Economics - The study of Microeconomics

Essay by mspireCollege, UndergraduateA, November 2008

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According to the text Economics is defined as "the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society". One of the areas of study within the discipline of Economics is the study of Microeconomics. The text defines "Micro economics as the study of individual choice, and how that choice is influenced by" two laws control these individual forces.

The Law of Supply and Demand, the text says the law of supply is "Quantity supplied rises as price rises, other things constant." The Law of Demand is defined as "Quantity demands fall as price rises, other things constant. Quantity of a good demanded is inversely related to the good's " As you can see by the definition of supply and demand one law has a direct impact on the other. When the price of supply goes up the demand will lessen.

As the demand lessens the price of supply will ultimately fall in order to compensate for the lower demand. As the Demand increases the price on supply will also increase in relation. As this cycle perpetuates itself it creates a phenomenon called Consumption. Consumption is what happens as a consumer uses a commodity and needs to replace it. If there is no need to replace a consumed commodity then there is no demand. So consumption is an intricate part of the cycle. I have read an article titled Fixed Preferences and Tastes authored by Edi Karni and David Schmeidler. This article deals with the subject of consumption on a more variable basis as it pertains to not just the static classical theory does not account for change in taste due to social acceptance. The authors of this article address this issue and I would like...