Free Principles of Economics Essay Sample
Analyze what is driving the increase on "donations" for certain body products. Explain the rationale for this trend.
The increase on “donations” for certain body products can be explained using the principle of voluntary exchange in action. People donate body parts with the notion that they are likely to benefit. People are exchanging body parts with money. This is the power of transaction where the seller is not fully informed as it is the case with buyers. The voluntary exchange of some body parts is trend that has been there due to the fact people expect one thing for another. This is what entails trade as people expect money in exchange with body parts.
Explain what diminishing returns are.
Diminishing returns occurs in a situation where inputs are increased that leads to increased output at a decreasing rate. This mainly occurs, where a firm tries to produce more using the already existing production facilities. The number of workers is likely rise forcing them to share the available facilities. Each worker becomes less productive. Therefore, the total output is likely to increases, but a decreasing rate. Diminishing returns will only occur in a situation where inputs used in production are fixed. However, if a firm decides to establish firm with enrollment of new workers, diminishing returns is not likely to occur. Each worker is likely to explore his potential fully as there would be no sharing of machinery, equipments or the factory space. If a firm is flexible, in terms of expansion with increase in the number of staff, the principle of diminishing returns is not applicable.
Using analytical details in the text, explain whether the production of fish has reached the point of diminishing returns.
Production of fish in ponds is mainly increased by the use of artificial fertilizers mixtures such as nitrogen, phosphorus as well as potash. Therefore, the relationship between the amount of fertilizer used and the out put in fish production can be analyzed using the principle of diminishing returns. For instance, a farmer has one fish pond. The first bag of nitrogen fertilizer increases the production of fish from 85 to 120, a gain of 35 fish. The next bag of nitrogen fertilizer to be used will increase production by only 15 fish (from 120 to 135). This will be followed by another gain of 9 fish (from 135 to 144). The next will then gain only 3 fish (from 144 to 147). In this case, the farmer has experienced diminishing returns. This is simply because, he has kept other inputs of production fixed. Therefore, the production of fish will have experienced diminishing returns.
Provide an example of a time when you had to deal with opportunity costs. Describe the situation and how you responded
An example of a situation where I had to deal with opportunity cost is the time I was to buy either a text book or shoe from my fixed budget of $50. In this case, I opted to buy a text book as I saw it more helpful at that moment. Thus, I had to forego the shoe despite the fact that I really wanted to buy one.
Rational decision-making and opportunity costs. A closer look at economic choices
Economic decision-making often involves considering both explicit and implicit costs. In the case of purchasing a textbook over shoes, the explicit cost was the actual monetary expenditure on the textbook, while the implicit cost was the satisfaction foregone by not having the new pair of shoes. This dual consideration of costs adds depth to the analysis of choices, as individuals not only evaluate visible expenses but also the less tangible, yet significant, aspects of satisfaction and personal well-being.
Furthermore, the concept of rational decision-making comes into play. By choosing the textbook over shoes, I aimed to maximize the overall benefit derived from my limited budget. This aligns with the rational choice theory in economics, which posits that individuals make decisions that optimize their utility, given their preferences and constraints. The rationality of my decision lay in the pursuit of long-term gains through knowledge acquisition.
Opportunity costs extend beyond individual choices to societal decisions as well. In the broader context, governments and organizations grapple with allocating resources among competing needs, facing opportunity costs on a larger scale. The principles of opportunity cost and rational decision-making apply universally, guiding choices at both the micro and macro levels of economic activity.
In summary, the dynamics of economic decision-making involve weighing explicit and implicit costs, considering rational choices, and understanding the broader implications of opportunity costs. These elements collectively contribute to a comprehensive understanding of the factors influencing choices in the realm of economics.