OPPORTUNITY COST & THE FREE MARKET
Scarcity is one of the most basic and crucial points to understand in microeconomics.1Scarcity means that we cannot have all the needs and wants to satisfy our desires. Scarcity can be applied to almost anything. Due to the scarcity of products we must make a choice of what we want. We must choose whether to do one thing or another by what we value to be most important to us. This, therefore, leads to us opportunity cost. Usually when one has to make a decision over what to do, buy, or build, it is narrowed down to two things. We might choose what satisfies our desires, what is more economical, or what is needed more. The choice that we do not take is our opportunity cost, the choice that we value less. Scarcity, choice, and opportunity cost are all related and interlaced with one another. If resources were unlimited we would never have to choose what is more important to have because we would have it all. A good example of applying scarcity would be with time. Have you ever had to decide whether to stay home and study or go out and party? By choosing to go out and party we take time away from our studying. This is a choice that we have to make and whatever we decide not to do is our opportunity cost.
Since resources in our economy are limited we must decide what is more important and where to apply our money and time. A production possibility curve shows us opportunity cost and how to get the best possible combination of our two choices. The production possibility curve might help us to better understand how to bring things to equilibrium and therefore not have to sacrifice a choice but to combine them. The production possibility curve is illustrated in a diagram; through the diagram we ...
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...mixed economy individuals can achieve a better education, more distribution of wealth, and prosper in small businesses without fear that monopolies might overpower them. This is not only beneficial for the population but for the country as well. This type of economy leads to fairly stable countries that are dominant in many markets and have the ability to prosper in new advancing technological fields. Even though no system is perfect, and you will find those who disagree with it, it has proved to be a good combination of freedom and restriction as it works in many countries such as the United States and Great Britain.
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From classroom to a cocktail party, having knowledge in today’s economics is definitely an asset when it comes surviving in the world of business. Cocktail Party Economics, by Eveline Adomait, and Richard Maranta undeniably satisfies as an economic training book, helping you understand the concepts of basic economics. The book brings to light many theories and thoughts, which are explained in a certain way that help readers easily, compare and relate them to each other. During the first couple chapters of the book, the main theories presented are scarcity, value, opportunity cost, production, and absolute/comparative advantage. Believe it or not, all of these theories are relatable to Supply and Demand; the two concepts introduced in chapters six and seven.
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There are some advantages but there are also some disadvantages that can be crucial. First off I will start off with an advantage for The United States market economy. A huge advantage of a market economy is that the citizens of the economy are free to make all of their own decisions except they still will have to follow the laws that the government has put in. But the disadvantages add up quickly and a huge one is that so many people are unemployed because the government does not offer all of the jobs that the mixed government. So the only way for people to get a job in the USA is to apply at a private businesses (e.x. Walmart). All in all mixed economies have a much lower unemployment rate than market economies
Exploitation is an important part of the capitalist economy, in capitalism shows that the exploitation is carried out by an economic system that is impersonal and objective. Capitalists pay workers less than the wage that they produce and reap the benefits for themselves. This brings to the central concept of Marx's surplus value, surplus value is defined as the difference of the value product when it is sold and the elements used to make these products (including the labor of the worker).
Discuss the importance of the concept of opportunity cost. In your discussion you are required to identify and explain:
Opportunity cost is simply what you give up in order to do something or more specifically the highest-value opportunity forgone (Maranjian, 2013). Opportunity cost can be anything in our daily lives like: time, money, skill, work, etc. We have the tendency to choose an option without knowing or considering the other alternatives. Opportunity costs are not always noticed sometimes we humans lack in decision making. There are a lot of different examples of opportunity cost in our lives yet we still do not analyze them very well.
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The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the amount of goods that buyers are willing and able to purchase at various prices, assuming all other non-price factors remain the same. The demand curve is almost always represented as downwards-sloping, meaning that as price decreases, consumers will buy more of the good. Just as the supply curves reflect marginal cost curves, demand curves can be described as marginal utility curves. The main determinants of individual demand are the price of the good, level of income, personal tastes, the population, government policies, the price of substitute goods, and the price of complementary goods.
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The crucial importance and relevance of economics related disciplines to the modern world have led me to want to pursue the study of these social sciences at a higher level. My study of Economics has shown me the fundamental part it plays in our lives and I would like to approach it with an open mind - interested but not yet fully informed.
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