Based on this research economics is about scarcity and choice. It is assumed that all human beings are rational thinkers hence would always choose to consume products that would give them maximum satisfaction or utility. Mankiw argues that rational people ‘systematically and purposefully do the best to achieve objectives given available opportunity.’ Given a choice among alternatives and with scarce resources, one would evaluate the benefits and costs of consuming an extra unit of a product and would only take a decision only if marginal benefit is greater than marginal cost. In this case, to solve the alcohol abuse problem, one has to consider marginal benefits and marginal costs derived from consuming an extra unit of alcohol and since excessive drinking has more costs than benefits, one would refrain from alcohol. The opportunity cost foregone by choosing to abuse alcohol is too high compared to satisfaction derived; money spent on alcohol can do many other things such as feeding the family, education for children, and investments among others. Besides, the person may have health problems thus adding to the costs. By considering all these factors, a rational person would refrain from alcohol abuse. Heyne acknowledges the role played by incentives in directing behavior. For him, rational people usually respond to incentives or are induced to act by them. Assuming alcohol abusers are rational, imposing taxes on alcohol substances would eliminate the problem. This would follow the law of demand which states that other things being constant, if the price of a good increase, the quantity demanded of the good decreases. Taxes have the effect of increasing alcohol prices and this would automatically mean that the abusers would desist from alcohol consumption or cut their consumption. Prescription Drug Effects on Demand and Supply of Other Products and Services Prescription drugs are drugs prescribed by a medical officer to a patient and are regulated by legislation unlike the over-the-counter drugs which can be old to anyone. If a patient is under prescription drugs, he/she buys the drugs despite the price of the drugs. An increase or decrease in price of the drugs therefore has little or no effect on the quantity demanded by an individual (McCarthy & Schafermeyer, 2007). The drugs are provided by the National Health Insurance and have no close substitutes. The increase in price of the drugs thus affects all the sectors of healthcare industry such as patients and private insurers. Due to increased costs, the private insurers are forced to increase the cost of their services in case they have to offer such drugs and this may lead to low demand for their services. The patients are also required to get medical prescriptions before obtaining the drugs thus the demand for the medicine may be low compared to over-the-counter drugs. Use of prescription drugs also has an effect on demand for other healthcare services such as hospitalization. The prescription drugs also affect supply of generic products as manufacturers have patents to supply the new drugs for some years. Elasticity of Demand and Supply The price elasticity of demanded which is percentage change in quantity demanded over percentage change in price shows consumers responsiveness to price changes. (McKenzie & Lee, 2006). It is an important consideration when analyzing the impact of a shift in supply and in determining if the firm should raise or lower its price. The supply curve is upward sloping showing a positive relationship between price and quantity supplied other things held constant. However, in long-run, those factors do change causing a shift in supply curve. Such factors include; input prices, technology, expectations and number of sellers in the market. For example, an increase in input prices such as labor would lead to a decrease in supply thus shifting the supply curve to the left. This
The paper tells that an increase or decrease in price of the drugs therefore has little or no effect on the quantity demanded by an individual. The increase in price of the drugs thus affects all the sectors of healthcare industry such as patients and private insurers…
Menger observed and then explained the real fluctuations in the commodity prices while working as an economic journalist in Vienna. The commodity prices are based upon their marginal contribution as they fulfill the desires of the individuals (Jaffe, 1976).
National income accounting is an aggregate measure of the outcome of economic activities. The most commonly used measure is the gross domestic product (GDP) which represents the aggregate production of goods and services at market value. There are some serious limitations in how it represents our standard of living.
This paper discusses some of the significant roles played by the principles of economics in the health care sector. The Role of Economics in Health and Medical Care Economics Economics has become one of the most important concepts in the present times. Most of the economists and management experts define the idea behind economics as the analysis, production, distribution, and consumption of the several goods and services by the business and consumers.
In this article, the Labor Department reported that prices of goods imported to the United States fell in June for the first time in a year as oil and food expenses retreated while for David Semmens, a United States economist at Standard Chartered Bank in New York, the drop is really reflective of what they’re expecting for the second half of the year with weaker energy and food prices (Bloomberg News, 2011).
Locals pay less because the shop aims to develop deeper relationship with them and make them repeat customers. Our belief is that from the repeat purchases, the shop will be able to make good returns from the locals.
The interplay of these factors makes up the law of supply and demand which governs the dynamics of the market and affects the price of goods and services (Englander and Moy 291). II. How a change in demand for a good or service in one market can have an effect on the supply of a different good or service in another market.
The topic on Ten Principles of Economics interested me the most. The ten principles of economics gave me an introduction to all the basic economic concepts and helped me understand what economics is all about. Among the ten principles four discuss how people make decisions; the use of tradeoff, opportunity cost, rational decision making and response to incentives.
The paper analyzes the arguments of the proponents of supply side economics in an attempt at discovering all the pros and cons of the theory. In the 1970s, supply side economics was developed in response to the Keynesian policy, which became ineffective. As it is shown, supply side economics is a viable model in today’s environment.
Relatively elastic demand curve is the result of relatively bigger change in demand for good in response to a small change in prices of that good. On the other hand the relatively inelastic demand curve is the result of smaller proportionate change- decrease or increase in the demand for quantity of goods in response to a given proportionate rise or fall in its price.