2.2 WHAT ARE THE CONSEQUENCES? Economics is a method of considering decisions, a
ID: 1223026 • Letter: 2
Question
2.2 WHAT ARE THE CONSEQUENCES? Economics is a method of considering decisions, actions and their consequences. For example, some people assert that war is good for business and the economy. War is claimed to provide impetus to production, employment and incomes. However, economics looks beyond what we see. If production is found to expand in war, one must examine what occurs under conditions of peace. Would the resources sit idle or would they be used to produce other goods and services of value? If the answer is that production may be strong in times of peace, then the benefits of war are offset by the opportunities forgone. Economics sets the framework to objectively examine all consequences. Understanding the direct, intended consequences of an action is easy. Providing income to senior citizens as an equity goal is the intended consequence of the Social Security system. The indirect, unintended consequences are more difficult to understand. Social Security has several unintended effects - one being that people will tend to save less than otherwise for retirement while expecting the government to provide for them as elder citizens. Of course, the government is simply the vehicle for gathering taxes from younger generations and channeling the money to seniors. What we observe is a group of younger families with their incomes diminished to support seniors. Some of the younger families may even earn less than seniors do from their pensions – an unintended consequence. Besides understanding the intended and unintended consequences of an action, the economic way of thinking includes determining who are impacted. Economics What You Need to Know: 3 This involves describing which groups of people are impacted and how they are impacted. When a retail firm such as Wal-Mart proposes to build a new store on the edge of a small town, various groups of people see themselves impacted differently. Some retailers in the central business district expect to lose customers if they do not find a competitive niche for themselves. Locals wanting to preserve the old charm of the central business district become upset by the potential disruption of the towns character. On the other hand, consumers anticipating better bargains seem happy for the new choice in shopping. Job seekers look to the new retailer as an alternative place to work
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What you need to do is insert specific statements on principles that are covered in this chapter 2.2. The chapter titles are questions, but this assignment does not involve answering the entire title question. Instead it involves presenting one principle that is learned in a section. Together, with many postings over different sections by various students, the principles within each section of the chapters are flushed-out.
Explanation / Answer
Economics is about allocation of scarce resources for efficient output in the society. Land, labor and capital are three primary resources and by its nature they are tend to be limited. A good policy should make maximum out of these scarce resources for the welfare of ovarall society and it involves trade-off. A land given to school can not be used for manufacturing or farming. In such case allocation have to be made considering value it will derive from making one choice and value forgone for not making other choice. This is called as 'Opportunity Cost'. It is very much necessary in decision making because market will only allocate in terms of monetary reward. Economic accounting will take into consideration the 'opportunity cost'.
A coal fired power plant is a ncessity for a town which has many manufacturing units. Coal fired power plant tends to be cheap in compariosn to solar power plant or wind power unit. However, coal fired power plant increases pollution and has recurring cost for environmental cleaning and raw material. Solar power has initial set up cost.
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