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Economic Principles Essay

663 words - 3 pages

Introduction

Economic principles are thought not to go hand in hand with natural science laws. These are laws or principles upon which the economy should be build. This is the discipline which economists use when applying economics.
Basis, a text book written by Alfred Marshall (1890 Principles of Economics) who was born in
1842 in Bermondsey, London, England, died 13 July 1924 in Cambridge, England) who was a great economist in his days for a long time and his book dominated England for a considerably lengthy period of time. He is known to be one of the economics founders. His book brings to life the ideas mentioned below.
Marshall saw the work of economics was to improve the living standards of the people and eliminate poverty. In his book Marshall had many original ideas however; he added an improved version of W.S Jevons ideas.
Supply and Demand
Supply and demand are thought to be some of the most primary ideas of ...view middle of the document...

The law of supply states that the higher the price of certain goods, the higher their supply. This is because producers will produce more thus making more profits. The producers are actually in dilemma when the price changes because they are not sure whether it is a permanent or temporal change, whether the price has gone up genuinely or as a result of higher demand and if it is the demand, how long will it last. At the point at which supply meets demand, then the market is said to be at equilibrium, and the economy is said to be most efficient, this however is not practical.
Marginal Utility
The economic concept of utility provides a means of studying a persons’ preferences and how they intend to satisfy them.Utility is the satisfaction an individual gets from certain goods. Marginal utility is the additional satisfaction a person gets from consuming more of their preference. Economists say that if a person finds satisfaction (utility) in certain goods or services they will tend to consume more of them. Harvard economist Greg Mankiw, a former advisor of the white house and a popular textbook author wrote that economists assume that most goods demonstrate decreasing marginal utility. Marginal utility provides economists with a measurable way of studying peoples’ preferences and advice the producers of such goods accordingly. It also makes economists quantify whether consumers would give up a given good for another.
Costs of Production
This is the total amount of money that is used to produce certain goods. There are two types of cost of production, the fixed costs and the variable cost. The sum of the fixed and the variable costs give the total cost of production. Most common production costs include cost of buying the raw materials, paying of employee salaries and wages and payment of taxes. The more a company can reduce its cost of production the higher profits or revenue the firm will make therefore all firms work towards minimizing their cost of production. The cost of production will determine the prize of the given goods, which is the total cost of resources that made the product will determine the final cost of the product.

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