Principles of Economics Research Paper Example | Topics and Well Written Essays - 1000 words

Principles of Economics - Research Paper ExampleBased on this research economics is about scarcity and choice. It is assumed that all human beings atomic number 18 rational thinkers hence would always choose to consume crossways that would give them maximum satisfaction or utility. Mankiw argues that rational people systematically and purposefully do the trump to achieve objectives given available opportunity. Given a choice among alternatives and with scarce resources, one would evaluate the benefits and bells of consuming an extra unit of a product and would only take a decision only if marginal benefit is greater than marginal cost. In this case, to solve the alcohol abuse problem, one has to deal marginal benefits and marginal costs derived from consuming an extra unit of alcohol and since excessive drinking has more costs than benefits, one would refrain from alcohol. The opportunity cost foregone by choosing to abuse alcohol is too high compared to satisfaction derived mo ney spent on alcohol can do many other(a) things such as feeding the family, education for children, and investments among others. Besides, the person may have health problems then adding to the costs. By considering all these factors, a rational person would refrain from alcohol abuse. Heyne acknowledges the role played by incentives in directing behavior. For him, rational people usually respond to incentives or are induced to act by them. Assuming alcohol abusers are rational, imposing taxes on alcohol substances would eliminate the problem. This would follow the law of demand which states that other things being constant, if the price of a well increase, the quantity demanded of the good decreases. Taxes have the effect of increasing alcohol prices and this would automatically mean that the abusers would desist from alcohol consumption or cut their consumption. Prescription medicine Effects on Demand and Supply of Other Products and Services Prescription drugs are drugs pre scribed by a medical officer to a patient of and are regulated by legislation unlike the over-the-counter drugs which can be old to anyone. If a patient is under prescription medicine drugs, he/she buys the drugs notwithstanding the price of the drugs. An increase or decrease in price of the drugs therefore has little or no effect on the quantity demanded by an mortal (McCarthy & Schafermeyer, 2007). The drugs are provided by the National Health Insurance and have no close substitutes. The increase in price of the drugs thus affects all the sectors of healthcare diligence such as patients and private insurers. Due to increased costs, the private insurers are forced to increase the cost of their services in case they have to stretch out such drugs and this may lead to low demand for their services. The patients are also required to get medical prescriptions before obtaining the drugs thus the demand for the medicine may be low compared to over-the-counter drugs. Use of prescrip tion drugs also has an effect on demand for other healthcare services such as hospitalization. The prescription drugs also affect supply of generic products as manufacturers have patents to supply the new drugs for some years. Elasticity of Demand and Supply The price elasticity of demanded which is ploughshare change in quantity demanded over percentage change in price shows consumers responsiveness to price changes. (McKenzie & Lee, 2006). It is an important consideration when analyzing the impact of a switching in supply and in determining if the firm should raise or lower its price. The supply curve is upward sloping showing a confirmatory relationship between price and quantity supplied other things held constant. However, in long-run, those factors do change causing a shift in supply curve. Such factors take input prices, technology, expectations and number of sellers in the market. For example, an increase in input prices such as labor would lead to a decrease in supply t hus shifting the supply curve to the left. This