Essay On Economic Behavior

817 Words4 Pages
Economics is the social science that studies the behavior of individuals, households, and organizations, when they manage or use scarce resources, which have alternative uses, to achieve desired ends1. Economic reasoning is the process by which analysts study people. It has been concluded that people are molded by characteristic decisions. People choose. They seek by their choices to obtain the best possible combination of costs and benefits. All choices involve costs. In any decision, there is a cost. The opportunity cost is the most desirable alternative we don’t choose. People respond to incentives in predictable ways. People can be expected to pursue rewards. If there is a two for one sale more people will come in the store.
People create economic systems that influence individual choices and incentives. Economic behavior occurs in a climate of rules, formal and informal. The “rules of the game” influence the choices people make in particular cases. Rules often act as incentives. Tax laws, for example, influence people’s behavior. People gain when they trade voluntarily. Voluntary trade is when people exchange something they value less for something they value more. The chance to see a movie is worth more than the $7.00 for a ticket. People’s choices have consequences that lie in the future. People make choices based upon the long-term benefits. For example a homeowner will take better care of their house than an apartment because they have no long-term interest in the market value of that apartment.

A free market is a market economy in which the forces of supply and demand are free of intervention by a government, price-setting monopolies, or other authority. A free market contrasts with a controlled market or regulated mark...

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...chaser found it reasonable to pay for these luxuries. They are considered luxuries because the government couldn’t necessarily afford that type of development. Auto-dependency becomes a result of this because in order to build most of these McMansions and have these gated communities; development has to happen farther out the city where there is space. Everyone living there would need a car to get back into the city for work.

In contrast, a regulated or controlled market has controls. Our government has implemented laws protecting people against various discriminations that can arise out of a free market. Economic reasoning explains why people would choose a free market route and rationalizes why people make the decisions they make. A free market independent of but in conjunction with a controlled market would seem to be the approach to achieve optimum balance.
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