Question

Using complete sentences and proper grammar, thoroughly discuss each of the 4 concepts you have chosen (Minimum of 100 words for EACH concept):

During this class, several different macroeconomics concepts were covered.

Select any 4 Macroeconomic concepts/topics/assignments we have covered thus far in class, list them, and explain how the economic concept(s) impacts you.   Explain and support your answer (examples are encouraged!)

Examples of topics/concepts: Supply and demand, Diminishing marginal utility, international trade, etc.

Answer 1

•Diminishing marginal utility :- In economics, the law of diminishing marginal utility states that the marginal utility of a good or service declines as its available supply increases. Economic actors devote each successive unit of the good or service towards less and less valued ends. The law of diminishing marginal utility is used to explain other economic phenomena, such as time preference.

The law of diminishing marginal utility explains that as a person consumes an item or a product, the satisfaction or utility that they derive from the product wanes as they consume more and more of that product. For example, an individual might buy a certain type of chocolate for a while. Soon, they may buy less and choose another type of chocolate or buy cookies instead because the satisfaction they were initially getting from the chocolate is diminishing.

•Supply and demand :- The law of demand says that at higher prices, buyers will demand less of an economic good.

The law of supply says that at higher prices, sellers will supply more of an economic good.

These two laws interact to determine the actual market prices and volume of goods that are traded on a market.

Several independent factors can affect the shape of market supply and demand, influencing both the prices and quantities that we observe in markets.

The law of supply and demand, one of the most basic economic laws, ties into almost all economic principles in some way. In practice, supply and demand pull against each other until the market finds an equilibrium price. However, multiple factors can affect both supply and demand, causing them to increase or decrease in various ways.

For example there's a sudden increase in the demand and price for umbrellas in an unexpected rainy season; suppliers may simply accommodate demand by using their production equipment more intensively. If, however, there is a climate change, and the population will need umbrellas year-round, the change in demand and price will be expected to be long term; suppliers will have to change their equipment and production facilities in order to meet the long-term levels of demand.

•International Trade :- International trade is the exchange of goods and services between countries.

Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries, or which would be more expensive domestically.

some argue that international trade actually can be bad for smaller nations, putting them at a greater disadvantage on the world stage.

International trade allows countries to expand their markets for both goods and services that otherwise may not have been available domestically. As a result of international trade, the market is more competitive which results in more competitive pricing which brings a cheaper product home to the consumer.

If you can walk into a supermarket and find American bananas, Indian tea and African wines, you're experiencing the effects of international trade.

•Inflation :- Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.

Inflation is classified into three types: Demand-Pull inflation, Cost-Push inflation, and Built-In inflation.

Most commonly used inflation indexes are the Consumer Price Index (CPI) and the Wholesale Price Index (WPI).

Inflation can be viewed positively or negatively depending on the individual viewpoint and rate of change.

Those with tangible assets, like property or stocked commodities, may like to see some inflation as that raises the value of their assets.

People holding cash may not like inflation, as it erodes the value of their cash holdings.

Ideally, an optimum level of inflation is required to promote spending to a certain extent instead of saving thereby nurturing economic growth.

Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over some period of time. It is the rise in the general level of prices where a unit of currency effectively buys less than it did in prior periods.

The day to day example of inflation can be well understood in the supermarket where we find the prices of say breads or milk to increase in a short while.