Premium Essay

Principles of Microeconomics

In: Business and Management

Submitted By TimFlynn
Words 862
Pages 4
Principles of Microeconomics Paper

Why does human action imply the Law of Marginal Utility? This can be supported by the Diamond-water Paradox explained by the economist Adam Smith. It can be further supported by the Law of Diminishing Marginal Utility. As well, if you already have multiple units of a good or service, each will have its own value and desired end. All of this information will come from the simply perfect book Foundations of Economics a Christian View by Shawn Ritenour, by far the best investment I have ever made. Every decision we make we weigh all of our options and choose the highest desired end without even realizing we do it, this can be explained by human action and marginal utility.
In 1776 the economist Adam Smith wrote a famous book called The Wealth of Nations, in this book he talked about this Diamond-water Paradox thing. You’re probably wondering what this thing is, or how it could possibly have to do with marginal utility. Well luckily for you I’m here to explain it to you. Let’s first start by defining paradox, Merriam-Webster defines a paradox as a statement that seems to say two opposite things but that may be true. Also we all know what water is and what diamonds are, so we can move past that. Smith states that water is much more useful than diamonds, but diamonds are much more valuable than water. Why is this? You would think that something such as water that is more useful and needed to live would be the more valuable than diamond but it is not. As stated in Dr. Ritenour‘s book, you can very easily get a cup of tap water for free but it is basically impossible to get a cup of diamond for free. So again I ask, why is this if water is so much more useful that diamonds? This is because water is such an abundant entity that you can find it just about anywhere, diamonds however are not as easy to come by. Also as we go throughout…...

Similar Documents

Premium Essay

Microeconomics

...Microeconomics Paper One Renee Ingram Chamberlain College of Nursing Econ312: Principles of Economics Spring 2013 MICROECONOMICS 2 Every day individual consumers make choices for products they feel are needed in their lives. Whether out of comfort or necessity, the choices made can determine the standard of living for the individual. Research by McConnell, Brue, and Flynn (2012) argue, “Even though biologically people need only air, water, food, clothing and shelter,” once these basic needs are met, the other items desired are only to make one’s life more comfortable (McConnell, Brue, & Flynn, 2012). However, the choices made by these individuals have one obstacle, and that is how does one chose to use limited resources so as to satisfy these unlimited wants. This is where the idea of economics comes into play. Economics is defined as the basic study of supply and demand of goods in a market structure, and how this market is driven by self-interests of individual consumers for their unlimited wants. For consumers, McConnell, Brue, and Flynn (2012) suggest, “Individuals look for and pursue opportunities to increase their utility---they allocate their time, energy, and money to maximize their satisfaction” (McConnell, Brue, & Flynn, 2012). Since goods or services are limited, the self-interest of individuals will drive them to choose one product or service over another in order to maximize their comfort. Bearing in mind the above......

Words: 606 - Pages: 3

Premium Essay

Microeconomics

...“How is Your Personal Economy? Abstract The discussion of the book entitled “The Money Book for the Young, Fabulous & Broke” by Suze Orman, and “Let’s Get Real About Money” by Eric Tyson is one that measures an individual’s knowledge on how to handle their money and ways to make it grow to benefit them. Key points found in both books deals with a lot of the economic aspects of our society today. By using both books as references and knowledge gained from the microeconomics book, This paper discusses the benefits of both books for one’s overall ability to be financially sound, even if you think you may live in an un-financially sound society. Although, both books are geared toward readers in different stages of their lives, they do bring up the questions of whether or not these individuals understand the concept of money, or how it should be a benefit and not a hindrance, and also that it is truly not the happiness factor for life that several millions believe the case to be. The one idea that should be taken from this paper is the knowing whether or not you are financially healthy enough to fit your needs, goals, and desires. What is an economy? It is a type of management of one’s resources. Whether its money, oil, food, land, or a type of service, knowing how to manage one’s own resources, is key to having a great personal economy, even when your countries’ economy isn’t doing so well. To make it even simpler, when talking about one’s personal economy, I talk......

