the economy are finite. The economy has a finite amount of labor, capital, land, and entrepreneurship that it can use for production. It might have a lot of those resources, but the quantities are NOT infinite. Scarcity in Sand, Gypsum, Aggregate Now a days there are so many construction works are going on in all over the country. The contractors they want enough construction materials for to complete the project in a successful way.

But they have facing scarcity problem in getting these materials. Because the excess demand for these materials such as Sand, Gypsum, Aggregate. In this situation contractors find the substitute materials for avoiding this problem. For example they are using alternative as sea sand for river sand. Scarcity in Sand The construction sector in the state, already suffering due to economic slowdown is feeling the pangs of sand scarcity. Since the availability of natural sand – a major ingredient in concrete – is getting shorter day by day many ongoing projects are facing a deadlock.

Even established realtors are wary and warn about an imminent crisis in the sector. Price of sand is skyrocketing as it becomes scarcer; one has to tackle various red -tapes it one decides to source sand trot a government run retail facilities, builders say. Dealers meanwhile want a simple procedure for procurement as well as sale of sand. Scarcity in Gypsum Gypsum is a naturally occurring mineral in many parts of the United States and the world. Gypsum is also often available as a by-product material. Gypsum has many uses in addition to agriculture.

A partial list of products and processes that use gypsum includes blackboard chalk, cement, wallboard, Plaster-of-Paris, dental molds, mint filler, toothpaste, molds for casting metals, Tofu coagulation, improving mineral content of brewing water, dietary calcium additives in breads and cereals, and pharmaceuticals. In case of preparing Cement need of gypsum is scarce. Scarcity in Aggregate The long-run aggregate supply reflects the lack of a cause-and-effect relation between real production and the price level. As the price level rises, real production remains constant at the full-employment level.

As the price level falls, real production remains constant at the full-employment level. Due to flexible prices, the same level f real production is generated at every price level. Consider the four broad resource categories in Sir Lankan Construction Industry: 1. Labor: This is the mental and physical efforts of humans (excluding entrepreneurial organization) that is used for the production of goods and services. 2. Capital: This is the manufactured, artificial, or synthetic goods used in the production of other goods, including machinery, equipment, tools, buildings, and vehicles. 3.

Land: This is the naturally occurring materials of the planet that are used for the production of goods and services, including the land itself; the minerals and nutrients in the ground; the water, wildlife, and vegetation on the surface; and the air above. 4. Entrepreneurship: This is the special sort of human effort that takes on the risk of bringing labor, capital, and land together to produce goods. Entrepreneurship is the factor that organizes the other three. The existence of limited resources has a very important implication. AT ANY GIVEN TIME, the quantity of goods and services that the economy can produce is also limited.

Having limited resources today, however, does not mean that they are fixed for ALL TIME. The economy can make the quantities of the resources less limited. The two key terms to note here are economic growth and investment. Economic growth is the process expanding the production capabilities of the economy by increasing the quantity or quality of resources. Economic growth is achieved through the fundamental process of investment. Investment is usually thought of as the acquisition of capital goods, or even more commonly as purchasing shares of corporate stock.

However, in the context of economic growth, investment applies to other resources, as well. In other words, exploring for land or the material resources f land is investment. Improving the quality of labor through human capital is also an investment. Division of labor or specialization is the specialization of cooperative labor in specific, circumscribed tasks and roles, intended to increase the productivity of labor. Historically the growth of a more and more complex division of labor is closely associated Witt the growth to total output and trade, the rise to capitalism, and of the complexity of industrialization processes.

Basically, it’s a working society that does many different Jobs. Example: A few people do farming, a few people do tottery, and a few people are blacksmiths. The society works together to make the city wealthier. The greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and Judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labor. The effects of the division of labor, in the general business of society, will be more easily understood by considering in what manner it operates in some particular manufactures.

It is commonly supposed to be carried furthest in some very trifling ones; not perhaps that it really is carried rather in them than in others of more importance: but in those trifling manufactures which are destined to supply the small wants of but a small number of people, the whole number of workmen must necessarily be small; and those employed in every different branch of the work can often be collected into the same workhouse, and placed at once under the view of the spectator.

In those great manufactures, on the contrary, which are destined to supply the great wants of the great body of the people, every different branch of the work employs so great a number of workmen, that it is impossible to collect them all into the same workhouse. We can seldom see more, at one time, than those employed in one single branch. Though in such manufactures, therefore, the work may really be divided into a much greater number of parts, than those of a more trifling nature, the division is not near so obvious, and has accordingly been much less observed.

This great increase in the quantity of work, which, in consequence of the division of labor, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from nee species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labor, and enable one man to do the work of many.

In the reason of migrating of labors there is a scarcity in labor requirement in construction. In this case in a construction firm if the management divides the work among in available staff then they can De produce the project with in short period, in a high quality and lower cost. 2 Explain the opportunity costs and now they are measured. The concept to opportunity cost is fundamental to the economist’s view of costs. Since resources are care relative to needs,l the use of resources in one way prevents their use in other ways.

The opportunity cost of investing in a healthcare intervention is best measured by the health benefits (life years saved, quality adjusted life years (Sally) gained) that could have been achieved had the money been spent on the next best alternative intervention or healthcare programmer. 2 Opportunity cost can be accessed directly with cost effectiveness or cost utility studies. When two or more interventions are compared cost utility effectiveness analysis makes the opportunity cost of the alternative uses of resources explicit.

Cost effectiveness ratios, that is the E/outcome of different interventions, enable opportunity costs of each intervention to be compared. Although the concept of opportunity cost is fundamental, incorrect conclusions can result from difficulties in applying the concept. Firstly, the study perspective (societal, patient, etc) is critical since it determines which costs and effects to include in the evaluation. A societal perspective incorporates all the costs and benefits regardless of who incurs or obtains them.

