Governments may choose to increase minimum wage on an arbitrary basis, making it difficult for companies to hire individuals at a consistent market rate. Government price controls distort the economic theory of supply and demand. Supply and demand is a significant underlying feature of free-market economies. This theory allows individuals and businesses to make decisions based on self-interest. Businesses often pay individuals a wage based on current market standards.
How does Adam Smith's concept of the invisible hand explain why markets move toward equilibrium? Do market participants need to know about the invisible hand for it to function? Explain your answer. Answer: Adam Smith’s concept of the invisible hand explains why markets move toward equilibrium because it allows consumers to freely choose what to buy and producers to choose freely what to sell and ultimately how to product it. It is important for market participants to know how the invisible hand functions so they can all benefit by understanding how self-interest regulates the markets supply and demand.
Lastly organizations must all seek the greatest profits meaning nothing else but profits. When these conditions are meet which isn’t often, organizations can supply goods following their own self-interests in a predictable manner to the market. Suppliers utilize the demand curve to determine the amount of productivity and the right cost for the market. The requirement that all the firms are large ensures no organizations will be able to gain more than another. These types of conditions keep firms from monopolizing the market.
In the next chapter we learn how sellers set the prices in which we pay for an item, why things cost what they do and not what they are worth. The key to prices are sellers that can sell their products as close to the cost of making the item. In a regular market, prices are the key. Businesses cannot afford to charge a higher price, customers are normally looking for a lower price and the lower the better, in today’s economy. Many customers ask the question, “What affects prices?” We learn that things happen beyond the sellers’ and buyers’ control to raise and lower prices in today’s market.
Variations in business cycles are able to be seen as short-term and long-term progression developments and they could shift. Cycles are calculated using the real gross domestic product of a country. Not like the more organized phases of economics, business cycles do not follow a foreseeable or mechanical form. However, they should be factored into considering an economy.
Which of the following is NOT a major area of study for economists? a. how people make decisions b. how people interact with each other c. how forces and trends affect the overall economy d. how countries choose national leaders ANSWER: d. how countries choose national leaders TYPE: M KEY1: D OBJECTIVE: 1 RANDOM: Y [ix]. The adage, “There is no such thing as a free lunch,” means: a. To get something we like, we usually have to give up another thing we like. b.
The topics I feel that had the most educational value were all of the topics. I find not one is more important than the other and each topics builds off previous topic discussed. These topics discussed pertaining to microeconomics are critical to companies, firms, and consumers. Companies know how much output to produce based off of profits. Companies will know where they can maximize these profits.
The authors attempt to look at why people use rational choice and what causes the chain reaction of events that occurs once a choice is made. In short, Micro-sociological factors determine Macro-sociological factors in society when cost benefit/choice theory is used to make decisions. Not just under special circumstance, always. PRATT, T. C. (2008), RATIONAL CHOICE THEORY, CRIME CONTROL POLICY, AND CRIMINOLOGICAL RELEVANCE. Criminology & Public Policy, 7:
“Being an American is also about making profits.” For me, being an economics major, I knew that Americans run their lives on their economic situation, and many times to make profits it is about seeing opportunities, and to some sense exploiting people, but they want to be exploited because it is called work. If people work for you and they do not produce more than they are worth, then the owner does not get a profit. You have to understand to appreciate your profit ability notion and that is all a part of being an American. This is clearly seen in the article, My Life as an Undocumented Immigrant by Jose Vargas. Jose’s driving force for staying in the United States was the ability to make profits and have a higher standard of living.
Be prepared; you will soon find that no degree on its own is enough to get you a job. 10. What skills will I develop studying economics? 1) Problem analysis and reasoning Analyze problems and strategize options Intellectual capacity to learn and think critically Capability to relate theory to practice