Microeconomic Concepts and Their Real-World Applications

Economics is defined as the knowledge that revolves around consumption, production, and creation of wealth. The article explains how economics is the creator of wealth and tries to justify this definition by relating the microeconomic theory and its applicability to real life situations. Going to school and earning higher income are positively correlated and income is causation to college education. Going to college results to higher income compared to those who do not attend college. Going to school has caused higher income to an individual and the household as a whole. School and income are also related in that there is a positive correlation between getting a college education and earning a higher income. The more years one takes in school, the more he/she will earn in future.

Summary of Microeconomic Arguments, Statistics, and Current Events

The article also discusses factors affecting demand. For instance, it has been established that tastes and preference, information, geographical area, and income are some factors that affect the demand for goods and services. For example, students who stay in the college demand more college services than students that stay far from college. Going to school is associated with higher income (Kodde, D. A, 2015). When a household has higher income, their purchasing power also increases. Therefore, by trickledown effect stimulate the aggregate demand in the economy.

Information was regarded one of the most important determinants of demand in the United States. For example, demand for medicine is likely to increase in a market where its content and usage is known than where the customers do not know its content. In addition to information as a determinant of demand, tastes and preference is also a determined. For instance, the demand for peanut jelly is determined by the level of tastes and preferences a consumer has towards it. There are those customers who prefer peanut than butter due to taste and preference and not necessarily testing them both. Taste and preference can be derived from family members and friends. A customer may develop a taste for a product simply because his friend or family likes the products. For instance, the parties in the United States the Republican and the Democrats. There are voters who voted for either party because their friends or family like those parties and therefore the demand for a product does not necessarily depend on price (Liang, 2014).

The article also differentiates between a shift in demand curve and movement along the demand curve. It is only the price of goods and services that were responsible for movement along demand curve while taste and preference, information, income, population and availability of substitutes were responsible for the shift in demand curves. An increase in income of household or individual consumer will lead to shifting to the right of the demand curve, and lack of information of a product can lead to shifting to the left of the demand curve of the products. Substitute products discussed in the article were peanut and butter. Other products included: political parties such as Republican and Democrats, medicine and college education.

How the Article Explains the Following Concepts

The Economic Concept of Scarcity

Scarcity refers to limited in supply. The article stresses that the economy has limited productive resources to stimulate investment thereby creating more jobs for graduates. There is disequilibrium between the demand for education and supply for education in relation to job available. Households are able to pay for the college fees and enrollment continues to increase every year, but the employment rate has reduced. It is also important to say that all economic resources are scarce and therefore call for a choice, opportunity cost and scale of preference to meet the unlimited wants of human beings.

The Economic Concept of Opportunity Cost and Marginal Decision Making

Since economic resources such as college fees and colleges are sparsely distributed, it calls for opportunity cost. Opportunity cost is defined as the forgone cost to consume the best alternative. For example, human wants are competing either to attend college or to buy medicine and peanuts or butter. The article gives merits for attending college since college enables one not only to earn higher income but also to gain knowledge. The consumers are faced by competing wants; the article suggests that other wants should be forgone to consume the best alternative which is attending college education. Marginal decision making is the extra or addition one unit of time used in making a decision. The guideline of marginal decision making is the use of a scale of preference. The scale of preference is the listing of wants in order of importance and choosing the best out of it.

The Economic Concept of Incentive

The incentive is the policy of the government or organization to motivate businesses or employees to increase production. The article explains the role of government in providing loans to students joining college to encourage enrollment of students to colleges. There is also investing in the advertisement to increase consumers' knowledge in on medicine products that will result to shift to the rights of these products. There is also a reduction in taxes or sometimes imposing tax holidays to firms to encourage the establishment of more Companies to solve unemployment problems in the United States.

Economic Concept of Efficiency

Efficiency refers to allocating resources as a factor of production that maximizes output and minimizes wastage. The article explains the need for the correct job with the appropriate knowledge, and this is aimed at increasing efficiency regarding skills are acquired in college and skills required by the employers so that there is no mismatch in skill requirement that can result in disguised unemployment. College also to be efficient to maximize output by training student to acquire relevant skills to enable students to increase their income and stimulate the aggregate demand and aggregate supply to reach an equilibrium.

Differences Between Correlation and Causation

Correlation is defined as the relationship between the dependent variable and the independent variable. For example in the article, the dependent variable is income which has a positive relationship with attending college education (Annenberg, 2015). From the article, it is vivid that income of an individual is likely to increase when one attend college education. In addition, attending college also depends on the location of the college. For instance, students who are near college attend college education than those who are far away from college. This means that distance a student cover to reach college has a positive relationship with the accessibility of the college education. Causation, on the other hand, refers to what makes something happen (Berg, 2011). For example, because of high income associated with attending college education, students attend college not just for knowledge but income purposes.

Characteristics of the Good Economic Model

The good economic model should be simple and easy to understand, the model should include even the externalities such as environmental pollution (Craig, 2010). Economic models should also have realistic assumptions and should include both indigenous and exogenous variables.

Comment on the Article

The article is very useful to me since it brings economic concepts learned in class to real-life situation. For example, a political decision in the cause of Republican and Democrats. The politicians are using the taste and preferences and information as a tool for their political gain purposes.

A politician does not have opposing views since they acknowledge the need for information and loyalty for a political party to be strong. From the article, Republican and Democrats are the major political parties, and every politician would want to use such parties for election. These parties are popular because the electorates have information about them. Further, there is loyalty developed from taste and preferences from friends and households'. There is a correlation between the economic view and political view on election and party superiority.

References

Annenberg Learner (Firm), & Films Media Group, (2015). Correlation.

Berg, L., & Uppsala University. (2011). Prices on the second-hand market for Swedish family houses: Correlation, causation, and determinants. Uppsala: Department of Economics, Uppsala University.

Craig, B. M., & Strassels, S. A. (February 01, 2010). Out-of-Pocket Prices of Opioid Analgesics in the United States, 1999-2004. Pain Medicine, 11, 2, 240-247.

Kodde, D. A. (2015). Microeconomic analysis of demand for education. Rotterdam: s.n

Liang, M. (2014). The microeconomic growth. Heidelberg: Springer