Principles of Economics - Essay Example

Download file to see previous pages... The economic success of a country derives its roots from the works of individuals. As a result, when individual are well conversant with the principle of economics, overall success is achievable. This paper seek to give an in-depth analysis of how the realization that economic principles underlie the choices we make at a personal, business and societal level has sparked today’s growing interest in economics. Economic Principles Before a commodity reaches the hands of a consumer, it usually undergoes various stages of development. Some of these stages include production and distribution. The entire process is referred to as economics and its contribution to development cannot be neglected. The economics principles usually give an overview of how the economy works. In the achievement of success, a proper understanding of the basics methods and concepts used by economist is necessary. Some of the principles of economics include: (A). Scarcity It is evident that the human needs are more than the resources available. As a result, not all the human needs can be satisfied at the same time. In economics, there are two categories of goods namely, free goods and economic goods. Free goods are available free of charge in nature while economic goods are limited in their supply (Mankiv, 2011). As people have been enlightened about scarcity, they are able to make sound decisions on the available resources thus increasing their efficiency. This is favorable for economic development. (B). Rationality In life, not everything comes as expected. As a result, proper reasoning is very necessary in ensuring that one gets a proper understanding situation. Making a rational decision is necessary, as it is optimal in achieving a goal. It usually takes into account all the merits and demerits before coming into a conclusion but taking into account the possible alternatives (Smith, 2008). By the people making sound decision, they are able to make proper economic activities and thus this has sparkled today’s growing interest in economics. (c). Preferences When a person is offered various items, he is likely to choose one out of the many. The decision to choose one is specifically dependent on an individual. This is mainly derived from the person’s attitude towards the subject. In essence, preference is not static but dynamic over time. This is mainly determined by the person’s knowledge on the item. Because people are equipped with different preferences, they allow them to explore the utilities of all the available options (Loewenstein, 2007). Since by making preferences one increases the net utility, it directly and indirectly influences economic development. (D). Restrictions If a person was to be asked on the items he would desire in life to achieve his set goals and objectives, it is evident that there are always restriction that would hinder him from achieving them. Some of restriction are clearly indicated in the budgets and input cost. For example, if the input cost is very high beyond the capability of a person, then he is bound not to undertake the transaction. Under such conditions, maximization is challenged. Therefore having clearly understanding how to maximize when restriction are there is necessary in ensuring that economic development is achieved. (E). Opportunity Cost This derives its roots from scarcity. Due to scarcity, the resources available to a person ...Download file to see next pagesRead More