Concepts of Choice and Opportunity Cost – Assignment Example

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The paper "Concepts of Choice and Opportunity Cost" is a wonderful example of an assignment on macro and microeconomics. a. Why does choice arise in Economics? Use an example to discuss the concepts of choice and opportunity cost. The choice is a decision or a course of action in preferring things to another. Relating this to opportunity cost, it means the value of the foregone opportunity when the choice is made. Foregone opportunity can be seen in the individual, business, and government actions. For example, I have chosen to work as a nurse in the local region, than to go to other countries which offer higher wages.

My foregone opportunity cost is the higher wages I will receive when I chose to stay in the region. In government, when US government chose to spend million dollars for military aid in IRAQ and elsewhere rather than spend for health projects locally, the foregone opportunity costs is the health welfare of the Americans who will be jeopardized by the decision. The opportunity cost of not producing cattle in favor of farm production of rice.

The opportunity cost of going to a vacation in Hawaii in favor of employment Balancing economic resources is an act of weighing decisions on opportunity costs and choices of better alternatives.   b) What do you understand by the law of demand? Pick a product and list two factors, which, in your opinion, would cause the demand curve to shift to the right. Can you think of two other factors which would shift the supply curve of your product to the left? Demand is the quantity that the buyer is willing to purchase at a given price while supply is the quantity sellers are willing to offer at a given price.

It is a relationship between the price of and quantity that is best understood through a demand curve. It has an inverse relationship as when the price goes higher, the people want less of the product. For example in the graph below, when the price of meat sells at $1 per pound, quantity demanded is 100 pounds per day, but when the price of meat increased to $4 per lb. , demand for meat decreased to 40 pounds per day, shifting the demand curve to left.

Demand curve shifting to the left can be caused by several factors, price increases, oversupply and government intervention such as price ceiling.   Price ceiling. The government can impose a price ceiling way above or below the free price market. For example, the government sets the price of wheat at $5 per lb. which is way below the market price of $6 in order to regulate the price. The effect will be on the supplier who will drop out of the market causing a reduction in the supply.

On the other hand, demand will increase because consumers find that they can buy the same product at a lower price. As a result, quantity demanded exceeds quantity supplied thereby causing a shortage of the commodity in the market.   (a) List four conditions of demand that are likely to cause the market demand of UK owner-occupied housing to shift. Give your reasons for choosing these factors of demand. UK gives homeownership the biggest value as according to a report, 78% of households in the UK are privately owned.

(Economics help). Demand for housing was high in the 1980s to late 1990s Factors that affected an increase in demand in 1980s to 1990s are the low cost of interest rate and liberalization of credit. At that time, prices of houses went up and remortgaging was allowed. This gives house owners available amount for spending that could be used to buy another property. In 2008, demands for housing may see a decline caused by economic factors affecting the income and expenses of households.

Tight economy causes shrinkage on budget spending for housing due to unemployment and interest rates. This causes a default on mortgages causing a shift in demand for housing going to the left.   (b) Are there any factors on the supply side that are likely to cause the market supply of UK owner-occupied housing to shift? If so, what are they? The housing prices in the UK are a significant index of consumer expectations. A decline of the economy means also a decline in demand for housing in the UK.

There will be more supply of housing units ready for occupancy pulling the price markets down. This scenario shifts the demand curve down and supplies curve upwards, meaning there is more supply than demand. Mortgage debts are another factor to consider as this is one of the causes of an economic crisis that has ballooned to an inappropriate direction Mortgage debts can be equated to the 78% household ownership in the UK, as reports said that the largest section of UK debt comes from mortgages.

According to the Economist. help, the average mortgage debt per person in the UK is £ 21,000.

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