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Ian Rappleye Econ 1010 KT Magnusson

Economics is the transferring of wealth through consumption and production. Prior to this course I did not understand how in depth economics truly is. It is mathematics and psychology combined that creates this study of how to best use the scarce resources for the optimal output. The big issue is that our wants e ceed our resources! not enough supply for our demand. The way to sol"e this problem is to answer the three basic economic #uestions! what to produce$ how it will be made$ and who recei"es the good. There isn%t enough time or resources to create e"erything$ so one must choose what to produce. The factors of production& land$ labor$ capital$ and entrepreneurship help decide what to create. The more factors a"ailable$ the more output that can be produced. These limited factors are best e pressed through the production'possibilities cur"e. This cur"e represents all of the possible combinations of goods and ser"ices that could be made$ but the goal is to find and achie"e the best possible mi of outputs. The alternati"e options foregone ha"e been e"aluated for their opportunity costs and ha"e been deemed not worth the resources. The mi of consumer goods with military goods is a common issue e"ery country must address. (or e ample$ )orth Korea belie"es that a military based economy offers the best security and because of

that$ they ha"e the fourth largest army in the world. *ut when there are no threats an army is useless and so )orth Korea has recently switched to fa"or consumer goods. In recent years +merica has switched to more military and less consumer goods due to ,-11 and the wars in Ira# and +fghanistan. Money that could ha"e gone to public goods such as schools and roads has gone o"er seas to supply our troops in war. E"ery .ountry must face these concerns and decide what is best for themsel"es. /ne common goal is to find an optimal method of producing goods and ser"ices. The production isn%t 0ust about getting the ma imum outputs from minimal inputs. /ne must also ha"e conscious decisions regarding the en"ironment. 1hould cattle be prepared in humane ways or 0ust the waste be thrown in the nearest ri"er2 It is the producer3s responsibility to answer these #uestions. The best possible way to answer the how to produce #uestion in"ol"es efficiency in the use of factors of production and regulations in polluting third parties and other societal concerns. The final #uestion is who recei"es the good2 1ome may say it should be split up e#ually between the consumers where others say there should be big and small portions. This #uestion deals with how an economy%s output is distributed to the consumers. + more popular e ample of the 4for whom5 answer is Karl Mar %s communist ideals. 6is

idea was 4(rom each according to his ability$ to each according to his need.5 E"eryone puts whate"er they can into a goal and e"eryone reaps the benefits e"enly no matter who ga"e more effort. This lead some to feel cheated out of their hard wor7. To sol"e this problem a more modern go"ernment model is used such as +merica%s democracy. 8emocracy and a free mar7et offer incenti"es to the participants. 9ith a better education and time commitment$ one can get a better income. 1till$ the problem of income'transfer programs may arise. :o"ernment'paid income transfers li7e unemployment benefits and 1ocial 1ecurity are there to help those in desperate need. If the benefits become too great the consumers incenti"e to wor7 declines and will become unemployed to gain the benefits. + similar problem arises in ta systems. If the ta es are too high$ hard wor7 and entrepreneurship may pro"e to be not worth the effort. The most desired distribution of incomes must deli"er e#uality and our longing for more output. + mi ed economy relies on go"ernment inter"entions and mar7et signals to best answer what to produce$ how it will be made$ and who is it for. The first ob0ecti"e of economic theory is to find better answers to the three basic economic #uestions and to do this$ we must ha"e mastery of how the economy functions. The second

ob0ecti"e is to anticipate go"ernment policy changes or mar7et institutions and how they will affect the economy. To achie"e these ob0ecti"es$ we must understand the two hal"es of economics& macro and microeconomics. Macroeconomics centers on the health of an entire economy. Macroeconomics obser"es the goals of a nation such as controlled inflation$ economic growth$ full employment$ and a healthy nation as a whole. The 7ey role of macroeconomics is to impro"e the nation as one. Microeconomics focuses on the indi"iduals! the details of the nation%s economy. Microeconomics cares for firms$ go"ernment agencies$ and all of the indi"iduals that together ma7e up the economy. The concern is the conduct of these factors$ what they wish to accomplish$ and how they wor7 in unison. Economics is a crucial part of the modern lifestyle. 9ithout it$ the world would return bac7 to a barter system and trading would be much more difficult. /ne uses economics e"eryday$ without being consciously aware by wor7ing or choosing to buy that new laptop. 9e$ the consumers$ set the supply and demand and affect the mar7et. The resources may seem endless$ but the truth is our wants e ceed our sources and economics helps with resource allocation to ensure the best output.

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