How the economy works - Essay Example

s to be made very carefully and after a lot of thought as it is important to understand that every choice made will also mean forfeiting another choice. This question can be answered only after proper analysis of the resources that are available in an economy. The one thing that is also kept in mind is the true cost. This is one aspect of the choice that economist are interested in. as mentioned earlier while making a choice the chances of forfeiting another choice are always possible. Hence economists generally use the concept of opportunity cost which allows them to analyze the value that must be sacrificed or given up (Stonebraker, 2008).

This question deals with the determining how to use the factors of production to produce the product. In countries that are highly industrialized use of capital goods like computers, machinery etc. In countries which are lesser developed the production is normally got through physical labor. This question mainly deals with from whom the goods are being produced. This is mainly who will receive the produced products. In a country as developed as the United States, it depends a lot on the income of the people and the prices of goods and services.

While talking of economic stability the one variable which always catches attention is Unemployment. After which the prices levels is the next topic of interest. The levels of unemployment and the economic stability of a country are directly related. With the decreasing levels of employment the levels the economy of the country will also be affected. Hence to maintain the economic stability of a country it is essential to keep the levels of employment stable, or increasing however no reduction should be permitted.

Also the price levels for goods and services directly affect the countries economy and thus need to be kept at constant levels. Countries which have prices of goods increasing drastically signify inflation within the country (Brozen, 1958). Thus to maintain the economic