Words: 2484 - Pages: 10

Free Essay

Microeconomics

...Charles  Zoller     Principles  of  Microeconomics   Final  Paper   12/8/12       Selfish  Reasons  to  Have  More  Kids       In  Selfish  Reasons  to  Have  More  Kids:  Why  Being  a  Great  Parent  Is  Less  Work  and   More  Fun  Than  You  Think,  Bryan  Caplan  describes  why  it’s  in  a  parent’s  best  interest  to   have  more  kids  than  they  originally  planned  on  having,  and  spacing  the  time  between  when   a  couple  decides  to  have  children.    Economic  principles  obviously  encompass  the  ability  to   influence  the  views  and  measures  of  people  for  the  better.    These  principles  are  not  just   meant  for  stockbrokers  and  economists,  but  they  give  the  average  person  a  method  of   sorting  through  the  obstacles  of  society  from  an  economic  standpoint.    Since  economics  is  a   study  of  choices,  and  we  make  hundreds  of  choices  each  day  without  even  acknowledging   them,  it  is  unmistakable  that  economics  can  be  found  ubiquitously.       The ...

Words: 1456 - Pages: 6

Premium Essay

Microeconomic

...entry which may limit the number of firms in an industry and ensure only one existence of monopoly, and thus reduce competition (Arnold, 2006). For such understandings about market structures defined in the microeconomics, coffee bun belongs to monopolistic market. In this market, there are a lot of coffee bun producers such as PaPa Roti, Roti Mama, Roti Mum, Baker’s Boy, Mr. Bun and all sorts of bun shops all over the places. The price is set up differently from difference producers. For example, Roti boy is at RM 1.8; while coffee bun in Tesco is at RM 1. However, the product is homogenous and the producers compete with each other to the same amount of consumers. The ingredient to make the coffee bun can be easily accessed from every supplier. And one more, no firm in this industry has a power to prevent the entry and exit of the newcomers or existing firms from exiting or entering the market. 2. Reasons for withdrawing from Singapore RotiBoy has entered Singapore since 2004. It used to be a fad of new buns which many consumers are willing to queue up to get one bun. However, it is slowly fad away and now RotiBoy chose to withdraw from Singapore. The question rises why RotiBoy fails to operate in Singapore. Let’s go to explore the reason in terms of microeconomics. 3.1 Tastes and preferences Tastes and preferences of consumers have a direct impact on the quantity demanded (Sloman, 2003). Tastes and preferences are individual’s attitude towards goods and......

Words: 3010 - Pages: 13

Premium Essay

Principle of Microeconomic

...Professor Kosten Banifoot, a prominent supporter of the National Aeronautics and Space Administration’s (NASA) space shuttle program, estimated that the gains from the program are currently $24 billion per year (an average of $6 billion per launch) and that its costs are relationship between the number of shuttles launched and the total cost of the program is as described in Table 1.1. On the basis of these estimates, Professor Banifoot testified before Congress that NASA should definitely expand the space shuttle program. Should Congress follow his advice? Explain. In your opinion, how many space shuttles should NASA launch? Number of launches | Total cost ($ billion) | Average cost ($ billion) | 0 | 0 | 0 | 1 | 3 | 3 | 2 | 7 | 3.5 | 3 | 12 | 4 | 4 | 20 | 5 | 5 | 32 | 6.4 | Table 1.1 Answer: First at all, we must compare the marginal cost of a launch to its marginal benefit. However, the professor just tells us only the average cost and average benefit of the program. There are the total cost of the program divided by the number of launches and the total benefit divided by the number of launches. The average benefit and average cost per launch for all shuttles launched thus far is simply not useful for deciding whether to expand the program. The average cost of the launches undertaken so far might be the same as the cost of adding another launch. But, it also might be either higher or lower than the marginal cost of a launch. The benefit of an......

