RUNNNING HEAD: Principles of Economics 1
Principles of Economics
Professor Michael Horvath
Economics 100- Principles of Economics
August 2, 2012
Principles of Economics 2
Economics is defined as a social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants. According to O’Sullivan, A., Sheffrin, S., & Perez, S. (2012) economics provides a framework to diagnose all sorts of problems faced by society and then helps create and evaluate various proposals to solve them. In this paper the research will suggest how an economist would approach the problem of alcohol abuse and provide two possible solutions to this problem. The four elements of the economic way of thinking will be included in the analysis. It will analyze how prescription drugs affect the demand and supply of other products and services in this country. A reason will be formulated as to why elasticity of demand is an important consideration when analyzing the impact of a shift in supply and why the elasticity of supply is an important consideration when analyzing the impact of a shift in demand. At least one example in each scenario will be included. Two examples of increasing-cost industries in my state will be proposed and a reason will be formulated as to why they would have a positively sloped supply curve. Suggestions will be made as to how certain conditions; a perfectly competitive market is economically efficient.
An economist would approach the problem of alcohol abuse by increasing cost through adding tax and reducing availability. When measuring the cost of alcohol abuse in any city in the U.S. we must understand what make the assumptions of alcohol abuse...