Understanding and application of economics
Economics is the study of how society manages its scarce resources. Put simply, economics is to discuss how to use the limited resources to produce the products as much as possible. The core idea of economics is scarce resources and efficient use of resources, and can be divided into two main branches, microeconomics and macroeconomics. The microeconomics is focus on the market forces of supply and demand; elasticity; markets and welfare; externalities, public goods and common resources; cost of production; firms in competitive markets; monopolistic competition. However, the macroeconomics study on the real economy in the long run; money and prices in the long run; the macroeconomics of open economy and short-run economic fluctuations. From the point of view of economic origin, Adam Smith described the “invisible hand” metaphor in the 1700s, when everyone is acting in accordance with their own interests, then an invisible hand guide people to promote the public welfare unknowingly. This paper will link the economics knowledge to our daily life from three aspects: opportunity cost, marginal utility and inflation.
Firstly, the term of opportunity cost in economic is used in allocate resources reasonable and implement the greatest benefits. The opportunity cost of an item is what you give up to obtain that item. The item that you should give up has a wide range, such as money, time, goods, labor services and so on. For instance, if you have a shop and there is a few options for you to run a small side business. You can choose sell flowers, sell cosmetics or sell jewelry (only can choose one option).
The Term Paper on Managerial Economics 5
Chapter 1: Introduction to Managerial Economics 4. Describe the importance of the “other things equal” assumption in managerial economic analysis. 5. Describe what constitutes a market, distinguish competitive from non-competitive markets, and discuss imperfect markets. 6. Emphasize the globalization of markets. NOTES 1. Definition. Managerial economics is the science of directing ...
If you choose to sell flowers, the opportunity cost is the benefit come from sell cosmetics or jewelry that you give up. So, we can assume the benefit of sell flowers is $80,000, the benefit of sell cosmetics is $90,000 and the benefit of sell jewelry is $100,000. Then we can know the opportunity cost of sell flowers is $100,000, the opportunity cost of sell cosmetics is $100,000 and the opportunity cost of sell jewelry is $90,000. But in some other cases, it cannot be measured in terms of money. For example, if you make a choice between study in library and go to the movies with your friends. The opportunity cost of study in library is you can’t enjoy the movie with your friends. In contrast, the opportunity cost of go to the movies with your friends is lost the knowledge that you learn from the library. From these examples, we can find the opportunity means decision-maker can choose from, and opportunity cost is the highest benefits item among all foregone opportunities. So it can give us some suggestions when we meet the choice to achieve the maximum profit.
Secondly, in the terms of marginal utility, the definition is the amount that utility increases with an increase of one unit of an economic good or service. And the law of diminishing marginal utility was an important part of marginal utility theory. It showed the relation between quantity change of consumption or consumer’s consumption or labor and its utility change. The meaning of the law of diminishing marginal is “A law of economics stating that as a person increases consumption of a product – while keeping consumption of other products constant – there is a decline in the marginal utility that person derives from consuming each additional unit of that product”. For example, if you feel very hungry, someone provide some pieces of cakes for you. When you eating, the first and the second is delicious, the third is good, and full at least. However, you don’t want to eat the left of cakes, the good feeling is disappeared. In this case, the left of cakes are same with the cakes that you eat, but you are not satisfied with these rest cakes. It is because you desire for the cakes keep falling. Because consumers buy goods in order to obtain the utility, marginal utility of large goods, consumers are willing to pay higher prices to buy the goods have bigger marginal utility. Therefore, according to the law of diminishing marginal utility: the more goods are purchased, the bigger marginal utility, the lower commodity prices; conversely, the fewer goods are purchased, the bigger marginal utility, the higher commodity prices.
The Term Paper on China Inflation
In recent years, China has met price of commodities rising quickly, inflation has affecting the overall economy. In this article, I will analyses last five years status of China inflation, explain the cause and effects, then base on the cause and effects, giving some solution to deal with the inflation. According to the definition of economics, inflation refers to the number of currency in ...
Finally, inflation is an increase in the overall level of prices in the economy. One of the most important cause of inflation is the government creates large quantities of money, the value of the money falls. The performance of inflation includes banknotes depreciation and price rise. It is bad for economic development. In fact, the inflation is relevant to our life and influence the standard of living. In an inflationary environment, price rice and the resident real income decrease. It causes the decline of living standard of low-income groups. What’s more, inflation means that depositors are earning negative interest- losing money, and erode the value of your saving. Likewise, like pensions, insurance, other valuable securities and property, these would have been funded for human livelihood. Due to the inflation, its real value will fall. So the inflation influences the standard of living, especially lower income group and retired group.
In conclusion, this essay states the meaning of economics from its two characteristics: scarcity and efficiency. Get the definition of economics – how society manages its scarce resources. Then introduce the two main branches of economics, microeconomics and macroeconomics. At the last, the economics knowledge related to our daily lift through three aspects: opportunity cost, marginal utility and inflation.
References
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Economics for real people. Ludwig von Mises Institute.
The Essay on Composite Indicators of Poverty and Living Standards:
Development is more than simply increasing economic output i.e.GDP per capita. It is a wider concept than economic growth. Even if a country's economy experiences real growth of GDP it does not mean that economic development is taking place. Nevertheless, wider more meaningful indicators of development are often correlated with GDP per capita.The Physical Quality of Life Index (PQLI)In this index ...
Minowitz, P. (2004).
Adam smith’s invisible hands. Econ Journal Watch, 1(3), 381-412.
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Microeconomics: theory, applications. New York: Norton.