Words: 1254 - Pages: 6

Premium Essay

Microeconomics

...TYP: RE 47. Microeconomics approaches the study of economics from the viewpoint of: a. | inflation, unemployment, and economic growth. | b. | the federal government. | c. | individual economic units, such as consumers, firms, and units of government. | d. | the economy as a whole. | ANS: C PTS: 1 DIF: Easy REF: Full: 6 | Mic: 6 TOP: Microeconomics TYP: RE 48. The basic difference between macroeconomics and microeconomics is: a. | microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. | b. | microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms. | c. | microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. | d. | microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment. | ANS: C PTS: 1 DIF: Medium REF: Full: 6 | Mic: 6 TOP: Microeconomics TYP: RE 49. Determining the price of compact discs is a concern of: a. | macroeconomics. | b. | microeconomics. | c. | both macroeconomics and microeconomics. | d. | neither macroeconomics nor microeconomics. | ANS: B PTS: 1 DIF: Medium REF: Full: 6 | Mic: 6 TOP: Microeconomics TYP: RE 50. Which of the following is the best example of a microeconomic topic? a. | The......

Words: 9136 - Pages: 37

Premium Essay

Econ212-1402b-04 Principles of Microeconomics

...Ralph Thomas ECON212-1402B-04 Principles of Microeconomics Professor: Lance Brofman Phase: 2 Individual Projects June 2, 2014 What is the price elasticity of demand? What determines it? What is elastic and inelastic demand? The Price Elasticity of Demand (commonly known as just price elasticity) measures the rate of response of quantity demanded due to a price change. The formula for the Price Elasticity of Demand (PEoD), (Moffat, M., para1 economic, about.com) is: PEoD = (% Change in Quantity Demanded)/ (% Change in Price) * If PEoD > 1 then Demand is Price Elastic (Demand is sensitive to price changes)  * If PEoD = 1 then Demand is Unit Elastic  * If PEoD < 1 then Demand is Price Inelastic (Demand is not sensitive to price changes) The price of a laptop increases by 20% and there is a 40% drop in the quantity demanded. =40/20 =2 The price of a pack of cigarettes increases by 10% and there is a 5% drop in the quantity demanded =10/5 =2 Why is elasticity an important concept for a business? If you use elasticity of demand information to predict the potential impact of a price fluctuation on the total sales revenue, the price elasticity of demand is a way of looking at the sensitivity of price related to product demand. Demand elasticity is an economic concept also known as price elasticity. Price elesticy can be a confusing at times but its main reason is to help the company gain the maximum profit possible. If you utilize the versatility of...

Words: 1110 - Pages: 5

Premium Essay

Microeconomics

...Week 2 Assignment: Raise or Lower Tuition? ECO 204: Principles of Microeconomics August 10, 2014 For this week’s assignment we have to assess how to increase the total revenue for a university by raising or lowering the tuition. As a consultant hired to help Nobody State University, I will assist in helping the university find the appropriate solution to help the university survive by changing the cost of tuition. Assess a raise in tuition and if it will necessarily result in more revenue. Raising the tuition at the university would not necessarily result in more revenue. When the price of tuition increases it will cause students to drop out; if the school is trying to keep the same number of students enrolled this will be a problem. However, if they are looking to decrease their enrolment while still increasing their tuition cost they could see an increase in revenue but not much. I would see the university’s goal as getting the most amounts of students to pay the higher tuition fees. Describe the conditions under which revenue will (a) rise, (b) fall, or (c) remain the same. Price determination is a difficult decision; one that should establish a tuition that retains current students, attracts new students, and provides adequate revenues to cover costs. (Byran & Whipple, 1995) Rise Conditions under which revenue will rise would be if the enrolment of students remains the same and rises. The university will have look at other factors that will make......

Words: 911 - Pages: 4

Premium Essay

Principles of Microeconomics

...lines you include on the graph). b. What is the equilibrium price and quantity? a.) b.) PRICE: ______________________ QUANTITY: ______________________ Now, assume that a new government report claims that video game play stimulates the brain (in this case, stimulation is a good thing). c. What will this do to the demand curve? Which shifter causes this? d. What will happen to the equilibrium price and quantity? c.) d.) P: _______________________ Q: _______________________ 3. Based on the following information for the state of Montana, a. Draw the Production Possibilities Curve. b. Determine the opportunity costs for a move from A to B; B to C; and C to D. c. What principle does this illustrate? |CHOICE |OIL / barrels |WHEAT / bushels | |A |5000 |0 | |B |4500 |10000 | |C |2500 |20000 | |D |0 |25000 ...

