Microeconomics is the study of how economic trends and tendencies are determined by the choices people make, the factors involved with supply and demand in their choices, and the overall impact on businesses and society. The complex relationships between consumers, producers, and government are all considerations in the study of microeconomics, which highlights the importance of various people’s roles. Consumers effectually push the market tendencies towards one direction or another through their purchasing needs and desires; producers are most successful when they meet consumer demands in a satisfactory manner. The business planning aspects of most enterprises will include a careful study of the direction of consumer trends, which is a major focus of microeconomics. “Microeconomics does not try to explain what should happen in a market. Instead, microeconomics only explains what to expect if certain conditions change” (Microeconomics). Various governmental regulations that impact the supply of money and other economic issues also have a significant role in the overall economic picture. These interrelated processes show the high significance of social cooperation at every level. Microeconomics brings these issues all together in an understandable way.
Interactions And Decision-Making
The first principle of economics is that people face tradeoffs, which is also true in society as a whole (Mankiw). A primary example of the decision-making process at the individual level is the tradeoff a person makes when he/she decides to work overtime hours on the weekend instead of socializing with friends. The cost of something is equal to what you give up to get it, according to principle #2 (Mankiw). The tradeoffs a person makes are based on many socio-cultural and psychological factors, so when a person decides to work overtime this shows a lot about his/her personal values and priorities as well. In society, important tradeoffs between efficiency vs. equality occur at every level (Mankiw). A significant example of this tradeoff occurs in businesses in almost every sector of society, which have a long history of disputes between labor and management over the years. Management decisions that keep a business making high profits mean that not everyone is paid equally because it would not be efficient for them to do so. Some employees have higher education levels and more experience to offer the company, while people in entry level positions frequently earn lower salaries due to less experience. However, this tradeoff in business causes a high degree of inequity among people everywhere and continues to be an important factor in society.
How The Economy Works As A Whole
Another important principle of economics is based on establishing cooperative trade that can make everyone better off (Mankiw), which is a fundamental component of the economy and society. The establishment of a market economy is the basis of organization in economic activity. A market economy assigns various resources through the decisions made by many different sectors, run by people who all work together to achieve a more efficient way to distribute goods and services. Each person has an important role in this process, from the top levels of executive management to the laborers in manufacturing plants and all the way through the chain of production. The example of how grocery market economies work efficiently to bring products to the consumer is an effective illustration. Truck drivers move the food from the agricultural regions to the cities, to packing houses, and to various places for preparation before distribution to grocery stores. Consumers buy the finished product and feed their families, saving countless hours of growing their own food as they did in past generations. In the meantime, there are tens of thousands of people employed in the process and economic wealth builds as the level of productivity increases. This example is basically similar to how every market economy operates; each person has a specific job to perform that will depend upon current market requirements—what people are buying, where they shop, and other consumer issues that are at the basis of economic activity.
Thus, society manages its scarce resources and benefits through cooperative economic systems that allow more producers to concentrate their productivity efforts in one area of economic output. Economic interdependence is a positive consequence of these cooperative measures among people. It may be as small as the local grocery co-op in rural regions, or as large as international trade markets that sustain the global economy. The basic principles are similar, although the complexity of international economic enterprise far surpasses smaller agreements
In economics, the demand curve slopes downward because lower prices will increase consumer demand in a particular product or commodity. Affordability factors are very high incentives for people, especially during an inflationary economy or when minimum wage salaries are the norm for many young people. These conditions all have a role on people’s choices as well as in political and social areas. As prices drop according to these various factors, this has a positive effect on the consumer’s income, which may be the same in terms of actual numbers but one’s buying power has increased. The upward sloping demand curve is an indicator that shows an increase in price due to a higher demand among consumers. The point of equilibrium is reached when supply equals demand, at which time there is a leveling off of price that keeps markets somewhat stable and consumers will have a better idea how to budget their money.
In conclusion, the understanding of microeconomics is a knowledge of people working together in society and business concerns for the betterment of all. Cooperation is key to success.
- Mankiw, N. Gregory. “Ten Principles of Economics.” Cameron.edu, 2006, http://www.cameron.edu/~abduls/EC2013PPT/ch01(Ten%20Principles).pdf. Accessed 20 Feb. 2017.
- Microeconomics. “What is ‘Microeconomics’”? Investopedia, 2017, http://www.investopedia.com/terms/m/microeconomics.asp. Accessed 22 Feb. 2017.
