Economics for the global manager Essay Example | Topics and Well Written Essays - 1750 words

Economics for the global manager - Essay ExampleAll benefits have a corresponding cost. The air we breathe, kept new through laws costing millions of dollars to enforce, is not free. If your friend treats you for lunch, it is not free for you either, because the time you spent with your friend has an opportunity cost that may probably be more than than the price of the lunch.3. Why might the government want to influence transactions The government wants to influence transactions for many reasons. First, as in nations with free tradeplace economies, the government wants to make sure the markets rules are fair as part of its mandate to time lag the people happy. One danger of a free market economy is explained by what is called asymmetric in breedation sellers may hide vital information from buyers that does not allow a fair price to be compensable for a good (think second-hand car dealers). Otherwise, people cheated all the time pass on be aggravated and may move to change the government. Second, the government wants to control the run and flow of money in the economy, because if they do not, there will be trouble in the form of inflation that can lead to social unrest (Solomon 1972 cited in Samuelson 1992, p. 712). Third, the government wants to influence transactions, like the Fed setting interest rates, Congress cutting budget deficits, or the Commerce Department negotiating trade agreements, because of the addendum effects that these actions (all are forms of market intervention) have on the nations macroeconomic conditions. And fourth, government wants to ensure the countrys patrimony is safe, for example to prevent some scam artist from interchange the Statue of Liberty to foreigners.4. What does the spillover or remoteity principle measure Use examples. This principle measures the costs or benefits of externalities, activities that affect others, without meaning to, either positively in the form of benefits not paid for or negatively in the fo rm of inconvenience or costs for which they are not compensated. An example of the first (called external economies) is having a wife who is a doctor (you can consult her for free or, at least, you dont have to pay someone else to prescribe the right medicine). An example of the second (called external diseconomies) is driving recklessly on the freeway, which makes many other drivers nervous and increases their consumption of tranquilizers.5. Currently our demand for gasoline is rising as our economy is expanding. However, we expect OPEC to keep the supply stable. Use a graph to show what your prediction is for the price of gasoline. USE A GRAPH INDICATING WHEN THE DEMAND INCREASES. I predict the price will increase, because as shown in the graph on Figure 1, with the supply constant and the demand change magnitude, the demand curve shifts to the right, moving the equilibrium point to the right, with the effect of increasing the equilibrium price, or the point at which the current supply curve intersects the increased demand curve, from p to p. At price p, the gasoline market is in equilibrium, that is, supply equals demand. OPECs move holds the supply curve steady, but an expanding/growing economy needs more fuel,