ECO discussion question #1

Discussion Question 1

The three areas of economics affect an individual both positively and negatively . First , in making decisions , a person often has to decide on tradeoffs because he /she just cannot afford to buy everything that he /she needs . In other words , sacrifices must be made . Economics , after all , is about allocating the resources available to a person - which happens to be scarce most of the time . This would mean , for instance that if one has set aside 10 dollars for chocolates and he /she wants to buy some oranges , the

decision would often entail buying less chocolates to enable him /her to buy some oranges . This effect is often interpreted as a negative one because a person has to let go of one want in to satisfy another desire . This illustration clearly shows that budget constraint plays a major role in decision-making (Mankiw , 2004

The second area of economics , interaction with others , affects members of society positively because in a free market economy , prices could not just be dictated by producers and sellers without the involvement or say of the consumers . In other words , if the price of a certain commodity proves too expensive , consumers would usually look for cheaper alternatives , thereby causing the demand for the more expensive version to fall . If the 21 ' colored television set produced by Sony Corporation , for instance , has been priced much higher than the 21 colored television of Philips , chances are that consumers would opt for the television set being sold by Philips because of the lower price . In this case , preference for Sony , which might prove to have a higher quality , could only be expressed by those who have the money , therefore feeling no budgetary constraints (Mankiw , 2004

Finally , the workings of the economy could affect an individual both positively and negatively . One instant is when government decides to print and circulate an abnormally high volume of money . This situation forces money to depreciate in value , thereby resulting to inflation . A high level of inflation causes prices to increase because of the additional costs being shouldered by manufacturers owing to the lower value of money . An upside of this situation , however , could be a temporary increase in employment . Because of the availability of money employers can afford to hire additional workers (Mankiw , 2004

Reference

Mankiw , N . G (2004 . Principles of economics (3rd ed . Chicago IL Thomson South-

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