Words: 554 - Pages: 3

Premium Essay

Microeconomics

...FRAMINGHAM STATE COLLEGE PRINCIPLES OF MICROECONOMICS PROBLEM SET NUMBER 2 My Name is? ________________________________________ Text Chapter 2: Page 34 3. Draw a circular-flow diagram. Identify the parts of the model that Correspond to the flow of goods and services and the flow of dollars for each of the following activities. a. Sam pays a storekeeper $1 for a quart of milk. b. Sally earns $4.50 per hour working at a fast food restaurant. c. Serena spends $7 to see a movie d. Stuart earns $10,000 from his 10 percent ownership of Acme Industrial. See Figure 1; the four transactions are shown. Figure 1 Principles of Microeconomics 1 Problem Set Number 2 5. The first principle of economics discussed in Chapter 1 is that people face tradeoffs. Use a production possibilities frontier to illustrate society's tradeoff between a clean environment and the quantity of industrial output. What do you suppose determines the shape and position of the frontier? Show what happens to the frontier if engineers develop an automobile engine with almost no emissions See Figure 2. The shape and position of the frontier depend on how costly it is to maintain a clean environment⎯the productivity of the environmental industry. Gains in environmental productivity, such as the development of a no-emission auto engine, lead to shifts of the production-possibilities frontier, like the shift from PPF1 to PPF2 shown in the figure. Figure 2 Principles of Microeconomics 2 Problem Set Number......

Words: 1787 - Pages: 8

Premium Essay

Microeconomic Principles - Definitions and Examples

...highlights how new economic notions are easily learned and applied, but the subsequent ideas are harder to achieve. Therefore, a graph that represents the progression of an idea will show a steep incline that decelerates into a plateau. This applies to both customer utility of a product and company skill development. For example, when Apple first released its iOS7 software, it was highly feasible with a high percentage of users acquiring it. However subsequent updates of iOS7.01 and iOS7.02 it did not get as much attention, and further updates within version 7 (iOS7.03 and iOS7.04) took longer to produce by the developers, although they are relatively less tedious to accomplish. Comparative Static Analysis This is a study used mainly in microeconomics used to highlight the effect of an exogenous variable upon an economic model. When running this type of analysis, stability is assumed, that is, that all other variables remain constant. When the tested exogenous variable is applied, the supply and demand model changes are studied. It is mainly applied for profit maximization as it enables comparison of the different states of equilibrium in each case. For example, imported chocolate truffles are demanded at a certain schedule of quantities. However, a new local producer has emerged, and therefore the supply will shift, followed by that in demand, and a new equilibrium will be founded. The study of the economic impact this new producer would putatively have is considered......

Words: 2733 - Pages: 11

Premium Essay

Difference Between Microeconomics and Microeconomics

... Differentiate between Microeconomics and Macroeconomics Name Institution Differentiate between Microeconomics and Macroeconomics According to (Krugman, 2005), Microeconomics involves analysis of individual economic units such as households, demand, and supply and market equilibrium. Macroeconomics, on the other hand, includes analysis of aggregate economic variables such as national income, inflation, unemployment and interest rates. My primary objective in this paper, therefore, is to differentiate between macroeconomics and microeconomics. This fact alone cannot distinguish macro and microeconomics. Nevertheless, microeconomics and macroeconomics are interdependent. While analyzing macroeconomics an economist has to ask questions which affect the standards of living of an entire country. Such issues will be related to inflation, unemployment, national income, product markets, fiscal policies, international trade, economic growth and interest rates (Mankiw, 2007). On the other hand, an economist while analyzing Microeconomics will look at individual’s purchasing power, demand, supply, income, utility level, labor markets, production, consumption and opportunity cost. Macroeconomics is concerned with the national income and the gross domestic product while Microeconomics is concerned with the impact of an increase or decrease in a single economic variable (Krugman, 2005). Microeconomics works on the principle that prices of goods and services are determined by......

