Unraveling the Complexities of Economics: Agents, Markets, and Systems - Essay Sample

Introduction

Economics is a social science that deals with the study of the behavior and interactions of economic agents as well as how economies work. It entails the analysis of essential elements of the economy, such as agents, persons, and markets. Individual agents include firms, households, buyers, and sellers. Economic concepts can also be used to analyze the international economic system, such as production, consumption, investment, and saving, as well as factors affecting them. Consequently, economics is associated with employment, resources, labor, capital, land, and currency stability. All these factors affect the economy in one way or the other. Most importantly, the economic concept is useful since it can be applied to the daily activities in society, such as business, finance, and government, in making sound decisions based on the current economic status of the society. Therefore, this project seeks to focus on the application of the economic concept in real-life situations.

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Notably, the economic concept can be applied to distinguish between needs and wants. For instance, needs are items that human beings cannot lack. Sometimes they are referred to as the basic or fundamental of life. They are the first necessity of life. For instance, shelter, clothing, water, and medication. On the other hand, wants are things that make the life of human being better. Some are luxurious. Human beings can survive with or without them. Examples include education, resources, electricity, land, capital, expensive cars, and a costly apartment. Every person and group of persons would like to satisfy all the human wants. However, human wants are scarce in nature and, therefore, cannot be satisfied. Since human wants are limited and cannot satisfy all humans at the same time, the economic concept can be applied to create a balance of their acquisition among the members of society. The human needs and wants cannot be met because they are insatiable and limited, for instance, land, and capital. Either, human wants are expensive, and therefore, the limited resources available cannot be used to purchase them at once. The economic concept thus comes in to employ some balance to suit the demand. According to the demand and supply concept, when the demand for a particular good is high in the market, then the price of such commodity goes up, and only a few buyers will purchase it at that time. Similarly, when there many goods in the market, the price goes down, implying that the price of a commodity is directly proportional to the demand provided other economic factors are kept constant( Jhun 271-292). Notably, when the product's supply reduces, the product becomes scarce, and the price goes up to meet the production of that specific goods. Accordingly, figure 1 shows the demand and supply graph describing how prices change with different outputs. When a given commodity let say D1 increases, customers will shift for the substitute let say, D2 when the supply(S) is constant. Generally, the curve shows that when the price (P) increases, the demand for the quantity(Q) also increases, and the converse is true. Also, since an individual or the society cannot have everything at once, a model called production possibilities frontier (PPF) can be applied to explain the satisfaction of various human wants. According to figure 2, a society cannot prioritize on both health and education. One has to decrease from one point to another, as illustrated by the curve, implying a trade-off between education and healthcare. If the society chooses to put all its resources to pint A, then there will be no resource left to put in education. At B, some resources will be available for education. At C, the average resources will be available for education, while health resources will start to reduce. At D, health receive no resources

Figure SEQ Figure \* ARABIC 2: The Supply and Demand Curve

Figure 2: A Healthcare vs. Education Production Possibilities Frontier

Description of economic systems

The economic system consists of a system of resources, production, allocation, distribution of goods, and services in the society set up. It entails the integration of agencies, entities, firms, decision making, and consumption trends that make up the economic structure in a particular set up. The economic system usually considers means of production, what to manufacture, how to manufacture, the amount of commodity to produce, and the end-user of the product manufactured. Currently, society depends on mixed economies, which is market-based in nature. Notably, different economic systems exist in the contemporary business world. For example, the Free Market economic system and Mixed economic system (Islam). The commercial market systems depend on the existence of free markets and do not accept government involvement in regulating the ongoing trade. The government does not restrict any resources and other elements of the economy. The whole system is governed by the people and the law of supply and demand. Therefore, it is sometimes called laissez-faire capitalism. Notably, a free market system facilitates the high growth and development of the economy. However, private sectors become dominant, and therefore, money does not circulate to the public. It has some weaknesses, including the private sector's exploitation of the people, capitalism, and low wages to the workers.

