Summary of the Text Basic Microeconomics 2022

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Subject : Economics
Course Title : Microeconomics
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Summary of the Text Basic Microeconomics
From time immemorial, the concept of economics has played a major role in determining the
interactions between people of different cultures and governments whether it is a capitalist, socialist, feudal
or any other form of socio-political association. A closer examination of the topic of economics draws
researchers’ focus on the study of the scarce resources and their alternative use in the society. Scarcity
takes into account difference in living standards and wants of each society as key parameters for policy
formulation because however well-endowed the society may be, there can never be a state whereby
everybody is fully satisfied in a community.
The conclusion of chapter one reveals that economics is a vital tool for conducting cause and effect
analysis of body-tested knowledge and key principles of the societal welfare. One concern of the economist
is how to multiply the means to satisfy wants using the scarce resources within the nation, that is, turning
inputs into outputs. This concept is brought out more clearly in chapter two where different economies used
various channels for making economic decisions. In simple terms, economics evaluates the consequences
of the decisions made by the owners of land, labour and capital in the society to come up with efficient

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ways of allocating resources to improve the living standards. Therefore, economics plays a vital role in the
economy by ascertaining the cause and effect of actions taken by the policy makers to predict what will
happen in the future in terms of general welfare. For instance, as reported in the Basic economics, China
that had for a long time been seen as one of the poorest countries underwent structural from the onset of the
20th century and is currently one of the economic bedrock of the continent. On the other hand, poor
decisions as witnessed in the government-directed policies in the Soviet Union resulted into commodities
getting stale in the warehouses before being processed.
Another case is cited on the ideal policy framework for developing countries- that is, Ghana and the
Ivory Coast. A freer market proves to be a better option compared to government-run economy. It reveals
that one of the most important but relatively scarce assets for economic development is knowledge. The
concepts traverse monetary, military and socio-political spheres involving allocation of scarce resources to
achieve optimal returns to capital investment. Key concept brought out in the text is the role of market
forces in determining the scope and nature of economic activities in a country.
The underlying principle in the text is change as dictated by the market forces, as seen in the works
of Marx and Engels who were concerned with economic efficiency rather than retention of power and
control. In addition, when the market is left to operate freely, the quality of goods improve as a result of
competition.
Importance of the work as far as economic thinking is concerned
This study bridges the information gap to inform the researcher on how complex and high-tech
economies make vital decisions that are critical for improving the living standards of the citizens using
unanimous means. As seen in the case of China, it does not matter the level of natural resources
endowment but the nature of policies enacted by the society. Additionally, the quantity demanded of a
commodity or its supply is so dynamic that the economy must adopt flexible policies to address the needs

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as they arise. This was exhibited in the oil and petroleum exporting countries that had to shut down low-
yielding oil wells when the marginal cost of extracting oil were far above the marginal revenues.
This text has been great in revealing the fact that physical commodities are not the only products
whose supplies appreciate proportionately with increase in prices but also non-physical commodities such
as labour. This relationship works in the opposite direction when it comes to the demand for the same
commodities in the market.
Reflection on the important questions raised by the book to the reader
One of the issues raised in the text relates to question relating to the meaning of economic. It
demystifies the misconception that has been postulated by several experts that economics is intended to
provide guidelines for personal finance management. Indeed, the variables used to analyze the principles of
economics are intended to achieve effective allocation of resources with the motive to improve the living
standards of the majority. In other words, the incentives brought about by the long-term consequences of
the decisions matter more than the intended goals. For this to be achieved, there should be a clear
framework for executing the programs that are effectively communicated to implementers and the society
as a whole.
Since there are many players in the industry with different motivations and objectives, an economy
requires a proper framework for guiding the transactions carried out to improve the living standards. One
such tool that is conspicuous in the work is an effective price strategy to ensure that demand and supply are
coordinate to avoid instances of surpluses or deficits in the market.
For a society to be better off compared to trading partners, it must allow the natural resources within
its control to be directed by the market forces to produce those commodities demanded in the market. This
is necessary even when others perceive their competitors are receiving more than their “real” worth since
conditions under which production takes place differs from one society to another. The common ground for

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economic transactions is the fact that all players in the market derive utility in accordance with their
desires-they practice a win-win or zero-sum game.

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References
Basics of economics:
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