Microeconomics

MICROECONOMICS 7

#1

Efficiencyrefersto a performancelevel that entailstheuseof fewinputsandscarceresourceswith theaimof gettingmaximumoutput.Thetermefficiencyrelatesto theuseof everyinputavailablein theproductionof an output.Therefore,thetermis allinclusiveandeveryresourcehas to betakeninto considerationin theproductionprocess.Efficiencycan beregardedas a crucialcomponentin theproductionprocess.Thisis becausemanyresourcessuchas rawmaterials,time,as wellas money,can beregardedas limited.Therefore,theyhaveto be conservedthrough efficientmeansas thiswill ensurethattheyare usedto themaximum.There are certainalternatives,which can helpin thefairallocation of scarceresourcesin theproductionprocess.One of thealternativesis ensuringthatthere is notimewastedin theproductionprocess.Allinputshaveto beavailedat therighttime,andtheresourceof timeshould be adhered to accordingly. Anotheralternativeis through ensuringthateachresourceisusedin thecorrectproportionas thisenhancesefficientresults(Bowles, 2008).#2

Taxeshavean impacton thewages,employers,workers,as wellas employment.With hightaxrates,itimpliesthatworkersreceivelowwagesas muchof their incomeis usedto coverforthetaxes.Employerswill alsohaveto beartheburdenoftaxsince their investmentswill be highlytaxed.Lowtaxesmeansthattheearningsof bothemployersandemployeeswill increase.Since wagesarepaidon a casualbasis,there are lesslikelyto be affectedby taxation.Taxeshavea significanteffecton employmentwhenemployeesaretaxedheavily,theyare likelyto becomeself-employed as itis believedthatthetaxesforself-employed personsare lowerthan thosechargedon theemployedpeople.Taxeshavehelpedin numerouswaysfirst,taxationhas helpedin fundingtheeducationsectorof which I havebeena beneficiary.Taxeshavealsohelpedme accessaffordable medicalcarefrom healthcare organizations.Partof thetaxescollectedby thegovernmentis usedto fundmedicalservices,andthishelpsme a lotin accessingaffordable healthcare in theformof subsidized medicalservicesanddrugs(Bowles, 2008).#3

Summer(2004) assertsthatthetragedyof thecommons entailsa situationwherebythere are manypeoplewhoare drivenby self-interest, andtheysharea limitedresource,which is depletedas a resultof increasedusage.Thetermrelatesto theconceptof sustainable developmentthat advocatestheconservationof resourcesforfuturegenerations.Based on thetragedy,theenvironmenthas to be protectedin orderto ensurethatsomeresourcesarenot finished.An exampleof thetragedyof thecommons is a situationwherebyherders sharea commonpieceof land,wherebyeachharder has therightto grazetheir cattlein theland.Eachherder has theself-interest of puttingthecowshehas in thelandforgrazing.Whiletheherderbenefitsfrom addinga cowin theland,thedamageto thelandresultingfrom overgrazing is sharedamong allherders. Apossiblesolutionto managingthetragedyiscontrolleduseof resources.Forexample,a parcelof landbeingusedby herderscan be controlledthrough regulatingthenumberof cattlethat eachherdercan grazein theland.#4

Accordingto Arnold (2008), marginalutilityentailsthesatisfactionthatthecustomergainsupon consumingan extraunitof a product.Whena customerbuysa goodorservice,theyare likelyto comebackformoreandthesatisfactiontheygetby buyingmorethan whattheyrequiredis whatmarginalutilityentails. Asan economicconcept,marginalutilityhas beenusedto determinetheamountof itemsthata consumerwill purchase.With additionalconsumptionof a commodity,itmeansthatthemarginalutilityfortheproductis positive.Whenthetotalutilityof theitemisdecreasedby consumptionof an additionalitem,thisimpliesthatthemarginalutilityis negative.An exampleof marginalutilityis whena personcontinuallypurchasesa softdrinklike soda.After drinkingthefirstbottle,theconsumermay opt to purchaseanotherbottleuntil theybecomesatisfied.Theamountof satisfactionthat comesfrom drinkingseveralbottlesof sodais whatisknownas marginalutility.#5