More restricted perspectives may mask the fact that costs are simply being shifted to another sector rather than Ewing saved. Secondly, the choice of comparisons can play a crucial part in cost effectiveness analysis, affecting the measurement of opportunity cost. Ideally an intervention should d be compared Witt all relevant interventions, including doing nothing. Without a “do nothing” baseline, the best of two generally undesirable options may be chosen. Sometimes, however, the do nothing option may be unethical, such as when a new treatment is being compared with one that has been shown to be beneficial.

Partly for this reason, many studies compare particular interventions with existing practical which may or may not be well defined. Failure to select an appropriate comparator may make the intervention appear more cost effective than it should, leading to wrong estimates of the opportunity cost. Thirdly, the incremental rather than average cost effectiveness ratio should be estimated. The average cost per benefit (calculated by dividing the total cost of an intervention by the total benefits) may be less appropriate than the incremental ratio (derived by dividing the additional (incremental) costs by the additional (incremental) benefits).

A recent study showed that the incremental cost effectiveness ratio for maternal age greening was 27% higher than the average ratio and concluded that the failure to consider incremental ratios could mislead decision markers about the opportunity cost of screening in Downs syndrome. Resources used in economic evaluations should be valued at opportunity cost, but doing this is difficult (especially in health care, where there is no perfect market), so unit costs tend to Be used instead, based on the costs of the various inputs. Accounting practices do not aim to measure opportunity costs.

Opportunity costing generally requires comprehensive, disaggregated data at the individual patient level. Even then, the allocation of overhead and fixed costs is difficult since the cause and effect relation between resources and different users is difficult to determine. Since many economic evaluations use accountancy cost data, the results should be treated with some caution. The prices of pharmaceutical products may be poor estimates of their opportunity cost because the retail price reflects the patent, the regulation of profits by governments, and the sunk research and development of both successful and unsuccessful products.

In practice, very few studies attempt to estimate the opportunity costs of drugs, relying instead on prices. Finally, valuation of resources for which no market exists, such as informal care, or patient time costs, requires methods to derive what economists call “shadow prices”?the true social value (or opportunity cost) of non-marketed resources, such as time and informal care. Figure : Opportunity Cost Curve Health economists disagree about the most appropriate technique for measuring the opportunity cost of time.

The best valuation of the opportunity cost of time for working age adults is the wage they are, or could be making, in paid work, 1 varying according to whether the mime lost involves lost work or leisure time and the likelihood of being unemployed. If resources are to be allocated efficiently, then the value of using these resources in alternative ways needs to be made explicit. Despite the importance of this concept, the complexities of its application mean that few studies are even completely explicit about their estimates of opportunity costs.

Greater clarity about the perspective of the study could help in clarifying the range to opportunity costs included 1. 3 Economic systems differ from country to country, ranging in the continuum of free market economies to command economies. Describe the characteristics of main economic system and explain those characteristics in relation to the economies such as India, Italy and Sir Lankan. You have to take following characteristics into consideration. An economy is the activities related to the production and distribution of goods and services in a particular geographic area.

An economy consists of the economic system of a country. Economic system is the framework adopted by each country to run their economy in the best manner. There are three economic systems prevailing in the world currently. In general, an economic system consists of individuals, industries, overspent, means of production and a medium of exchange (I. E. Money) for buying and selling goods and services. How these factors interact and who controls means of production are the main considerations in identifying the different types of economic systems that exist throughout the world.

Politics and economics are closely entwined; a country’s political system usually dictates the way its economy is run. Ideologies also play a key role. An ideology is a belief system. Many countries today operate a mix of ideologies. Pragmatism dictates that this mix and match approach is often adopted. The communist ideology is a good example of a belief system that was closely bound Witt the way the economy was managed Capitalism A capitalist system is based on principles of private property and free enterprise.

Buyers and sellers interact in a competitive market based on voluntary transactions, with only minimal government involvement. Socialism or Central Planning In contrast to capitalism, a socialist government takes an active, leading role in structuring and directing the economy. Rather than private property and free enterprise, industries are government-owned. Socialism’s goals also include equalizing the distribution of wealth. Free market system A free market is a market without economic intervention and regulation by government except to enforce ownership and contracts.

It is the opposite of a controlled market, where the government regulates how the means of production, goods, and services are used, priced, or distributed. This is the contemporary use of the term “free market” by economists and in popular culture; the term has had other uses historically. A free-market economy is an economy where all markets within it are free. This requires protection of property rights, but no coercive regulation, no receiver subordination, no coercive government-imposed monopolistic monetary system, and no coercive governmental monopolies.

Planned economy Planned economy (or command economy) is an economic system in which the state or workers’ councils manage the economy. It is an economic system in which the central government makes all decisions on the production and consumption of goods and services. Its most extensive form is referred to as a command economy, centrally planned economy, or command and control economy. In such economies, central economic planning by the state or government controls all major sectors of the economy and formulates all decisions about the use of resources and the distribution of output.

Planners decide what should be produced and direct lower- level enterprises to produce those goods in accordance with national and social objectives. Planned economies are in contrast to unplanned economies, such as a market economy, where production, distribution, pricing, and investment decisions are made by the private owners of the factors of production based upon their individual interests rather than upon a macroeconomic plan. Mixed economy A mixed economy is an economic system that includes a variety of private and overspent control, or a mixture of capitalism and socialism.

There is not one single definition for a mixed economy, but relevant aspects include: a degree of private economic freedom (including privately owned industry) intermingled with centralized economic planning and government regulation (which may include regulation of the market for environmental concerns, social welfare or efficiency, or state ownership and management of some of the means of production for national or social objectives). Elements of a mixed economy To possess means of production (farms, factories, stores, etc. ) to participate in

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