Economics involve the study on how the scarce resources of the society are managed, with scarcity being described as the limited resources that each nation faces and the economic study on how individuals are affected by these actions. Through the study, the development of ten principles has hence been realized.
How individuals facilitate in decision making.
Technically in the ten principles of economics, the first four principles provide a description individual on individual decision making. With the first principle stating the People face tradeoffs. This principle provides an explanation on how for society or an individual to gain service or goods, they are to offer something which is of equal value as well. For example, someone can decide to send money owning a car, which in turn replaces and takes away the same amount of money in a retirement fund. In the society, the decision on what is to be given value, a cleaner environment or national security. Through such decisions, the allocation of resources and where the money goes is decided, with the behavior of the economy imitating the behavior of the individuals who are in place in making such decision (Mankiw, 2014).
With the second principle stating The Cost of Something is What You Give Up to Get It. Through this, we realize that when it comes to decision making, it requires comparing the benefits and the cost of some alternative causes of action. A student attending a university is supposed to realize that the cost of education is not just a monetary cost, but also time is spent. With the years spent on course work are not years spent to collect the paycheck.
The third principle stating that People Think at Margin through these individuals is perceived to be thinking about the next move in pursuing their future and bringing thoughts to the next day and year or dollar expended in time or money. Economist encourages people to focus on the future and not concentrate on their past, with the fourth principle stating that People Respond to Incentives. Society in practically any situation is viewed to meet the economic incentives. Rising cost of some products lead to poor motivation on the level of purchase and if any case the government offer tax break in some vehicles the sales of such vehicles will lead to their rise (Gans et al., 2014).
How individuals in the society interact
Since the first four principles have been used to address individual decision making, the fifth principle through the seven principles concentrates on how society and people are making interaction with each other. With principle five focusing on Trade Can Make Everyone Better Off, the trade that involves two countries is associated with a relationship that involves relationship that leads to mutual benefit.
Principle six states that Markets are a Usually a Good Way to Organize Economic Activity. Through this principle, we realize that a market economy makes all the decision based on the millions of firms and households in the society through the decision of a sole planner (Mankiw,2015). The company makes choices on whom to choose and whom to hire in order to look for employment from what services and good to own through their income.
With the seventh principle being the government can sometimes improve market outcomes. The government is supposed to enforce rules and regulations in place to facilitate distribution of goods while having to maintain and hold accountable the players that are playing a significant role in the market. Additionally, the government provides assistance when it comes to equality and individual property rights.
How the economy function as a whole.
Principle five through the seven principles bring a discussion on how individuals are interacting with each other and principle one through the fourth principle discussing how individuals are making principle and decisions. The eighth to the tenth principle concern how the economy works as a whole.
A countrys Standard of Living Depends on its ability to produce services and goods as the eighth principle, provide a demonstration that all the worldwide variation existing in the living standards are some of the attributions from the productivity of a state. Countries with the massive production of goods tend to offer good living standards for their individuals (Mankiw, 2015).
With the 9th principle focusing on the Price Rise when the Government Prints Too Much Money, in this case when the government comes up with the large quantity of nation money, its value fall and to some extend leads to inflation. Additionally, the 10th principle states that the society through its nature faces a trade-off which is short term between unemployment and inflation hence affecting the business cycle of an economy.
The gain and interdependence from trade
Trade and interdependence are advantageous to the economy as a whole since it offers the allowance to the society to be able to consume a different variety of services and goods, and an advantage is when one can produce a product at a minimum cost, with the free trade among countries being advocated by comparative advantage.
The market forces of demand and supply.
Technically, variable markets are evaluated by the model of demand and supply. On the other side, the law of demand demonstrates that a decrease in the price of a product leads to the increase of the quantity of the same product. Some of the factors that are in place to identify how the demand and supply curve shift include expectation, taste, and number of buyers.
Gans, J., King, S., Libich, J., Byford, M., Mankiw, G., & Stonecash, R. (2014). Principles of Economics PDF. Cengage Learning Australia.
Mankiw, N. G. (2014). Principles of Macroeconomics. Cengage Learning.
Mankiw, N. Gregory (2015). Principles of Microeconomics (7th ed.). Stamford, CT: Cengage Learning.
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