Economics and Business Environment
Economics and Business Environment tests microeconomics, macroeconomics and the Myanmar business setting: demand and supply, elasticity, market structures, GDP, inflation, monetary and fiscal policy, exchange rates and regional integration.
Core rules
- Price elasticity of demand = % change in quantity demanded / % change in price.
- GDP measures output produced within a country; GNP measures income earned by residents.
- Inflation is a sustained rise in the general price level; it erodes purchasing power.
- The Central Bank of Myanmar uses monetary policy; the government uses fiscal policy.
- Market structures range from perfect competition to monopoly; barriers to entry determine pricing power.
- ASEAN and special economic zones affect trade, investment and labour flows.
Worked example
A 10% price rise reduces quantity demanded by 5%. PED = −5% / +10% = −0.5. Demand is inelastic because |PED| < 1. Total revenue rises when price increases: the percentage fall in quantity is smaller than the percentage rise in price. For a firm facing inelastic demand, a price increase can raise revenue, but the effect on profit depends on costs.
Traps
Ignore the negative sign when judging elasticity magnitude. Do not confuse nominal GDP with real GDP. A fall in the exchange rate is not always good for all firms. Do not treat a movement along the demand curve as a shift.