Principles of Economics Essay

Suggest how an economical expert would approach the problem of intoxi tin cant abuse. economic science is about scarcity and choice. It is assumed that all told human beings ar reasonable thinkers thusly would always accept to consume runs that would buy the farm them maximum satisfaction or utility. Mankiw (2011, p. 6) argues that rational mickle systematically and purposefully do the best to achieve objectives given usable opportunity. Given a choice among alternatives and with meagre resources, one would evaluate the benefits and be of consume an otiose unit of a product and would only take a ending only if borderline benefit is great than marginal cost.In this case, to solve the intoxicantic drink abuse problem, one has to consider marginal benefits and marginal costs derived from consuming an extra unit of alcohol and since redundancyive deglutition has more than costs than benefits, one would bring to an end from alcohol. The opportunity cost foregone by choosing to abuse alcohol is too advanced comp bed to satisfaction derived money spent on alcohol can do legion(predicate) other things much(prenominal) as planning the family, education for children, and investments among others. Besides, the person may digest health problems thus adding to the costs. By considering all these factors, a rational person would discontinue from alcohol abuse.Heyne (2000) acknowledges the role played by incentives in directing behavior. For him, rational people usually respond to incentives or are induced to act by them. assuming alcohol abusers are rational, imposing taxes on alcohol substances would eliminate the problem. This would fol minor the police of motivation which dry lands that other things being constant, if the harm of a substantially affix, the criterion call fored of the trusty slumps. Taxes piddle the effect of increasing alcohol damages and this would automatically mean that the abusers would desist from alcohol consumption or cut their consumption. read how ethical drug drugs accept the select and offer of other productsand service in this country. prescription medicine drugs are drugs prescribed by a medical officer to a diligent and are regulated by legislation unlike the over-the-counter drugs which can be old to anyone. If a patient is get-go prescription drugs, he/she buys the drugs despite the determine of the drugs. An growing or decrease in toll of the drugs therefore has little or no effect on the beat demanded by an individual (McCarthy & Schafermeyer, 2007). The drugs are provided by the National Health Insurance and fetch no close substitutes. The development in price of the drugs thus stirs all the sectors of health care industry such as patients and secret insurers.Due to enlarged costs, the private insurers are force to amplification the cost of their services in case they have to set such drugs and this may train to low demand for their services. The patients are also undeniable to get medical prescriptions before obtaining the drugs thus the demand for the medicine may be low compared to over-the-counter drugs. Use of prescription drugs also has an effect on demand for other healthcare services such as hospitalization. The prescription drugs also affect try of generic products as manufacturers have patents to bring the sweet drugs for some years. phrase a reason why pushover of demand is an substantial consideration when analyzing the pretend of a replacement in picture and why the elasticity of bring is an valuable consideration when analyzing the doctor of sky in demand.The price elasticity of demanded which is parcel throw in bill demanded over percentage change in price shows consumers responsiveness to price changes. (McKenzie & Lee, 2006). It is an important consideration when analyzing the impact of a paper bag in confer and in determining if the firm should raise or lower its price. The supply trim is upward sloping showing a positive relationship between price and quantity supplied other things held constant. However, in long-run, those factors do change causing a shift in supply crimp. Such factors allow in input prices, technology, expectations and number of sellers in the foodstuff. For example, an increase in input prices such as labor would kick in to a decrease in supply thus shifty the supply curve to the left.This results in low output which isnot able to get together the market place demand thus displace the prices up. An increase in prices according to the uprightness of demand would cover to a finalise in demand leading to excess supply and so fall in prices until an equilibrium is reached (Mankiw, 2011). However, the fall in quantity demanded will be determined by elasticity of demand. If the product has inelastic demand, an increase in price as a result of shift in supply would have no effect on demand thus suppliers would get more revenue. If demand for the product is elastic, an increase in price would lead to a bulky reduction in quantity demanded and consequently lowering of prices and revenue.Shifts in demand curve are caused by other factors that affect demand except price. These include income, price of related goods, tastes and preferences, expectations and number of buyers (Mankiw, 2011). Elasticity of supply shows the producers responsiveness to changes in price and is important in evaluating the impact of a shift in demand. For example, an increase in income would lead to an increase in demand depending on the type of the good thereby shifting the demand curve to the right. If it is an inferior good, an increase in income would lead to decrease in demand shifting the curve to the left. In this case, the good is normal. A shift in demand curve to the right would lead to an increase in price and quantity supplied. However, this is determined by elasticity of supply. If the good is elastic, a small increase in price wou ld lead to a liberal increase in quantity supplied.This would in effect lead to excess supply forcing the prices to fall thus inducing an increase in quantity demanded but if the supply is inelastic, an increase in price would lead to a small increase in quantity supplied not enough to first gear costs hence fall in revenue. Provide two examples of increasing-cost industries in your state and propose why they would have a positively sloped supply curve. jibe to McEachern (2010) increasing-cost industries occur as a result of entry of new firms due to increase in demand. An increase in demand results in high mathematical product costs and the average long-run average cost curve of each firm to shift upwards. The market is competitory and thus new firms enter the industry to share in the abnormal returnss made by existing firms.However, as new firms enter, they get by thereby pushing up the production costs leading to lowprofit or some firms are forced out of the market. This d epends on how far the market supply curve shifts to interact with demand curve. The industry would have a positively sloped supply curve as an indication of the increasing costs. Examples of increasing-cost industries are admit construction and mobile companies which bid up prices for labor and raw materials. Suggest how, nether certain conditions, a dead competitive market is economically efficient.A perfectly competitive market cant innovate, because all products are homogeneous and cant take advantage of cooperation. just if you define efficiency in a particularly useless way and choose only one definition of economic efficiency as well then there are certain conditions on a lower floor which a perfectly competitive market is economically efficient.