Economic Decision Makers – Outline Example

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The paper "Economic Decision Makers" is a perfect example of an outline on macro and microeconomics. We are faced with economic decision making in our everyday lives. These decisions have to be made because we have limited resources to work with. We are faced with budget constraints that force us to make sure that our expenditure never exceeds the capital available. There are four decision makers; households, the government, firms and the rest of the world. These are the people who live under one roof. They demand goods and services from firms (product markets) and also help supply factors of production that include; capital, labor, land and entrepreneurship skills to the existing resource markets.

Economists assume households to be a single decision maker and rational utility maximizers. Households earn money by providing labor to the firms and through government handouts. They then spend this money on buying goods and services from firms and paying taxes to the government (Piros & Pinto, 2013). Firms are economic units that are formed by people seeking profit from selling goods and services. Firms use available resources to produce goods and services that are later sold to households.

The government is important in an open market as it helps ensure that there is a level playing ground for all firms. They also ensure that the conditions are favorable for the firms to maximize their profit (Silvia, 2011). In turn, the firms pay taxes to the government. This revenue is used by the government to provide public goods for the firms and household to enjoy.   The households provide labor to the firms. In return, they earn income from the firms that they use to purchase goods and services from the firms and also pay taxes.

The firms, on the other hand, provide goods and services to the households and also pay taxes to the government to ensure that there is a level playing ground and the environment is good to ensure firms maximize their profits.

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