Introduction to Microeconomics - Essay Sample

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Boston College
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While economics studies choice under the conditions of scarcity as well as constraints, its primary component; microeconomics, provides a critical overview resulting from decisions made by individual economic agents such as a person, a firm and consumers. The course documented factual materials regarding the operation of individual firms and households or consumers in addition to developing a basic understanding of economic decision-making. This paper puts much focus on the informed analysis of current microeconomic events from both a domestic and a foreign perspective.

To achieve this goal, I have structured this paper into three main sections, two of which form an analysis of the current domestic event and external event respectively. In the second section, the discussion base on the transition and ideal process towards capitalism in some emerging economies such as India, Chile, and Bolivia. I end the paper with the conclusion section, which offers a summary of microeconomic analysis drawn from the topic concept.

Part 1

Consumer Behavior in the United States

Goods and services are available to consumers in both adequate and scarce amounts. However, individual consumers behave differently with the allocated income. The essay intends to strengthen the overall understanding of the law of demand in the current United States' economy. The main goal is to determine how individual consumers make decisions on which commodities and services to buy with the allocated budget.

Marginal utility

Marginal utility documents the easiest assumption on consumer behavior. It is embodied by the principle which specifies that beyond a certain level of quantity, an extra unit of particular good yields proportionately a decreasing amount of additional utility to an individual consumer. However, there are situations where consumers preference stays unaffected. In such a case, they tend to attain as much of a specific product or services within their set budget. Nevertheless, the more they obtain the product or service, the less the desirability of the same product. Therefore, it is proof that is fulfilling particular desires amid of successive units of a product; an extra unit derives a less utility compared to the last unit purchased.

Since consumers derive utility from a product, as well as finding out whether it can satisfy a want, it, therefore, means that utility is a want satisfying power in the context of consumer behavior. It is important to know some features that rest squarely on the utility. The following features describe a utility:

Utility is personal. Satisfaction of a particular item for consumption varies extensively from one consumer to another. For instance, someone who drives off-road desire lifted pickup truck with great utility compared to a person not capable or averse to drive off-road.

Utility is unquantifiable. However, for illustration purposes, we base on the assumption that satisfaction can be measured with formulated components of utility called utils. For instance, an individual may derive 50 units of utility from one particular product as well as 20 utils of satisfaction from a typically different product. In light to this, convenience is achieved from the assumption of the imaginary units of satisfaction thus quantifying consumer behavior as an illustrative reason. The components of utility are supported by theories about consumer behavior that form an explanation of how individuals focus mainly on maximizing their utilities.

Consumer Behavior Theory

The law of diminishing marginal utility tries to illustrate how individuals distribute their earnings given a various goods and services. The theory assumes that every ideal consumer choice is subject to a budget constraint.

Taking the case study of American's market, consumers are depicted by a short purchasing decision. Explanation of the theory shows that consumers tend to plan earlier to buy a particular product; however, it is not the case in America global market as most consumers make short-term decisions when considering a purchase. Retailers viable to adopt such short purchasing decisions, benefits more as the consumer behaviors are easily identified.

As result of budget constraint entitled by a rational consumer, goods are scarce relative to the demand. Therefore, consumers are likely to buy extra related products until satisfaction is achieved.

Since consumers are rational and entitled to limited income, they tend to combine a manageable amount of goods and services which maximize their taste and preferences or utility. The concept of consumer behavior is vital to the market system as the information gained provides better products that cater for consumer satisfaction. The study is relevant to the free market economy as analysis of different factors which influence consumer decision making is greatly achieved.

Part 11

Demand and supply in Japan

People can have different perceptions on the amount of manufactured goods or services they want to acquire from a particular farm or market. In return, the farm can offer a solution to the customer desires by supplying a considerate amount of goods. The essay aims to instigate the general knowledge on how the idea of demand and supply is undertaken in the Republic of Japan. The primary goal is to elaborate on how individuals are affected by their trading choices, how the cost of goods and demands are resolved as well as how their preferences are harmonized in the market.

The law of demand

The law of demand can be illustrated in three dimensions. An individual tends to buy a particular product at a reduced price rather than when the price of that product is increased. Secondly, income and substitution effects can illustrate the law of demand. In terms of income, an item with a lower value raises its ability to be bought. In terms of substitution effects, consumers tend to replace an item with a lower cost for a similar item which costs more. Thirdly, customers can buy more products if the cost of these products continuously decreases with time. For instance, the law of demand can be illustrated in the auto industry. The amount of Corolla brands purchased does not depend only on the brand's price, but it also depends on the price of alternative brands such as Allion and Avensis. A less number of Corolla brands would be bought if its price is increased and the prices of other competing brands remain at a certain amount. In a case whereby their price tags decreases or increases with equal amounts, customers might result to purchasing more or equal number of Corollas.

The law of supply

The law of supply can be greatly attributed to the connection between the cost of a particular item and the number of items that can be circulated in the market by a particular firm. As the cost of manufactured products increases, the number of goods supplied increases subsequently, while the price of the goods falls. This relationship suggests that when other firms produce similar goods, their selling price would be at a higher value rather than being at a lower value. In this scenario, the value of the product will affect the willingness of the customer to purchase the product, when the value of the product is much higher the less the chance of the customer buying it. When the product gains value, the number of goods circulated in the market by a particular firm increase. In consideration of a fish canning plant in Japan, the firm employs more personnel to increase production rate since the added workers cannot access the plant's equipment at the same time this leads to a low rate of production and the value of units rises. The firm will, therefore, raise the price for their products to produce more units.

In conclusion, the number of goods produced and the ability of the market to avail the products to the consumers can be greatly influenced by a person financial approach, the decision and options the person takes, how these decisions are affected by markets and how the value of goods is set in these markets.

Part 111

Communism system of economy was established in the quest to help avert the inequalities that existed in most parts of the world during and after the major world wars. A communist system is one that is anchored convenient form of government where the government takes custody of its citizens at all cost. The government believes in the good governance to its citizens and as such, it most efforts to device effective economic strategies, communism and capitalism has faced great opposition from the different economic theorist. The products are centrally collected then the equally distributed. However, the communism came with a lot of constitutional limitations. The citizens lost their liberty, and this raced all a lot of suspicions about the intentions of the government. The film; the Agony of reforms brings clear episodes of how capitalism started gaining fame in the early 19th centuries.

Capitalism came on the spur of the democratic demands. The agony of reforms is, therefore, a story that tries to tell how the economies failed and new leaders picked to embrace the conversion of a free-market economy. The program focuses on how economies such as; India, Russia, Bolivia, Poland, and Chile sailed throughout the transition facing the mayhem and the changes and the implications of the freedoms.

Capitalism came into privatization, deregulation and freewheeling competition. Unlike the centrally based economy of communism capitalism is individual based and one man for himself. Ideally, the named country would have thrived in a communist system by the fact that the citizen would for sometimes get the services from the states directly since the major corporations would be privatized. The privatizations would deny the individuals to invest freely. In the quest for fairness and equality, the countries development would be deterred.

An open lesson learned from this episode is that a free economy is important that regulated economy. The donation of investment power to the private individuals would increase the GDP. Evidently, in a situation where everything comes from the central government induces laziness among people. The general population grows dependent, and this kills the development morale of the citizens. In the 20th century, people cast blamed on the free-market strategy, so it forced the governments to change to communists, it was only a matter of time to realize how the economy had been eaten away. According to Jeffrey Sachs the capitalism model that was despised then proved to be the only model that could help the economic stumbling in the whole world. Most economies above included worldwide have embraced free-market capitalism.


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