The Economic Problem Of The Market Economy

What is the main purpose of the economic system? The main purpose of the economic system is method used to produce and distribute goods and service. The three economic questions are: “What goods should be produced?” “How should these goods and services be produced” And “Who consumes these goods and services?” The characteristic of a market economics is that self-interest is the motivating force in the free market, self regulating market. The interaction of buyers and sellers motivated by self-interest and regulated by competition, all happen without a central plan. In a market economy, economic decisions are made by individuals and are based on exchange or trade. However, characteristics of a command economic

We currently live in a market society that is completely different from past societies. In market society, the society is a system of self-regulating market as a whole (Polanyi 43). People are needed to act and think in particular ways for the market society to function (Polanyi 68). For instance, people in market society believe that economic relations are more needed than interpersonal relations (Polanyi 44). Polanyi calls the emergence of market society “the great transformation”. My thesis is the change to market society is a fundamental transformation due to market society being characterized by self-regulation, fictitious commodities and an emphasis on individuals, which are considerably different from past societies. A number of the differences that take place under the workplace in the system of market society will also be shown. Furthermore, the thoughts that people have about the world in market society will be explained by pointing out the association between the “spirit of capitalism” and the “protestant work ethic”. Lastly, the reasons why these ideological conditions are essential to the emergence of market society will be provided.

In the first week of classes we learned seven economic principles that would later be reinforced with examples in the class along with providing our own examples and analysis of the concepts in our own written work and debates about real world issues and events. We first talked about how incentives matter. In agriculture, and many other business sectors, incentives are very important and come in many forms such as subsidies or tax breaks from the government. It was also very important to learn about the shortages and surpluses that could amount from such incentives. For example, if the government were to give farmers prices above equilibrium, farmers would then be able to over produce above the demand levels. This is not to say that the government can’t sometimes improve the market outcomes. If a market failure is present and the government interferes, it would result in a positive market outcome. Next we discussed the importance of trade-offs and the opportunity costs behind those trade-offs. We make our trade-offs among three pillars of values: social/cultural, environmental, and economics and only when all three are balanced are we completely sustainable. In agriculture, trade-offs and opportunity costs are faced daily, and decisions should be made according to what is most sustainable now, and in the future. If a farmer decides to drain a wetland for more crop space to produce more (economic), the opportunity cost is the ecosystem being destroyed (environmental). Another example is if a farmer decides to farm organically, the opportunity cost is the increased yields of non-organic farming practices. Next I learned that rational people think at the margin. An example of this within agriculture is that a farmer does not think that he will hire five people to run two tractors, he thinks at the margin, hires two people to do the job, and therefore profits from that decision. I learned that markets are a good way

The famous economist, Adam Smith, promoted the idea the “division of labor has given us many of the blessings of civilization” and about the role the invisible hand plays in the supply and demand of the production of goods. Although these goods are produced under specialization, the production of a good by a single entity in order to promote efficiency, there is still the problem of human want for an unlimited amount of commodities while still taking into account scarcity.

2. The key economic concept that serves as the basis for the study of economics is:

Although every country will answer the what, how and for whom questions differently, every country will be confronted with the same fundamental problems: resource allocation and scarcity.

“It is as important to examine what we forgo, as well as what we will get if we choose one alternative over another.” In other words, before a change is implemented into an economy, careful consideration of all other alternatives and their possible outcomes must be thoroughly examined. However, unforeseen outcomes often arise due to the imperfectability of humans.

* Economic problem: how a society can satisfy the unlimited wants (of individuals or the community) with the limited resources available.

TEXT: Economics, Principles, Problems and Policies, 15th Edition, McConnell and Brue Video: Econ U$A series with discussion Class Activities: APIP workbook activities, reinforcement and writing activities and other teacher-developed materials This semester-long course gives students a thorough understanding of the principles of economics that apply to the function of individual decision-makers, both consumers and producers, within larger economic systems. It places primary emphasis on the nature and

The impact of the market revolution in the United States was very large during the 19th century. The change in who was producing the products allowed for many entrepreneurs and inventors to either gain or lose wealth. In the case that the product sold, it not only allowed for the people who contributed in the making of the product to sell it, gaining wealth, but also permitted all the people of America and those in trade with America to use this product. Products such as vulcanized rubber used for clothing and tires, the steel plow used to make farming more efficient, and the sewing machine were apart of this revolution and have played a key part of the evolution of the world.

Whenever a decision is made, the first step is usually examining the costs and the benefits. This is called marginal analysis. A business owner always wants the benefits to outweigh the costs. Once an individual preforms marginal analysis and makes a decision, the opportunity cost can be identified. The opportunity cost is what is given up when a choice is made.

In business it is essential for owners to consider important factors when mapping out their business objectives. Economics used as a tool to solve coordination problems. They include what and how much product to produce, how to produce their product, and for whom they are producing. In order to effectively answer these questions, economics is used. Colander (2006) describes economics as “the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society” (p. 4). The foundation of economics is based on several factors that assist in understanding an economy.

The basic economic problem refers to a situation where human wants are unlimited while human resources are finite; it is the economic problem of scarcity of resources. At any one particular time, the resources of the earth are capable of producing a limited number of goods and services, however, human wants exceed limited production possibilities and this gives rise to what is known as the economic problem of scarcity.

Different market decisions determine how an economy is run. There are several different factors that account for how markets make their decisions, which determines how they function. The theory of markets mostly depends on supply and demand. However, it is key to note that there is a difference in demand/supply and quantity demanded/supplied. A demand is how much the buyer plans to purchase at various markets prices and the quantity demanded is what the buyer actually purchases at a particular price. Supply is the producer or the seller’s plan of the amount the seller will make available at different market prices and the quantity supplied is the actual amount that the seller makes available at a particular market price. It is important to

imagine living in a world in which there are infinite amounts of goods and resources to satisfy every human desire. People will not find need to budget their limited incomes, businesses will not worry about the cost of labor, and governments will not have reason to tax its citizens, or give importance to environmental issues. People living in this society will be equal to one another and everything would be free, like water in the ocean and sand in the desert. All prices would be zero and society will not find need for markets or financial institutions. Unfortunately we do not live in a utopia of limitless possibilities; we live in a scarce world of unlimited wants. Given unlimited wants, we must make the best use of our limited resources, a science our ancestors have developed and named economics. This study measures how societies use scarce resources to produce valuable commodities and distribute them efficiently among different people.