On the other hand, in the Mixed economic system (Spanulescu, Ion, and Anca), there is a mixture of the market and command economic system. It is a dual system that has no specific practices. The government regulates the market system. For instance, the production from private industries is monitored and taxed by the government. Therefore, both the administration and the private sector regulate the market and economy, and thus, the wealth circulates to society. However, a mixed economy does not encourage the privatization of the firms that will ensure the maximum production of goods and services. America is one of the countries that practice a free market and a mixed market system in which the government regulates the set minimum wages and antitrust law to be respected by the private sectors( Lake). For instance, it is associated with production means, which may include the product to produce and the ownership, which can be the private sector or the government. Either, the economic system is associated with decision making, particularly over the economic activities, which include contract binding. Similarly, the economic system is associated with a coordination system to enhance communication between the suppliers and the buyers.

Economic Decision making

The government plays a significant role in setting protocols to regulate taxation, budget, money circulation, the supply of goods, ownership, and the labor market. For example, the government can employ a fiscal policy that focuses on administration actions on taxation, interest rates, and expenditure. Also, the monetary policy which concentrates on the regulation of central bank actions which affects the money circulation and supply and interest earned through money borrowed by different countries and group of people, including individuals. The policies in the economic system are influenced by international institutions such as International Monetary Fund, the World Bank (Clemens, Michael, and Michael 53-76), political stability, government policies, and trade unions advocacy. Citizens are the people who are usually being affected by the policy made by the government or the economic stakeholders. For instance, if the policy in place does not favor the production of goods or trade in general, then the price of the commodities and services will go high, and life becomes unbearable to the ordinary citizens. However, favorable policies, such as reduced tariffs, promote the free circulation of goods and services. The production cost will decrease and, therefore, the price of the end product. The citizens will not have a high cost of living.

Most importantly, the policy must be made by the various stakeholders because they control trade and business. For instance, the World Bank must control the monetary policy to prevent countries from borrowing many funds. It also ensures money is available to help during emergencies such as the Covid-19 outbreak and terrorism attack leaving many people homeless and some disabilities. The government regulates trade to prevent over-exploitation of the citizens by the private sectors through little wages and overpricing in the market.

Participating in Economic Systems

For the realization of a smooth economic system in the contemporary world, stakeholders must come together to control the economy—for example, the administration, commercial banks, business organizations, central banks, and investors. Investors are the stakeholders who contribute money to start a particular income-based project. The project is then used to employ workers. Therefore, investors contribute to the growth of the economy by availing the production of goods to society. Also, investors do the role of using many jobless people, rendering them a source of income. Banks like the World Bank can improve the existing economic system by donating funds to the system to facilitate the trade. Individuals or groups of people can borrow money and inject into the growth of the economy. The economy will grow because of the money which is injected into different projects and investments. Consumers are one of the prominent participants of the economic system. Without consumers, goods and services consumption will not be realized. Consumers are the key participants in any world economic system. All other participants have a common goal of creating policies that will not discourage consumers from building an economic system. Eventually, the government plays a significant role in controlling the economic system of the world. If the government levy a huge exercise duty and trade tariffs, the participants, such as private sectors will feel discouraged from starting any project because of fear of making losses. Moreover, when the government does not ensure a favorable trade condition exists, citizens will be the eventual sufferer because prices of goods and services will skyrocket and thus increasing the cost of living. To ensure beneficial practices exist in the economic system, the stakeholders need to depend on the economic concept to regulate economic growth and development.

Works Cited

Clemens, Michael A., and Michael Kremer. "The new role for the World Bank." Journal of Economic Perspectives 30.1 (2016): 53-76.

Islam, Shafiqul. "Aspects of Free Market Economy & Autonomy in Applied Philosophy." (2019).

Jhun, Jennifer S. "What’s the point of Ceteris Paribus? or how to understand supply and demand curves." Philosophy of Science 85.2 (2018): 271-292.

Lake, David A. Power, protection, and free trade: International sources of US commercial strategy, 1887–1939. Cornell University Press, 2018.

Spanulescu, Ion, and Anca Gheorghiu. "Econophysics Approach and Model on Mixed Economy." arXiv preprint arXiv:2004.13008 (2020).