Pricediscriminationentailschargingvaryingpricesto customersforthesamegoodorservice.Thedifferencesin thepriceschargedto consumersare not necessarilyrelatedto thecostincurredin supplyingtheproducts.Pricediscriminationis affectedby themarketswheretheproductsaresold,as wellas thedifferencesin incomesof theconsumers.There are variouslevels of pricediscrimination,which includefirstdegree,seconddegree,as wellas third-degreepricediscrimination.Asa formof pricediscrimination,firstdegreeentailssellingproductsto customersat thehighestpricetheycan paythiseliminatesissuessuchas consumersurplus.Seconddegreeexplainspricediscriminationin which customerspaydifferentpricesbased on thequantitytheyconsume.Forexample,pricescan be discountedforcustomerswhopurchasemanyitems.Thirddegreeentailschargingdifferentpricesto customersbased on their socialclassandincome(Bowles, 2008).

Pricediscriminationhas its pros andconsone of theadvantagesitthatithelpsorganizationsincreaserevenueandsales.Anotheradvantageis an increasein thenumberof customerssince pricesvaryduring thepeakandoffpeakperiods.Asa result,thebusinesseswill increasetheir profits.Pricediscriminationis disadvantageous since itmay putoff customerswhoare forcedto payhighprices.Pricediscriminationmay alsocreatea monopolyas a singlebusinessmay opt to applytheconceptto outwit competitors(Bowles, 2008).#6

Thelabormarketisinfluencedby certainfactorsthat determinethesupplyanddemandof labor.One of thefactorsaffectinglaborsupplyis compensation.Whenemployeesarepaidhighwagesandsalaries,theymay seekemploymentin organizationswith betterremuneration.On thecontrary,thesupplyof laboris lowin organizationswherewagesare low.Economicfactorssuchas depressionalsoaffectthesupplyof laborin themarket.During economicdepression,manyemployeesare laidoff, andthisimpliesthatthere is lowdemandforlabor.In themoderntimes,thefactorsthat affectlaborsupplyanddemandincludeglobalization, knowledgeandskills,as wellas experienceof employees.Through globalization, ithas becomepossibleto importcheaplaborfrom othercountries,andthisaffectsthelocallabormarket.Highlyskilledemployeesarealsohighlypaidcomparedto employeeswith fewerskills.In addition,there is highdemandforemployeeswhopossessa lotof experience(Bowles, 2008).#7

Globaltradehas ahugeimpacton participantgainsandlosses.One positiveimpactof thetradeis reducingrelianceon a singlemarket.Assuch,theparticipantsmay not be affectedby adverseeconomicconditionssuchas recessions.Global tradealsogivesparticipantsan opportunityto sellsurplus products,thusgainingprofitsfrom suchproducts.Thisminimizes lossesthat may beencounteredwhensuchproductsare wasted.Apartfrom thegainsthat areaccruedfrom internationaltrade,participantsmay alsoexperiencesomelosses.Forexample,workersof corporationsinvolvedin thisformof tradeare exploitedas theyarepoorlypaid.Moreover,thisformof tradeis onlybeneficialto largecompanieswhocan enjoyeconomiesof scale.Assuch,smallbusinessesexperiencelosseswhentheyparticipatein internationaltrade(Bowles, 2008).

References

Arnold,R. A. (2010).&nbsp.Mason, OH: South-Western Cengage Learning.

Bowles,S. (2008).&nbsp:Behavior, Institutions, and Evolution.Princeton: Princeton University Press.

Sumner,J. (2004).&nbspSustainabilityand the civil commons: Rural communities in the age of globalization.Toronto: University of Toronto Press.