Question

In the Economic Way of Thinking Chappters 5-11, answer the following AS AN ESSAY QUESTION - please give good details.  Why are business people who bring new or badly needed products to the marketplace often criticized or harassed by the government?

Answer 1

Why are business people who bring new or badly needed products to the marketplace often criticized or harassed by the government?

To answer the question above, we should first understand what is economic way of thinking. Following 8 points basically describe economic way of thinking:

1. The use of scarce resources to produce a good always has an opportunity cost.

2. Individuals make decisions purposefully, always seeking to choose the option they expect to be most consistent with their personal goals.

3. Incentives matter. The likelihood of people choosing an option increases as personal benefits rise and personal costs decline.

4. Economic reasoning focuses on the impact of marginal changes because it is the marginal benefits and marginal costs that influence choices.

5. Because information is scarce, uncertainty is a fact of life.

6. In addition to their direct impact, economic changes often generate secondary effects.

7. The value of a good or service is subjective and varies with individual preferences and circumstances.

8. The test of an economic theory is its ability to predict and explain events in the real world.

When new or badly needed product is brought into the market following points are associated with the same.

a) Companies do lot of research work which involves cost. Most of the time the funds are provided by investors and companies are answerable to investor profits and not social causes or impact on society

b) Pricing of the products is generally done by keeping profit margins in the mind. This may be against the view of the government especially related to industries associated with common people / society

c) Basic testing of the products is done and they may be beneficial in the near term, however its long term impacts and effects may not be immediately known.

d) Many times if the company produces products alone, they may take patent against the same and pricing of the product is done exorbitantly in order to get optimum returns from product during patented period. If these products are essential to human e.g. drugs, vaccines or any other medicals essential for survival of humans, governments may interfere regarding cost, so that it is affordable to common people.

e) Intension of the producer of the new product may be good, but that may not necessarily produce desired effect of the product.

f) Many times the promoters of the companies producing new products do not follow the complete procedure for the introduction of the same due to unawareness. This may result into problems at the hand of government.

Considering all the points above, generally during preliminary life cycle of any new product, business people who introduce new or badly needed products to the marketplace are often criticized or harassed by the government.