Microeconomic Principles - Essay Example

Macro & Micro economics December 10, Microeconomic Principles In this speech I am going to talk about the virtues of private property / free market price systems. There are two types of economies, the command economy and the decentralized economy or free market. Private property exists in the free market economy, while there is no existence of private property in the command economy. Free markets promote important virtues and they, however are treated with less attention. Free markets promote integrity and cooperative values. A free market system has its reliance on property rights and provides the best possible opportunities for repeat exchange. The social market economy is a type of free market based economy, which is based on a free price system and private property. This also includes government regulation, which promotes competitive markets. But social inequalities or inequalities with respect to income are results of free market economies or free market price systems. Private property is completely different from personal property, because private property is considered as a means of production unlike personal property. “In addition, the free market performs a constant process of selection with respect to the ownership of capital” (Reisman 8). Another virtue of the free market price system is that this type of price system penalizes people for making irrational choices, especially with respect to financial loss. 2) President Barrack Obama has provided a number of speeches with respect to international trade. President in his speech on free trade has said that the country intends to double its exports by 2014 and it started with Korea. “Barrack Obama: Double our exports by 2014; starting with South Korea” (2011 Address to Joint Session of Congress: On Free Trade 1). President Obama also gave an impressive trade speech at the ‘Chamber of Commerce Today’ on February 7, 2011, in which he stated that he viewed the trade agreement with Korea as one which would be highly profitable for both Korea and the US. The US Columbia and the US Panama trade agreements are the other agreements, which were signed in 2007 but the president disclosed that these agreements had not reached any level and no advancements had been made with respect to these agreements. Obama in his various speeches on international trade also said about various policies relating to various countries like, US should tighten its trade sanctions with Zimbabwe and how it should develop measures to increase trade with India. To shorten, Obama has released a number of speeches with respect to international trade. 3) Economists are critical of price floors and price ceilings. A price ceiling is the upper limit of the price of a commodity above which no seller can raise a price. Price ceilings are usually set below the market price of a product. Price floors are completely opposite to price ceiling. Price floor is the minimum price for a product and this is done to benefit the sellers. Both these measures are done in order to have a control over the price of products. Economist are critical of both price floors and price ceilings because somehow they viewpoint that these prices should be established through market equilibrium only. 4) A wage is compensation, typically financial, received by employees in exchange for their work. Compensation in conditions of wages is specified to workers and compensation in terms of salary is given to employees. Compensation is an economic benefit given to workers in return for the services given by them. The labor supply largely resolved by population development and migration; i.e. as labor supply increases, population development increases. Labor demand mostly determined by the growth and size of the financial system, in terms of more economic development, more business actions, more jobs formed. The wages are mainly of two types, they are Market-determined or equilibrium wage and Government-mandated minimum wage. Market-determined wage means the level of wage where supply meets demand in a given skills level, Government-mandated minimum wage is provided to unskilled workers. Otherwise, the financial system could be in the middle of an extended development that is pushing the restrictions of manufacture capabilities. Labor market shortages have kept unemployment low. Whereas misperceptions regarding real wages, access to structural and frictional unemployment, and even a touch of wage inflexibility might keep wages from increasing temporarily, eventually they rise in response to any shortage. So wages follow prices and prices follow wages, continuing even in the face of a recession. This wage spiral interrelates with inflationary prospects to create long-lived inflationary development. The first factor of the wage spiral does not apply if markets are relatively competitive. Rising labor productivity recompenses employers for high wages costs allowing workers to receive increasing real wages, whereas permitting the company's margin to continue the same. Main reasons of employees earn higher wages than others are skills, experience and seniority, incentive pay and labor union. Union can raise the wages in certain circumstances. The influence of labor unions to increase wages more than the long run on the workers is been extremely inflated. This exaggeration is mostly the outcome of breakdown to identify that wages are essentially determined by labor efficiency. 5) Economic discrimination is like other discrimination that is more related with the economic conditions and employees. Dissimilar charges or rates of compensation are given for similar skill of output by looking on the aspects like race, religion, age, gender, ethnic etc. Because of this kind of discrimination, true talents and skills are rejected from jobs and opportunities. In many countries we could find these kinds of discriminations, in every field that is related with economical factors it is present. Especially in many organizations, people have got rejected from the jobs because of discrimination based on race, religion, gender etc. This is a true fact and there are laws to stop these kinds of discriminations. In many countries, the government and constitution has brought various laws to stop these discriminations, though there is still economic discrimination around the economic world. Various Types of Economic Discriminations are: * Salary/wage discrimination- Different scale of wages or salary is given to the employees, who do the same kind of job; task and they would have same rank also. But they would be paid different scale of wages. * Price discrimination- Different prices for good/services to dissimilar people based on their religion, ethnicity, age, gender. Mostly seen in monopoly markets and products/services * Discrimination in service- Same like price discrimination, various services from organizations, government etc are rejected or delayed to the people based on their race, religion, gender etc (these people would be minority also) * Discrimination in Hiring- Candidates are hired in organizations not based on their merits or skills, but based on their race, religion, gender etc. Male candidates are mostly selected in organizations than female candidates; this is a perfect example for discrimination in hiring. Discrimination in hiring is costly to employers, because in fact they are rejecting the true talented candidates because of race, gender, and religion. At the time of hiring, the interviewers are giving more importance to the race, gender, religion etc. They are not giving preference to merits and well talented candidates. This is actually creating loss to the organization, because the selected candidate may not be able to work like the rejected candidate, and he/she may only have fewer skills than others. The employer is giving more money to the inappropriate employee. These kinds of employees may create time loss, low quality works etc. So it is unfair to implement discrimination in every sector, merit and talent should get the high preference. Work Cited Reisman, George. The Government Against The Economy. The Ludwig Von Mises Institute. Auburn, Albama. 2007. Web. 14 Dec. 2011. 2011 Address to Joint Session of Congress: On Free Trade. Global Sources. 2011. Web. 14 Dec. 2011. Read More