Words: 303 - Pages: 2

Premium Essay

Principles of Microeconomics

...ECN 201 PRINCIPLES OF MICROECONOMICS LECTURE 9 Topic: Output & Costs Short Run Costs Short Run- At least one factor of production is held fixed. Usually capital is held fixed and labor is held variable. Relationship between output and costs can be described by three concepts: 1. Total cost 2. Marginal cost 3. Average costi. ii. Average fixed cost Average variable cost Short Run Costs  Total cost (TC)- A firm’s total cost is the cost of all factors of production it uses. Total cost = total fixed cost + total variable cost.  Total fixed cost (TFC)- Cost of the firm’s fixed factors. Eg. Cost of machine, land, building etc. TFC does not change with output; it remains constant.  Total variable cost (TVC)- Cost of the firm’s variable factor of production; eg. labor cost (wage bill). TVC changes with total output. Total Cost (TC) Curve  Total Cost Curve comes from the idea of Total Product Curve (production function).  Shape of TC curve: Recall in TP curve, initially as marginal labor productivity (MPL) is higher, firm can get the work done with fewer workers and so the associated cost of production will increase at a slower rate. Later as MPL gets lower, to do the same work it will take more and more labor; and the associated cost of production will increase at a faster rate!  Total Cost, TC = FC + VC  Fixed cost (FC) is fixed/constant for any level of output. So the shape of TC actually comes from the shape of VC. Short Run Costs Average Variable Cost: variable......

Words: 570 - Pages: 3

Premium Essay

Microeconomics

...Microeconomics  The $20,000 Suit In an article by Michael Stetz, a Mr. Catalino a long time lawyer has orders 20,000 dolor suit to be made from the best materials in the world. This suit will have a silk lining which cost $300, each button costs $25. The tailor Mr. Cortese is now 70 years of age and he has at least 50 years of experience, saying he is the right person for the job is understating it. Spending this much money on a non-essential need (a want) is a great example of the Utility principle. Utility is a concept that measures the satisfaction or gratification gained by consuming any and all goods. Utility numerically measures consumer’s satisfaction what microeconomics calls cardinal utility. For Mr. Catalino the suit is not a necessity, he is splurging for a desire. Economically speaking it is a complete waste of resources to spend so much money on a suit, because he will do just as well spending only fiftieth of that money. The only valid reason for splurging is the utilitarian satisfaction that Mr. Catalino receives. Economics considers this type on item a scarce good. Because of the human condition of unlimited want and a limited source of resources some items like this suit is considered a very scares item, which of course drives the demand and increases the price. The scarcity principal states: 1. “There is not ‘enough’ to go around” 2.”I want now what I may not be able to get in the future.” Mr. Catalino understands that the materials required to......

Words: 501 - Pages: 3

Premium Essay

Microeconomics

...UB18416BBU26251 INTRODUCTION TO MICROECONOMICS A Final Thesis Presented to AIU The Academic Department Of the School of Business and Economics In Partial Fulfillment of the Requirements For the Bachelors Degree in Business Administration Atlantic International University (AIU) @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ @@ INTRODUCTION TO MICROECONOMICS @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ @ Emmanuel Kasozi Atlantic International University (AIU) – School of Business and Economics August 15, 2012 School work, Micro economics @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ Atlantic International University (AIU) CONTENTS 1 1.0. Microeconomics and Business Markets an overview 2.0. Economics is defined 3.0. Opportunity cost 4.0. 3 Production curve 2 5.0. Microeconomics is defined 6.0. Business Markets 7.0. Market 8.0. 8 Assumptions of markets 3 Demand, Supply and market Equilibrium 9.0. 10 Demand 10.0. Factors influencing Demand 11.0. Demand curve 12.0. Ceteris Paribus 4 13.0. Supply 14 14.0. The law of supply 15.0. Supply schedule 16.0. Supply curve 17.0. Factors influencing supply Atlantic International University (AIU) 18.0. Equilibrium 19.0. Reference 21 MICROECONOMICS AND BUSINESS......

Words: 4430 - Pages: 18

Quan Zhi Gao Shou: Chapter 60.2: Fly With The Wind (2/3) | Le jour de mon retour | Last Night of The Proms Complete Part 1 and 2.