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Society On An Individual And Business Level Interact

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Canaan Knapp
Moorpark College
Micro Economics
4/9/2017
Microeconomics
Society on an individual and business level interact, perform, respond and make decisions according to different microeconomic factors and theories, resulting in different impacts on the economy. This essay will include the various relationships of these economic principles and theories that are illustrated throughout every day governmental policies, business practices, decision making and individual consumer choices. Consumers change individual decisions based on income earned and their perception of the potential changes in government policies. These policies affect the price of commodities and wages. On the other hand, firms vary their production decisions according
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This year, the Fed increased base fund interest rates by 25 basis point. However, according to Sanjay (1), the increase in interest rate will not affect the decision of firms in the apartment market to change their investment decisions. Sanjay (1) notes that the interest in the economy are still below the threshold that can make firms consider the cost of capital expensive enough to change their investment decision. This threshold is considered to be 3%. This means that any firm in the apartment market will generate adequate profit to meet capital expense as well as other costs of business if the interest rates are below 3%. Thus, Fed can revise the interest rates upwards without meaningfully affecting the level of investment in the apartment market. This shows that price elasticity of supply of houses is not high. On the other hand, consumers will not face a high increase in price for houses because supply will remain relatively constant. According to Vasel (1), monthly repayment will rise by only $57. This increase has little impact on purchase decision due to low price elasticity of demand for homes.
In the previous paragraph, it is noted that labor is one of the main factors of production. The price of labor in the market is determined by supply and demand for labor. However, different categories of workers have different equilibrium wage i.e. skilled workers’ equilibrium wage is the highest followed by semi-skilled workers and unskilled
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